Wyndham Hotels & Resorts, Inc. (WH) Bundle
Understanding Wyndham Hotels & Resorts, Inc. (WH) Revenue Streams
Understanding Wyndham Hotels & Resorts, Inc.’s Revenue Streams
The primary revenue sources for Wyndham Hotels & Resorts, Inc. include fees from hotel franchising, management fees, and ancillary revenues. The company generates significant income through royalty and franchise fees, which are derived from its extensive network of franchised hotels globally.
Breakdown of Primary Revenue Sources
| Revenue Source | Q3 2024 Revenue (in millions) | Q3 2023 Revenue (in millions) | Change (%) |
|---|---|---|---|
| Fee-related and Other Revenues | $394 | $400 | (1.5%) |
| Cost Reimbursement Revenues | $2 | $2 | 0% |
| Net Revenues | $396 | $402 | (1.5%) |
Year-over-Year Revenue Growth Rate
For the nine months ended September 30, 2024, net revenues amounted to $1,067 million, a decrease of $9 million or (0.8%) compared to $1,076 million for the same period in 2023.
Contribution of Different Business Segments to Overall Revenue
- Hotel Franchising generated net revenues of $1,067 million for the nine months ended September 30, 2024, which is 99.5% of total revenues.
- Corporate and Other segments contributed $0 million to net revenues, reflecting a focus on franchising.
Analysis of Significant Changes in Revenue Streams
In the third quarter of 2024, net revenues decreased by $6 million, or (1%), primarily due to:
- $18 million lower marketing, reservation, and loyalty revenues associated with the absence of pass-through revenues from the 2023 global franchisee conference.
- $7 million increase in royalty and franchise fees due to net room growth and higher royalty rates.
- $5 million increase in license and other ancillary revenues.
For the nine months ended September 30, 2024, the decrease in net revenues was primarily influenced by:
- $16 million decrease in marketing, reservation, and loyalty revenues.
- $8 million decrease in cost reimbursement revenues due to the exit of the U.S. management business.
- $15 million increase in license and other ancillary revenues.
Summary of Revenue Performance
| Period | Net Revenues (in millions) | Year-over-Year Change (in millions) | Percentage Change (%) |
|---|---|---|---|
| Q3 2024 | $396 | ($6) | (1.5%) |
| Q3 2023 | $402 | - | - |
| 9M 2024 | $1,067 | ($9) | (0.8%) |
| 9M 2023 | $1,076 | - | - |
A Deep Dive into Wyndham Hotels & Resorts, Inc. (WH) Profitability
A Deep Dive into Wyndham Hotels & Resorts, Inc. (WH) Profitability
Gross Profit Margin: For the three months ended September 30, 2024, the gross profit margin was 57.7%, down from 58.8% in the same period of 2023. For the nine months ended September 30, 2024, the gross profit margin was 65.4%, compared to 66.2% in 2023.
Operating Profit Margin: The operating profit margin for Q3 2024 was 43.1%, an increase from 40.5% in Q3 2023. For the nine months ended September 30, 2024, the operating profit margin was 34.3%, compared to 37.0% in the same period of 2023.
Net Profit Margin: The net profit margin for the three months ended September 30, 2024, was 25.7%, slightly down from 25.8% in Q3 2023. For the nine months ended September 30, 2024, the net profit margin was 19.1%, down from 22.3% in the previous year.
| Metric | Q3 2024 | Q3 2023 | Change | Nine Months 2024 | Nine Months 2023 | Change |
|---|---|---|---|---|---|---|
| Gross Profit Margin | 57.7% | 58.8% | -1.1% | 65.4% | 66.2% | -0.8% |
| Operating Profit Margin | 43.1% | 40.5% | +2.6% | 34.3% | 37.0% | -2.7% |
| Net Profit Margin | 25.7% | 25.8% | -0.1% | 19.1% | 22.3% | -3.2% |
Trends in Profitability: The company's net income for the three months ended September 30, 2024, was $102 million, a slight decrease from $103 million in Q3 2023. For the nine months ended September 30, 2024, net income decreased to $204 million from $240 million in the same period last year.
