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Operator: Good day, and welcome to the Wyndham Hotels & Resorts Fourth Quarter and Full Year 2022 Earnings Conference Call. . I would now like to turn the call over to Matt Capuzzi, Senior Vice President of Investor Relations. Please go ahead.

Matt Capuzzi: Thank you, operator. Good morning, and thank you for joining us. With me today are Geoff Ballotti, our CEO; and Michele Allen, our CFO. Before we get started, I want to remind you that our remarks today will contain forward-looking statements. These statements are subject to risk factors that may cause our actual results to differ materially from those expressed or implied. These risk factors are discussed in detail in our most recent annual report on Form 10-K filed with the Series and Exchange Commission and any subsequent reports filed with the SEC. We will also be referring to a number of non-GAAP measures. Corresponding GAAP measures and a reconciliation of non-GAAP measures to GAAP metrics are provided in our earnings release, which is available on our Investor Relations website at investor.wyndhamhotels.com.

We are providing certain measures discussing future impact on a non-GAAP SEC only because without unreasonable efforts, we are unable to provide the comparable GAAP metric. In addition, last evening, we posted an investor presentation containing supplemental information on our Investor Relations website. We may continue to provide supplemental information on our website in the future. Accordingly, we encourage investors to monitor our website in addition to our press releases, filings submitted with the SEC and any public conference calls or webcast. With that, I will turn the call over to Geoff.

Geoffrey Ballotti: Thanks, Matt, and thanks, everyone, for joining us this morning. We’re thrilled to report that our Q4 results finished stronger than our expectations with full year reported global RevPAR growth of over 16%; net room growth of 4%; and adjusted EBITDA of $650 million. We generated $360 million of free cash flow in 2022 and returned over $560 million to our shareholders, which represented 7% of our market cap. By all accounts, it was an outstanding year for Wyndham Hotels and Resorts. We grew net rooms by 4%, including 80 basis points of growth from the acquisition of our 23rd brand, Vienna House by Wyndham. Excluding Vienna House, we opened 64,000 rooms for the year, more than 1 hotel each and every day. This represents 20% more rooms than we added last year.

Here in the United States, we added 27,000 rooms with some great new hotels, like the Stone Hill Lawrence, a AAA 3 diamond hotel outside of Kansas City, who converted to our Trademark Collection brand and the opening of our first two construction, La Quinta Hawthorn Suite hotels in Texas, a combined extended stay and select-service hotel in a mid-scale space designed to streamline development and operational costs by utilizing a share lobby, fitness center, meeting rooms, bar and other amenities. Internationally, we opened 37% more rooms organically in 2022 than we did last year and 2% more than we did back in 2019. Latin America led the way with 14 luxury resort additions to our Registry Collection brand across the Caribbean and Mexico. And in the fourth quarter, our Latin America team welcomed our first Wyndham Grand in Mexico with the opening of the Beach Front, Wyndham Grand Cancun Resort centrally located in Cancun Hotel zone.

Our EMEA region also had a tremendous year, opening 57% more rooms organically than they did last year or 6% higher than 2019 with impressive fourth quarter additions like the Bulk and Jewel resort, a trademark collection conversion in the resort town of Razlock near Sofia, Bulgaria, and the Ramada Riyadh King Fahd, the first new Ramada addition since buying back our master license agreement in Saudi Arabia. In Southeast Asia, we grew net rooms by 5%, open 40% more rooms in 2022 than we did in 2021. And after many years of development, we welcomed the beautiful new 949 room Wyndham Benin Golden Bay Resort directly on the beach in this former French Colonial port, marking the 14th hotel opening for our Asia Pacific development team in Vietnam.

And finally, our China direct development team grew net rooms by another impressive 10%. And despite the sporadic lockdowns and travel restraints, many of our team members continue to face throughout the fourth quarter, which have now thankfully dissipated. The team added more direct franchise rooms than they did in the fourth quarter of 2019. And nearly twice as many rooms than they did in the fourth quarter of last year. With the opening of hotels, like the Wyndham, the Wyndham Grand and the La Quinta Shanxi, three beautiful new hotels located in the business district in the heart of Shanxi province featuring quite a direct access to Shanxi’s International Convention and Expo Center. And this new La Quinta Shanxi represents our second new construction La Quinta to open in China in 2022.

