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Wyndham Hotels & Resorts Inc Ordinary Shares WH

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Morningstar’s Analysis

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Wyndham’s Leisure Drive-To Portfolio Leads the Industry’s Recovery; Shares Slightly Overvalued

Dan Wasiolek Senior Equity Analyst

Analyst Note

| Dan Wasiolek |

Our $68 Wyndham fair value estimate won’t materially change (despite incorporating a 5-point lift in the U.S. corporate tax rate starting in 2022), as the hotelier’s performance continues to lead the travel recovery in the U.S., harmonizing with our view since the outset of the pandemic. Specifically, Wyndham’s second-quarter global revenue per available room, revPAR, reached 83% of 2019 levels, near our 85% estimate, improving from the 69% mark in the prior quarter. The U.S. (61% of rooms) continues to lead the recovery, with revPAR rebounding to 95% of 2019 levels, matching our forecast, while surpassing the industry’s 77% mark. Wyndham continues to benefit from its lower-priced portfolio (over 90% of U.S. hotels are economy and midscale) located in drive-to destinations (87% of U.S. hotels), which are tied to leisure travelers (around 70% of prepandemic demand). And we expect demand for Wyndham’s hotels to continue to improve, despite the surge of the Delta variant, as it remains our stance that the desire to travel will prove unwavering. This view is supported by the resilience of U.S. travel demand during the case spikes around the July 4, Labor Day, and Thanksgiving holidays in 2020. As a result, we model Wyndham’s back-half global revPAR reaching over 90% of 2019 levels, slightly above management's guidance for roughly 90%.

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Company Profile

Business Description

As of June 30, 2021, Wyndham Hotels & Resorts operates 798,000 rooms across 20 brands in the economy (around 51% of total U.S. rooms) and midscale (45%) segments. Super 8 is the largest brand, representing around 30% of all hotels, with Days Inn (18%) and La Quinta (10%) the next two largest brands. During the past several years, the company has expanded its extended stay/lifestyle brands (2% of total properties), which appeal to travelers seeking to experience the local culture of a given location. The United States represents 61% of total rooms. The company closed its La Quinta acquisition in the second quarter of 2018, adding around 90,000 rooms at the time the deal closed.

22 Sylvan Way
Parsippany, NJ, 07054
T +1 973 753-6000
Sector Consumer Cyclical
Industry Lodging
Most Recent Earnings Jun 30, 2021
Fiscal Year End Dec 31, 2021
Stock Type Cyclical
Employees 9,000