Comparison with Industry Averages: The company's gross profit margin of 57.7% in Q3 2024 is above the industry average of approximately 55%. The operating profit margin of 43.1% also exceeds the average of 35% for the hotel industry, while the net profit margin of 25.7% is higher than the industry average of 20%.
Operational Efficiency Analysis: Total expenses for the three months ended September 30, 2024, were $225 million, down from $239 million in Q3 2023, reflecting a 6% decrease. This reduction was driven by lower marketing and loyalty expenses of $13 million and lower general and administrative costs. The adjusted EBITDA for Q3 2024 was $208 million, up 4% from $200 million in Q3 2023, indicating improved operational efficiency.
| Period | Net Income | Total Expenses | Adjusted EBITDA | EBITDA Margin |
|---|---|---|---|---|
| Q3 2024 | $102 million | $225 million | $208 million | 52.5% |
| Q3 2023 | $103 million | $239 million | $200 million | 50.0% |
| 9M 2024 | $204 million | $701 million | $527 million | 44.7% |
| 9M 2023 | $240 million | $677 million | $505 million | 42.9% |
Operational Efficiency Metrics: The company has improved its operational efficiency, as indicated by the increase in adjusted EBITDA margins from 50.0% in Q3 2023 to 52.5% in Q3 2024. Overall, the operational efficiency continues to show a positive trend with a focus on cost management and revenue growth.
Debt vs. Equity: How Wyndham Hotels & Resorts, Inc. (WH) Finances Its Growth
Debt vs. Equity: How Wyndham Hotels & Resorts, Inc. Finances Its Growth
Wyndham Hotels & Resorts, Inc. has a significant debt level, with total long-term debt of $2.487 billion as of September 30, 2024. This includes a $750 million revolving credit facility, $400 million term loan A, and $1.5 billion term loan B.
Short-term debt, specifically the current portion of long-term debt, stands at $47 million. The company’s total liabilities increased by $284 million from December 31, 2023, primarily due to a $286 million rise in outstanding debt.
Debt-to-Equity Ratio and Comparison to Industry Standards
The debt-to-equity ratio for Wyndham Hotels & Resorts is calculated as follows:
As of September 30, 2024:
- Total debt: $2.487 billion
- Total equity: $583 million
- Debt-to-equity ratio: 4.26
This ratio is notably higher than the industry average, which typically ranges between 1.0 to 2.0, indicating a higher reliance on debt financing.
Recent Debt Issuances, Credit Ratings, or Refinancing Activity
As of September 30, 2024, the company completed refinancing activities, including the early extinguishment of debt amounting to $3 million. The weighted average interest rates on its outstanding debt are as follows:
| Debt Type | Amount ($ million) | Weighted Average Rate (%) |
|---|---|---|
| Revolving Credit Facility | 69 | 7.17 |
| Term Loan A | 369 | 7.17 |
| Term Loan B | 1,518 | 4.42 |
| Senior Unsecured Notes | 496 | 4.38 |
| Finance Leases | 35 | 4.50 |
| Total Long-Term Debt | 2,487 | 5.02 |
Balancing Between Debt Financing and Equity Funding
The company has strategically balanced its growth between debt and equity funding. As of September 30, 2024, total stockholders' equity decreased by $163 million from the previous year, partly due to $285 million in stock repurchases and $93 million in dividends. This indicates a focus on returning value to shareholders while managing a substantial debt load.
The company maintains a first-lien leverage ratio of 2.9 times, which is below the maximum allowed ratio of 5.0 times set by its credit facilities, demonstrating compliance with financial covenants.
Assessing Wyndham Hotels & Resorts, Inc. (WH) Liquidity
Assessing Wyndham Hotels & Resorts, Inc. (WH) Liquidity
Current Ratio: As of September 30, 2024, the current ratio was 1.33, calculated as current assets of $1,134 million divided by current liabilities of $853 million.
Quick Ratio: The quick ratio for the same period stood at 1.08, with quick assets (current assets minus inventories) amounting to $1,134 million and current liabilities remaining at $853 million.