On the retention front, we improved for the second consecutive year to a record high global rate of 95.3%, including the first time that our international retention rate has exceeded 95%, an indication of our ever-improving owner-first value proposition. We grew our development pipeline sequentially by 3% and by 12% versus prior year to a record 219,000 rooms and 1,700 hotels. This marks Wyndham’s tenth consecutive quarter of sequential pipeline growth. Our teams awarded 882 contracts globally for over 113,000 room additions, which is over 3 new contracts awarded each and every business day. The number of domestic contracts signed in the fourth quarter was 40% higher than what we awarded last year and nearly 90% higher than what we awarded in the fourth quarter of 2019, reflecting record developer interest in our brands for the full year.

We signed 563 contracts in the U.S. for 62,000 room additions, which is nearly double the amount signed in 2019 and 65% more than last year. Fourth quarter new construction domestic executions increased 95%. Notably, we awarded another 50 Echo Suites by Wyndham contracts this quarter to establish developers and experienced extended stay operators, bringing the total number of contracts awarded to 170 hotels in just 9 short months since launching the brand last March and making Echo the hotel industry’s fastest-growing new brand launch of 2022. We broke ground on our first 3 ECHO hotels in the last few months of 2022, and we expect to open our first ECHO Suites by Wyndham Hotels later this year as we break ground on another 2 dozen ECHO hotels in 2023.

On a full year basis, new construction domestic executions increased 130% year-over-year. While domestic conversion execution increased 30% compared to 2021. Developers are selecting by Wyndham new construction offerings now more than they ever have. Our economy new construction brand, Microtel, added 2,200 rooms to its domestic pipeline in 2022, driven by developer interest in its cost-efficient motor prototype. While upper mid-scale brands like Wyndham Garden added 1,300 rooms to its domestic new construction pipeline. In the upscale segment, we saw continued strong new construction demand for brands like Wyndham, which grew its U.S. pipeline by 1,700 rooms this year. Consumer demand remains strong. Our middle-class customers continue to spend more on travel than they ever have, and they are staying longer than they were back in 2019, given hybrid work environments.

We saw booking windows increase 18% versus prior year to over 14 days with guests planning further ahead given space constraints and the fear of being blocked out as so many were last spring and summer. Thursday and Sunday night occupancies and our guest average length of stays have both continued to climb in the fourth quarter versus where they were back in 2019. All of these trends are giving our franchisees the confidence to continue to yield up in their pricing with the new revenue management tools we’re providing to them, combined with the constant messaging that real ADR for the select-service space remains essentially flat to where it was 4 years ago. We believe that leisure travel remain the #1 priority for the discretionary consumer spend among middle-income Americans in 2023 as so many recent consumer surveys from our organizations such as MNG Wall at the same time, we’ve seen strong growth in our infrastructure-related revenues, which makes up about 20% of our U.S. royalties.

This area has always been a strength for Wyndham. And with the size of the pies that they grow substantially as the government begins to $1.5 trillion in infrastructure and CHIPS Act spending, we’ve been making further investments here to grow our share. Those investments have already begun paying off with domestic weekday occupancy in our economy hotels at their highest absolute levels on record. Our general infrastructure related revenues increased double digits in the fourth quarter versus 2019, a trend that began back in the second quarter of 2021. And we’re confident that it will continue to strengthen throughout 2023, as projects for new roads, bridges, rail, water systems, airports, broadband and public transfer begin. Funneling the hundreds of billions of dollars to the states is a heavy lift that will take time and require coordination from agencies on both the federal and the state levels as these projects commence over the next several years in the markets where our economy and mid-scale small business owners will benefit.

We estimate that this new level of spend represents an opportunity for us to generate over $3.3 billion of incremental revenue for our franchisees and over $150 million of incremental royalties for Wyndham over the spend period. Our award-winning Wyndham Rewards loyalty program recognized as the best hotel loyalty program for the fifth consecutive year by the readers of USA Today, grew its enrollment by 8% over the past 12 months and now stands at 99 million members. Wyndham Rewards helped drive a 23% increase in direct bookings to our brand.com sites, outpacing the rate of growth across all third-party channels and, once again, representing a record high level of contribution for our brand.com sites. Our core values and our connie service culture are at the heart of what drives our growth and what makes Wyndham such a great place to work.

There’s no better measure of why we are such a great place to work that our most recent team member engagement survey, which generated record high results. And it was no surprise to see Wyndham Hotels & Resorts qualify as a constituent of the 2022 Dow Jones Sustainability Index, a global index consisting of the top 10% of the largest 2,500 companies in the S&P Global Broad Market Index based on sustainability and environmental practices. We sincerely thank our valued team members without whose support, none of this would be possible. And with that, I’ll turn the call over to our CFO, Michele Allen. Michele?

