Wyndham's Off-Interstate Portfolio Benefitting From US Infrastructure Demand

Despite near-term macroeconomic challenges for the consumer—still-elevated inflation, depleted consumer savings - we expect Wyndham Hotels & Resorts to gradually expand room share in the hotel industry and maintain a brand intangible asset and switching cost advantage. This view is supported by the company's roughly 40% share of all US economy and midscale branded hotels (where Wyndham has a handful of the top 10 brands based on guest satisfaction, according to J.D. Power) and the industry’s fourth-largest loyalty program by membership (112 million as of Sept. 30, 2024), which encourages third-party hotel owners to join the platform. Also, Wyndham has around 10% and 5% share of existing US and global hotel rooms, respectively, with a pipeline that represents 28% of its current unit base. As a result, we see room growth averaging over 3%-4% during the next 10 years (2024-33), above the 1%-2% lift we model for the US hotel industry. Further, we forecast about 3% annual revenue per available room growth through the rest of this decade, aided by further price and occupancy increases, as well as incremental demand from increased US infrastructure (22% of 2023 gross room revenue from infrastructure workers) build out during the next several years.