Analysis of Working Capital Trends
The working capital as of September 30, 2024, was $281 million, reflecting an increase from $213 million as of December 31, 2023. This increase is attributed to improved cash flow management and a reduction in short-term liabilities.
Cash Flow Statements Overview
| Cash Flow Type | 2024 (Nine Months Ended Sept 30) | 2023 (Nine Months Ended Sept 30) | Change |
|---|---|---|---|
| Operating Activities | $156 million | $253 million | $(97 million) |
| Investing Activities | $(40 million) | $(50 million) | $10 million |
| Financing Activities | $(100 million) | $(283 million) | $183 million |
The cash provided by operating activities for the nine months ended September 30, 2024, was $156 million, down from $253 million in the previous year, indicating a decline of 38.3%. Cash used in investing activities decreased to $(40 million), while cash used in financing activities improved significantly to $(100 million) from $(283 million).
Potential Liquidity Concerns or Strengths
As of September 30, 2024, total liquidity approximated $750 million. The company maintained compliance with its financial covenants, indicating a stable liquidity position. However, the substantial increase in total liabilities to $3,571 million from $3,287 million raises potential concerns regarding future cash flow management.
The company's total assets were reported at $4,154 million, with stockholders' equity decreasing to $583 million from $746 million due to stock repurchases and dividend payments totaling $93 million.
Is Wyndham Hotels & Resorts, Inc. (WH) Overvalued or Undervalued?
Valuation Analysis
As of September 30, 2024, the following valuation ratios are relevant for assessing the company's market position:
- Price-to-Earnings (P/E) Ratio: 17.5
- Price-to-Book (P/B) Ratio: 2.4
- Enterprise Value-to-EBITDA (EV/EBITDA): 10.1
The stock price trends over the last 12 months show the following performance:
| Month | Stock Price ($) |
|---|---|
| September 2023 | 70.00 |
| December 2023 | 65.69 |
| March 2024 | 75.00 |
| June 2024 | 77.00 |
| September 2024 | 75.01 |
Regarding dividends, the company declared cash dividends of $0.38 per share for each quarter in 2024, resulting in an aggregate of $93 million.
The payout ratio is calculated as follows:
- Payout Ratio: 33.4%
Analyst consensus on stock valuation is as follows:
- Analyst Recommendations:
- Buy: 10 Analysts
- Hold: 5 Analysts
- Sell: 2 Analysts
In summary, the financial metrics and analyst insights provide a comprehensive view of the company's valuation and market positioning as of 2024.
Key Risks Facing Wyndham Hotels & Resorts, Inc. (WH)
Key Risks Facing Wyndham Hotels & Resorts, Inc.
The company faces several internal and external risks that could significantly impact its financial health. These include industry competition, regulatory changes, and fluctuating market conditions. The hospitality sector is characterized by intense competition, particularly from other hotel chains and alternative lodging options such as Airbnb. This competitive landscape can pressure pricing strategies and occupancy rates.
Operational Risks
Operational risks stem from the company's reliance on franchisees for revenue generation. As of September 30, 2024, the company reported net revenues of $396 million for the third quarter, a decrease of 1% compared to the previous year. This decline was primarily attributed to $18 million in lower marketing, reservation, and loyalty revenues due to the absence of pass-through revenues associated with the 2023 global franchisee conference.
Financial Risks
Financial risks are evident in the company's increasing interest expenses. For the three months ended September 30, 2024, net interest expense rose to $34 million, a 26% increase from $27 million in the same period of 2023. Additionally, the company's total liabilities increased by $284 million from December 31, 2023, to September 30, 2024, largely due to a $286 million rise in outstanding debt.
Strategic Risks
Strategic risks include the company's restructuring efforts and the potential impact of regulatory changes. The company incurred $11 million in restructuring costs during the first nine months of 2024. Furthermore, the introduction of the Pillar II directive establishing a global minimum corporate tax rate of 15% could affect the company's tax obligations starting January 1, 2024.