Michele Allen: Thanks, Geoff, and good morning, everyone. I’ll begin my remarks today with a detailed review of our fourth quarter and full year results. I’ll then review our cash flows and balance sheet, followed by our 2023 outlook. We generated $310 million of fee-related and other revenues and $126 million of adjusted EBITDA in the fourth quarter, bringing our full year fee-related and other revenues to $1.35 billion and adjusted EBITDA to $650 million, both above our expectations. Our franchising segment grew fourth quarter revenue by 12% year-over-year, primarily reflecting global RevPAR growth and higher license fees. Adjusted EBITDA increased 8% to $138 million, as the revenue increases were partially offset as expected by the timing of higher marketing spend in the quarter, which unfavorably impacted margin by 200 basis points.

Excluding this timing impact, our adjusted EBITDA grew 13% in the fourth quarter, and our adjusted EBITDA margin remained consistent with prior year. In our Hotel Management segment, fourth quarter revenue and adjusted EBITDA declined, reflected the sale of our select-service management and owned hotel businesses, which collectively contributed approximately $38 million in fee-related and other revenue and $12 million in adjusted EBITDA in 2021. Within our Corporate and Other segment, our fourth quarter expenses were in line with expectations or relatively flat compared to 2021. Fourth quarter adjusted diluted EPS was $0.72, a 4% increase year-over-year or approximately 16% on a comparable basis. This increase reflects adjusted EBITDA growth in our Hotel Franchising segment,as well as a benefit from our share repurchase activity.

Now turning to full year results. Our franchising segment grew revenue by 16% year-over-year, primarily reflecting global RevPAR growth and higher license fees. Adjusted EBITDA increased 15% to $679 million and our adjusted EBITDA margin was consistent with 2021 despite ongoing inflationary pressures. In our Hotel Management segment, full year revenue and adjusted EBIT declines reflected the first half of 2022 exit of our select-service management and owned hotel businesses, which contributed fee-related and other revenue of $50 million during 2022 and $125 million in 2021 and adjusted EBITDA of $18 million during 2022 and $37 million in 2021. Within our Corporate and Other segment, we saw $7 million of higher expenses due to inflationary cost pressures, in line with expectations.

Full year adjusted diluted EPS was $3.96, a 25% increase or approximately 29% on a comparable basis. This increase reflects adjusted EBITDA growth in our Hotel Franchising segment, lower net interest expense and a benefit from our share repurchase activity. Before moving on to free cash flow, let me take a moment to discuss current regional RevPAR performance. Global RevPAR in constant currency grew 15% year-over-year in the fourth quarter, up from 12% in the third quarter. Domestically, RevPAR finished 12% ahead of 2021 and 9% ahead of 2019. U.S. RevPAR growth accelerated to 480 basis points in the fourth quarter from 250 basis points in the third quarter. And for the first 6 weeks of 2023, RevPAR for our brand has continued to accelerate with the U.S. up approximately 600 basis points year-over-year.

Internationally, fourth quarter constant currency RevPAR ran 46% ahead of last year and 23% above 2019. All regions, with the exception of Asia Pacific, generated RevPAR well in excess of both 2019 and 2021 levels. Full year international occupancy finished down 21% to 2019 and will continue to provide a meaningful tailwind for us in the coming quarters as demand continues to grow overseas, especially in our Asia Pacific and EMEA regions, which, for the whole of 2022, were only 68% and 88%, respectively, of 2019 levels. Now turning to free cash flow. We generated $360 million in 2022 compared to $389 million in 2021, reflecting, as expected, lower cash collected from 2020 COVID-related fee deferrals as well as higher development advances. Importantly, we converted 55% of our adjusted EBITDA to free cash flow, right in line with our target.

We successfully executed on our stated capital allocation strategy by investing over $120 million to grow the business while returning a record high $561 million to our shareholders, representing 7% of our market cap through $445 million of share repurchases and $116 million of common stock dividends. As we move into 2023, our capital allocation strategy remains unchanged. We will remain disciplined on the core tenets of our M&A strategy and pursue transactions that are accretive from an earnings and net room growth perspective, and complementary to our existing brand portfolio. We will also continue to incentivize franchisees to invest in new brand prototype designs to improve overall brand equity. And based on the success of our new ECHO Suites extended stay brand to date, we expect to begin to deploy a portion of the $100 million of development capital we earmarked as the first ECHO Suite hotels near opening in late 2023.

