Wyndham Earnings: Travel Demand Still Resilient as Investors Monitor Macro Headwinds; Shares Cheap

Narrow-moat Wyndham’s WH first-quarter results and 2023 outlook continue to point toward resilient travel demand, even as macro clouds (higher inflation, softening labor markets, tightening credit availability) persist. Our $88 per share fair value estimate should not materially change on Wyndham’s report, and we believe shares should trade around a 15 times 2023 EV/EBITDA multiple versus the current 12 times valuation.

Wyndham’s first-quarter constant currency global revenue per available room, or revPAR, was 111% of 2019′s level, which compares with narrow-moat peer Hilton’s 108%. Wyndham noted April U.S. revPAR accelerated to 110% of 2019′s level versus the first quarter’s 108% mark and that it continues to expect international volume (15% of 2022 royalties) and occupancy demand from domestic infrastructure projects (20% of 2022 gross room revenue) to provide tailwinds through the rest of 2023. As a result, Wyndham reiterated its 2023 reported revPAR growth target of 4%-6%. Still, a recent softening in U.S. economic data and the simmering regional banking environment are causing us to tweak our near-term revPAR forecast toward 4% and 5% for 2023 and 2024, respectively, versus our prior 5% and 6% prognosis. If a prolonged and deep recession were to occur (which is not our expectation), it is worth noting that Wyndham’s lower-priced portfolio has historically seen revPAR outperformance compared with higher-end options as consumers trade down.

Wyndham increased its 2023 adjusted EBITDA guidance by $5 million at the midpoint to $654 million-$660 million, near our $653 million forecast. We expect adjusted EBITDA margins to reach the high 40s in 2023 from the low 40s in 2022, aided by recent terminations of owned and managed relationships.

The hotelier’s development remains healthy, with its pipeline of 226,000 of rooms up 11% year over year, aided by 25,000 rooms from the new extended-stay ECHO brand, launched in March 2022.