Market Conditions
Market conditions can also pose a risk, especially in light of fluctuating occupancy rates. The company's global RevPAR (Revenue per Available Room) for the three months ended September 30, 2024, was $49.33, down 1% from $49.71 in the previous year. The U.S. segment experienced a 2% decline in RevPAR, reflecting lower occupancy levels.
Mitigation Strategies
To mitigate these risks, the company has focused on operational efficiencies and strategic growth initiatives. The development pipeline as of September 30, 2024, included approximately 2,100 hotels and 248,000 rooms, representing a 5% year-over-year increase. The company also maintains a liquidity position of approximately $750 million to support operational needs and growth.
| Risk Type | Description | Impact | Mitigation Strategies |
|---|---|---|---|
| Operational Risks | Reliance on franchisees; lower revenues from marketing and loyalty programs | Decrease in net revenues by $396 million (1% decline) | Enhancing operational efficiencies |
| Financial Risks | Increasing interest expenses; rising liabilities | Net interest expense rose to $34 million (26% increase) | Maintaining liquidity of $750 million |
| Strategic Risks | Restructuring costs; regulatory changes | Restructuring costs of $11 million | Strategic growth initiatives |
| Market Conditions | Fluctuating occupancy rates; declining RevPAR | Global RevPAR at $49.33 (1% decline) | Expanding development pipeline |
Future Growth Prospects for Wyndham Hotels & Resorts, Inc. (WH)
Growth Opportunities
Future growth prospects for Wyndham Hotels & Resorts, Inc. are supported by several key growth drivers, including market expansions, product innovations, and strategic initiatives.
Key Growth Drivers
- Market Expansion: The company's global development pipeline consists of approximately 2,100 hotels and 248,000 rooms, reflecting a 5% year-over-year increase. This includes a 7% growth in the U.S. and 3% growth internationally.
- Product Innovations: The introduction of new brands and services, particularly the ECHO Suites Extended Stay, which represents 14% of the pipeline, aims to capture the growing demand for extended-stay options.
- Strategic Initiatives: The company's restructuring plan, initiated in early 2024, is designed to enhance organizational efficiency, with $11 million incurred in restructuring expenses during the first nine months of 2024.
Revenue Growth Projections
Future revenue growth is projected to be driven by increased royalty and franchise fees, which rose by $7 million in Q3 2024 compared to the previous year. The company anticipates continued growth in net revenues, supported by an increase in ancillary revenues, which grew by $5 million in the same period.
Earnings Estimates
The earnings estimates for 2024 indicate a potential increase in adjusted EBITDA, which rose by 4% to $208 million for Q3 2024 compared to $200 million in Q3 2023. For the nine months ended September 30, 2024, adjusted EBITDA increased to $527 million, up from $505 million in 2023.
Strategic Partnerships
The company has established strategic partnerships that enhance its market reach and operational capabilities. These partnerships are expected to facilitate growth through expanded customer engagement and improved service offerings.
Competitive Advantages
Wyndham Hotels & Resorts benefits from several competitive advantages that position it for growth:
- Brand Recognition: The company operates a diverse portfolio of well-known brands that cater to various market segments.
- Operational Efficiency: The implementation of operational efficiencies has allowed the company to reduce total expenses by 6% in Q3 2024 compared to the previous year.
- Global Presence: With a total of 892,600 rooms globally, including a 8% increase in international rooms, the company is well-positioned to capitalize on global travel trends.
| Metric | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Net Revenues | $396 million | $402 million | (1%) |
| Adjusted EBITDA | $208 million | $200 million | 4% |
| Total Rooms | 892,600 | 858,000 | 4% |
| International Rooms Growth | 8% | 3% | 5% |
Overall, the company's strategic focus on expansion, efficiency, and innovation positions it to leverage growth opportunities effectively going forward.
Wyndham Hotels & Resorts, Inc. (WH) DCF Excel Template
5-Year Financial Model
40+ Charts & Metrics
DCF & Multiple Valuation
Free Email Support
Article updated on 8 Nov 2024
Resources:
- Wyndham Hotels & Resorts, Inc. (WH) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Wyndham Hotels & Resorts, Inc. (WH)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Wyndham Hotels & Resorts, Inc. (WH)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.