Finally, we expect to maintain our industry-leading dividend payout ratio subject to Board approval and share repurchases will continue to be an integral element of our capital allocation strategy, albeit lower than 2022, given the absence of the onetime proceeds from last year’s transaction. We ended the quarter with approximately $900 million of total liquidity, and our net leverage ratio was 2.9x, just below the low end of our stated range. Moving on to outlook. For full year 2023, we expect global net room growth of 2% to 4% and global RevPAR growth of 4% to 6%, which translates to 6% to 8% above 2019 levels, a data point that we still consider to be relevant since the select-service space, which represents over 90% of our U.S. portfolio, recovered to pre-COVID levels much faster than the industry’s full service base.

Fee related and other revenues are expected to be $1.38 billion to $1.41 billion. We are projecting adjusted EBITDA of $650 million to $660 million, which reflects comparable basis growth of approximately 5% when neutralizing for the variability in the marketing funds year-over-year, which will contribute approximately $10 million less adjusted EBITDA in 2023 as we expect to completely recapture our 2020 investment. Adjusted net income is projected to be $337 million to $349 million and adjusted diluted EPS is projected at $3.84 to $3.98 based on a diluted share count of $87.7 million, which excludes any potential share repurchases. Finally, we are expecting free cash flow conversion from adjusted EBITDA of 50% to 55%, which reflects the impact from our expected increase in development advancement from $48 million in 2022 to approximately $60 million in 2023 as well as higher interest expense.

As a reminder, we have provided two slides in our investor presentation to help with your modeling. Slide 40 provides the historical financial impact of our select service management business and owned hotels, which will need to be adjusted from your base. And Slide 41 provides revenue sensitivity. In closing, we are very pleased with our 2022 performance. We successfully executed on our key business objectives, growing our system, increasing our owners’ profitability and simplifying our business model, while generating significant adjusted EBITDA and free cash flow and returning a record amount of capital to our shareholders. We enter 2023 with a strong balance sheet, a record pipeline, tremendous momentum behind our new extended stay brand, ECHO Suites by Wyndham and a great deal of optimism surrounding the largest infrastructure bill in our nation’s history.

With that, Geoff and I would be happy to take your questions. Operator?

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Operator: . Our first question comes from Joe Greff with JPMorgan.

Joseph Greff: Geoff, can you talk about the environment for, I guess, what we characterize as tuck-in acquisitions. How much is out there? Is there anything warm that you’re working on? How competitive is the environment today for tuck-in acquisitions versus a year or 2 years ago? And I have a follow-up.

Geoffrey Ballotti: I think the environment will continue and improve, joe. Vienna House is a good example of that, our latest tuck-in acquisition. And I think when you look at — domestically and internationally, it will continue to pickup and deals will continue to present themselves. And we’ll be strategic. We’ll be methodical and evaluating the deals as they come along. We’re going to be looking for brands that are both EPS and NRG accretive as Vienna House was the brands that are of high quality and brands with high ROI potential. Four of the last 5 brand launches, though, for us, Trademark, Ultra, Registry and ECHO have all been launched organically. And there’s no reason we can’t continue to do that, but we now have great brands in every segment of the industry.

But better than anyone that M&A is always in our DNA, having covered us for as long as you have with 19 of the 24 brands we have, have been acquired, and we do believe that size matters, scale matters. And we’ll continue to look for deals. But we’re not going to do a deal just to do a deal. We remain disciplined and ensure that any deal that we do in the next year or 2 to have compelling returns for our shareholders as Vienna House had.

Joseph Greff: And then switching over to ECHO and nice to see the sequential growth to continue here. And I heard both Geoff, your comments and Michele, your comments, it doesn’t sound to us that your 2% to 4% 2023 systemwide rooms growth incorporates much from ECHO, is that more of a 2024 contributor? And then is there any pivot, Geoff, on multi-development ECHO deals as yet to single?

Geoffrey Ballotti: Questions you’ve asked before offline. Yes, there is a pivot. We have not yet offered ECHO to the thousands of individual franchisees, which we expect to do later this year. And to your direct question, there is no impact really much impacted to 2023 net room growth. We will have our first ECHO openings later this year. We have broken ground and just some phenomenal RevPAR markets: Plano, Texas; Sterling, Virginia; Richmond, Virginia. And the team is unbelievably excited. I mean we said on the Q2 call that we have 100 in the pipeline. We’re at 170. And those are, as you say, all with multiunit development agreements with some of the nation’s most successful extended stay developers because we want to really open these — develop these, builds these and open these to have as big an impact as we can.

