Wyndham Hotels & Resorts announced results for the three months ended March 31, 2020. The development pipeline grew 4% year-over-year to 189,000 rooms and the global RevPAR declined 23% year-over-year due to travel restrictions related to Covid-19.
"During the most challenging crisis the hotel industry has ever endured, our highest priority has remained the well-being and safety of our guests, owners and team members. We have taken the difficult but prudent measures to reduce our costs and bolster our liquidity while providing support and relief for our franchisees to help them weather this downturn," said Geoffrey A. Ballotti, Chief Executive Officer. "Nearly 5,900 of our 6,300 hotels in the U.S. remain open, and with nearly 90% of those properties located outside of major cities in drive-to destinations that cater to a leisure customer base, we believe that our asset-light business is well positioned for a quick recovery when travel demand returns."
Net income was $22 million for the first quarter, a 5% increase over the prior-year quarter, due to lower separation-related expenses associated with the spin-off and a decline in overall expenses.
Revenues decreased $26 million compared to first quarter 2019 reflecting the impact of the crisis on travel demand globally, while a decline in adjusted EBITDA of $5 million was partially mitigated by cost savings initiatives.
The franchised system increased 3% globally, which included the transfer of 7,100 rooms from the hotel management segment related to the CorePoint Lodging asset sales.
RevPAR declined 23% globally, primarily reflecting a 17%, decline in the U.S. and a 37% decline 37% internationally due to a 70% decline in China.
Revenues decreased $30 million compared to the prior-year period due to lower cost-reimbursement revenues, which have little to no impact on adjusted EBITDA.
The managed system decreased 11% globally primarily reflecting the transfer of 7,100 rooms to the hotel franchising segment as a result of CorePoint Lodging asset sales.
RevPAR declined 21% globally, primarily reflecting a 17% decline in the U.S. and a 31% decline internationally.
During the first quarter of 2020, the company opened 58 new hotels totaling 6,200 rooms, a year-over-year decline of 47% as new construction openings were delayed in China and conversion were lower in the U.S. during March.
The development pipeline consisted of 1,500 hotels and approximately 189,000 rooms. Approximately 58% of the pipeline is international and 72% is new construction, of which nearly 40% have broken ground.
Balance Sheet and Liquidity
As of March 31, 2020, Wyndham Hotels & Resorts had $749 million of cash on hand and $2.9 billion of debt outstanding, of which $2.4 billion was first lien debt.
For the three months ended March 31, 2020, net cash provided by operating activities was $17 million, compared to $7 million in the prior year period. The increase was driven by lower separation and transaction cash outlays.
Share Repurchases and Dividends
During the first quarter of 2020, Wyndham Hotels & Resorts repurchased approximately 878,000 shares of its common stock for $45 million at an average price of $51.57 per share. The company suspended its share repurchase activities in March.
Due to the impact of the crisis on the global economy, the Board of Directors approved a reduction in the quarterly cash dividend policy from $0.32 per share to $0.08 per share, beginning with the dividend that is expected to be declared in the second quarter of 2020.
Wyndham Hotels & Resorts identified approximately $255 million of cash savings. In connection with these initiatives, it has eliminated approximately 440 positions, reduced capital spends, eliminated all non-essential spend, consolidated certain facilities and indefinitely suspended CEO’s salary and the Board of Directors’ cash compensation.
As a result, the company recorded a restructuring charge of $13 million during the first quarter of 2020 and expects to incur an additional charge of $18 million during the second quarter of 2020.
The ability to assess the impact of COVID-19 on its full-year financial results continues to be limited due to the rapidly evolving circumstances and uncertainty in travel demand.
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