Operator: Our next question comes from Stephen Grambling with Morgan Stanley.

Stephen Grambling: This first one, maybe a follow-up to those comments on ECHO and just development more broadly. We just hoping to dig into the components of your loan growth guidance in the context of gross additions and attrition especially in the contract pipeline, I guess, it’s now up 13% year-over-year in attrition rate that they continue to improve. So any color you can provide kind of splitting out as we think about the guidance in gross adds, attrition and any nuances by geography?

Michele Allen: Yes, sure. So I would say from a net room growth perspective, we don’t see significant impact in 2023 from the growth in the pipeline. 80% of the pipeline today is new construction. And in the U.S., construction starts within about a year or 2 of the deal being signed. So on average, there is a 18- to 24-month build from there. So it’s typically in the pipeline 4 years. And internationally, it’s a little longer. So overall, we would expect the pipeline to be realized over a 4- to 5-year period. So — and a big part of our pipeline growth is the ECHO brand, and that’s not going to have a material impact to 2023, as Geoff just mentioned. Moving our net room growth, that will also then require — as we’ve always talked about improvement and the retention rate.

And I think if you look back to pre-2019, we were in 93%, 94% range, and we’ve been steadily improving at 20 to 30 basis points every year since then, and we’re marching toward that 96% target. But when you see us get there, that’s when you should expect to see our overall net room growth expectations left.

Stephen Grambling: Sounds good for ’24 and ’25 then. Maybe changing gears. You had some good details on China and the direct component there. Can you provide a bit more color on how the reopening there may not only impact domestic RevPAR in the country, but also the broader region as outbound potentially resumes?

Geoffrey Ballotti: Yes, we see the — as outbound resumes a big beneficiary, certainly for our hotels were the Chinese are going to be looking to travel. I mean, we’re already seeing and hearing from our teams in South Korea, where we have over 10,000 rooms that they’re seeing more Chinese arrivals, Thailand, Indonesia, Australia, Singapore. Those are all big beneficiaries. China represented over 150 million international travelers in ’19, Stephen. And that number, as we know, dropped to under 20 for the last 2 years. So we’re excited to see that. On the ground, we’re just encourages all get out to see the strong rebound during the Chinese New Year. Our last 3 weeks of RevPAR were up 60% in China to last year and 8% to 2019, given that pent-up family holiday travel demand.

And our resorts in the vacation destinations, we got big resorts in Hainan and Sanya came back really, really strong. I mean through the last 14 days, after Chinese New Year, our Wyndham Sanya was up 30% to last year. Our hotel in Hainan, our big win gate was up 60% to last year, but importantly, they are up over 10% and 30%, respectively, to 2019. And while that was Chinese New Year driven, it was great to see the results that came out last night from Smith Travel, where overall China last week RevPAR was up 1% in what was almost a clean comp week versus ’19, with occupancy running around 90% in ’19 levels. So we’re really, really excited about what we’re hearing from our teams over there and just thrilled with everything our team accomplished despite the challenges with that 10% Q4 net room growth in our direct franchising business and how many more hotels they were able to open in a tough quarter than they were last year.

Operator: Our next question comes from Dany Asad with Bank of America.

Dany Asad: When we look at your 2023 guidance, so if we just look at your unit growth expectations, your RevPAR growth expectations kind of if you combine them, you’re looking at like a 6% to 10% fee growth as a whole. But your EBITDA guidance, if we strip out marketing reservation is more like 5% to 6%. So can you maybe just help us understand what’s causing a drag on the algorithm for 2023? And how should we think about that dynamic longer term?

Michele Allen: Yes, Danny. Your math there is correct. And I think there’s two contributing factors: The first one is higher expenses, mostly due to inflation. Some of that we saw roll on in 2022, but we didn’t have a full 12 months of it, and we will have a full 12 months in 2023. And then the second impact really is the mix effect of higher RevPAR growth internationally versus RevPAR growth in the U.S., and that really is because the international regions are still in recovery mode in 2023, while the U.S. business had been fully recovered as of the second half of 2021. And how that plays into the long-term growth algorithm? I would say, typically, if all regions are growing at similar rate growth, the algorithm works, but we knew over the last 2 to 3 years with the COVID impact playing out, we knew that there was going to be some differences in the algorithm, which is why when we provide the sensitivities, we provide sensitivity per point of RevPAR for the U.S. business separate and apart from the international business?

Operator: Our next question comes from David Katz with Jefferies.

David Katz: Following through on some of that, one of the themes we’ve started to focus on largely one of your peers is revenue intensity. And as you build out internationally, I wonder if you can shed some light on the deals that you’re making or the signings that you’re making in China, where I think the intensity has historically been a bit lower, but in the other areas of the world, how those compare with the U.S.?

Geoffrey Ballotti: And it’s good to hear your moms doing better, God bless her. In China, certainly, yes. I mean, where we’re growing our rooms. The growth is coming in our direct franchising business, which, as you know, is 3x more revenue-intensive than our master license agreements, which have nowhere near the growth that we’re seeing with our direct franchising right now at double digit. And you’re correct. And on Slide 9 in the IP that Matt put out last night, you see that over 70% — 73% of our pipeline are in that higher revenue-generating segments in the midscale and above brands that are driving that. Over 60% of our domestic pipeline are in the midscale and above, and over 85% — or about 85% of our international pipeline.

So what that means for us is that our average deal values per room in the pipeline are increasing there. They’re up 800 basis points domestically, which is important and up 240 basis points internationally. And that represents over $100 million of royalty fees for us over the next 4 years. Domestically, as they’re more weighted to higher RevPAR, higher segments, upscale brands. And internationally, as they’re weighted in higher RevPAR markets, especially notably in Latin America and in Europe with some of our more upper mid-scale brands. Our upscale brands, our Wyndham Hotels and Resorts, full-service brand are Registry Collection, luxury brands. So we’re very excited about that.

David Katz: Understood. And if you could just talk a bit more. I think one of the issues we’re altering to process is how people are what people people being — you are factoring into your guidance with respect to the macro environment as the year progresses?

Michele Allen: Sure. I would say what we really are factoring into our guidance is — well, first, our U.S. business has been fully recovered to pre-COVID levels since the second half of 2021, I mentioned. And finished 2022, 9% above 2019. So we’re looking to add another 4% to 6% on top of that growth this year. And I would say from a macro perspective, in the U.S., we began to lap more normalized comps in the second half of 2022. We were seeing about 3% year-over-year growth. So we’re expecting a continuation of that trend into 2023. And internationally, where not all markets are yet recovered to the pre-pandemic levels, there’s a bigger year-over-year growth opportunity. So we’re expecting all of our international regions with the exception of Asia Pac to get pretty close back to 2019 occupancy levels. So overall, we’re looking for about half of our growth to come from occupancy recovery and the other half to come from some modest ADR growth.

Operator: Our next question comes from Michael Bellisario with Baird.

Michael Bellisario: Michele, just one follow-up there. Just the 4 to 6 sort of system-wide globally. Can you give any more specifics on just what the U.S. expectation is versus international, just the spread in the components of the 4 to 6. I know you sort of touched on it a little bit, but any more specifics would be helpful.

Michele Allen: U.S. is certainly going to be lower growth overall compared to international since there still be in recovery mode for sure. So like I said, there’s probably in the U.S., there’s going to be a few points of occupancy growth and a few points of ADR growth. Whereas internationally, we’re expecting to see again some modest ADR growth, but a much bigger lift coming out of occupancy.

Michael Bellisario: Okay. And then, Geoff, for you, you have a big competitor now getting into the economy space, maybe big picture. What are the risks to you on the conversion front? And what are you hearing so far from your franchisees?

Geoffrey Ballotti: Congrats to you and Mary on the birth of Lucy, last Tuesday. Andy need to play made a father of four girls, I wish you two more. We talked about that offline. Yes, we’re not seeing any impact to your question on our economy brands. We have the most recognized economy brands in the space, and we’ve been in this space for over 30 years. We know these customers. We know these owners, and we know it’s important to both. The one thing that COVID has demonstrated to our economy owner base is that they wish they own more Wyndham product given just how well our brands performed throughout COVID and how well they performed after 9/11 and the great financial crisis. These everyday essential construction and infrastructure workers never stopped traveling and they were staying in our economy brands in record numbers, which was what allowed our franchisees to never have to close down.

So we’ll continue to provide the most flexible and the most competitively priced economy brands with a focus on what we know is important to our guests and what we also know is important to our owners. And our renovation and our PIP costs run 3 to 5x less than many of our larger brand peers and our technology stack installation. And our technology stack operating costs remain the lowest at 4 to 6x less with just a continued focus on generating the best cash-on-cash returns in the Economy segment.

Operator: Our next question comes from Patrick Scholes of Truist Securities.

Charles Scholes: One question. You talked in your press release about achieving your goal of retention rate of 95%. Going forward, do you see that as sort of the equilibrium level at this point? Or do you see there’s continued opportunity to improve that?

Geoffrey Ballotti: Absolute opportunity to continue to improve it, Patrick. We — as Michele said, we were in the 94s in ’19. We moved that to 95% in 2021, and we’ve moved it to 95.3% in ’22. Our teams are incredibly focused on that. You blend that in with what we’re doing on the gross unitization side, which we’ve also been moving up. We achieved 7% gross additions in ’21. We moved that organically, take out Vienna House to an 8% organic growth addition in 2022. An all-time record of organic growth room additions for our system, and you blend those two and it’s to Michele’s point, how we’re confident that we could move over time that 2% to 4% to 3$% to 5%.

Operator: Our next question comes from Brandt Montour of Barclays.

Brandt Montour: So maybe on that same theme, Geoff or Michele, the retention goal of just over 95.3% this year versus 95.3% last year. I’m just curious because it seems to me that a lot of folks in the industry think that this is the year where the brands will start pushing back on owners that maybe have some deferred CapEx during COVID that they held off, and this is the year that the brand sort of– the rubber meets the road on a lot of hotels having to deal with that, and we saw Marriott guide to higher deletion rate this year versus what they had last year. So just curious what you guys think about your system, about your brands and your owners that you think you’ll be able to sort of move in the opposite direction of that?

Geoffrey Ballotti: Well, I think the progress that we’ve been making, Brandt, from the 93% to 94% to 95% to 95.3% to your point, gives us confidence. I think there’s still an opportunity out there with the best brand value proposition in the economy and mid-scale space to pick up on the conversion front. And we think transaction volumes are going to continue to accelerate. The stress sales are expected to increase by the second half of this year. So we saw good movement on the adds, as we’ve said, and we’ve been really focused over the last few years. We had significant substandard deletions that were very targeted and very focused in 2018 and 2019 when our retention rates were lower than where they are today. And our brand quality and all of the efforts that we’re doing on the quality front continue to give us great confidence that we can move that number higher.

Brandt Montour: Okay. Okay. Great. And then if we move to the other side of the equation to gross ads because if you say retention might get a little better or stay the same. But if you look at your sort of the midpoint of your net unit growth guidance, would — maybe we’re splitting hairs here, but it would imply not a slight decel versus what you actually did do in ’22. So is that just conservatism? Or is there a part regionally? Or part of the chain scales that you would focus on in terms of your gross ads that isn’t as strong as last year?

Michele Allen: Yes, Brandt, I don’t think it’s actually a slight decel. I think when you look at the net room growth in 2022, you have to remember, there’s 88 basis points of growth in there from the tuck-in acquisition of the Vienna House. So I think we delivered at 3% on an organic basis. And the midpoint of our guide this year would imply 3%. I would say we’re looking for 20 to 30 basis points of improvement every year in the retention rate. And then — and that 3% is a rounded number. So it could be the 3.2%, it could be 3.3%. It could be 2.8%, but we’re expecting it to be 3% or better at the midpoint. And so I think if you target a retention rate of, let’s say, 95.5% and you’re looking at 3% net room growth then that would imply that you’re driving somewhere between 8% and 9% in gross opens.

Operator: Our next question comes from Ian Zaffino with Oppenheimer.

Ian Zaffino: You had another question on guidance here. When do we expect the impact of the government spending on the infrastructure build, other bills to kind of flow through in 2023? I don’t know if you really can do this, but any kind of magnitude you might be able to give us or at least directionally what we should expect?

Geoffrey Ballotti: Sure. We would expect in the back half of the year, if you follow everything that’s being put out by the congressional budget office that next round of the $1 trillion will set the fund in late ’23. There certainly are many preexisting and time-sensitive projects that have moved forward. The $350 billion highway reauthorization Act is a good example of that with $40 billion already being spent on bridges. In terms of the size, I think we said in our prepared remarks that it’s over a $3 billion revenue opportunity for our franchisees over the next 5 to 8 years, which would mean another $150 million-ish of incremental royalties over that period. We’re super excited about it. And we have been making investments in people for a while in processes and technologies.

We’re adding more sellers to win a greater share of these federal and state allocations, and we’re creating a dedicated business-to-business sales team to identify the biggest opportunity targets out there. There are 1.8 million infrastructure company businesses in the United States today, and we’re leveraging our relationships with our third-party partners. Our travel management companies, like CLC, who have over 1,400 buying centers across the country. And we’re sending our teams to events and conventions and conferences that have never been to before like the American Society of Concrete Contractors and calling on companies we haven’t called with before. So look, this has been a competitive strength of ours forever. We’re continuing to invest heavily in it.

The best is yet to come. And for the seventh consecutive quarter, we’ve seen a pickup in terms of what our franchisees are experiencing. We were up 16% in this business in the third quarter, and that accelerated to 21% in the fourth. So we’re really excited about what’s to come.

Michele Allen: Add to that really quick. We’re generating about $17 million a year from this part of our business. So if it just continued to increase in the double-digit category would be about $3 million of incremental EBITDA. And of course, we’re not looking just for continued share capture, we’re looking for an expansion in the size of the pie once the spend actually hits the market.

Ian Zaffino: That’s really good color. And then just as a quick follow-up. On the room growth projections, can you give us any of the puts and takes on like what you’re assuming with rates going higher, maybe a softening in the economy. How does that algorithm change with those two factors?

Michele Allen: Yes. So let me start by saying half the rooms in the current pipeline of either conversions or new construction projects that are already in the ground. So that’s going to significantly reduced our exposure to the current market dynamics and then we’re just seeing with the other half of the pipeline. And that, I’d say, the rapid rise in interest rates have impacted all asset levels in Canadian hotels, but hotels are unique and that they are — they have value rates and can offset cost side of that equation, whether it be inflation or interest on higher pricing, and they have the ability to do that daily, which is what we saw all during 2022. And developers — our underwriting sustained increases in ADR, which is either partially, or in some cases, fully offsetting the higher interest expense.

So we and the well-capitalized developers that we’re working with, we all believe this is the best time to build. Even though interest rates are higher than the historic lows that we’ve seen over the past decade, we’re all expecting that they will decrease a bit once inflation is under control and the economic uncertainty that we’re facing to pass this over and these select-service hotels have minimal staffing requirements. They’re delivering really high ROI for our owners and offering very attractive rates even in this environment.

Operator: Our next question comes from Dan Wasiolek with Morningstar.

Dan Wasiolek: So maybe wondering if you give update on your loyalty membership where that’s at? How that’s grown and the engagement of it pertaining to the number of room nights or percentage of room night is being booked by the loyalty base? And then second question, just I think you mentioned that the direct bookings were up 23%. Was that for 2022? And wondering if you could also give a similar figure for the OTA channel?

Geoffrey Ballotti: Sure. Our enrollments, to the first part of that question, grew 8%, Dan, year-over-year. We’re at 99 million members globally. And it is what’s driving that double-digit year-on-year percentage quote. Our brand.com growth is at the highest level it’s ever been. And to the OTA piece, it is outpacing the OTA growth. Our share of occupancy has increased 500 basis points domestically to where it was pre-pandemic, which is pretty remarkable, nearly 1 out of every 2 check-ins to our economy mid-scale, upper mid-scale, upscale brands are coming through the program. But we’ve got nearly that same percentage now in the economy space. And we have certain brands, like La Quinta and American that are pushing 60% share of occupancy blended. It’s about a 50% share of occupancy domestically.

Operator: At this time, I show no further questions in queue. I’ll turn the call back to Geoff Ballotti for closing remarks.

Geoffrey Ballotti: Thanks, Todd, and thanks, everyone, for your questions and your interest in Wyndham Hotels & Resorts. We’d like to, once again, thank our valued team members for their significant accomplishments around the world and for helping us deliver our eighth sequential quarter of organic net room growth along with a 12% growth and at a development pipeline that’s never been stronger than it is today. Domestic and global RevPAR growth accelerated to both prior year and 2019 levels and occupancy continues its recovery, providing a meaningful tailwind for us in the year ahead. With consumer travel demand holding steadfast in our iconic and trusted brands delivering record levels of direct contribution through our brand.com channels, we are very enthusiastic about the opportunities that lie ahead in our ability to deliver outstanding value to our shareholders, our guests, our franchisees and our team members.

Michele, Matt and I look forward to talking to and seeing many of you in the weeks and months ahead at many of the upcoming investor conferences will be attending. We wish everyone a happy President’s Day weekend and look forward to seeing you soon.

Operator: Thank you. This does conclude today’s Wyndham Hotels & Resorts Fourth Quarter and Full Year 2022 Earnings Conference Call. Please disconnect your line at this time and have a wonderful day.