Wyndham Hotels & Resorts, Inc. (WH) Q1 2026 Earnings Report, Transcript and Summary

Good morning, everyone. Welcome to the Wyndham Hotels & Resorts First Quarter 2026 Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Mr. Matt Capuzzi, Senior Vice President, Financial Planning and Analysis and Investor Relations. Mr. Capuzzi, please go ahead.

Thank you, operator. Good morning, and thank you for joining us. With me today are Geoff Ballotti, our CEO; and Amit Sripathi, our CFO. Before we get started, I want to remind you that our remarks today will contain forward-looking statements. These statements are subject to risk factors that may cause our actual results to differ materially from those expressed or implied. These risk factors are discussed in detail in our most recent annual report on Form 10-K filed with the Securities and Exchange Commission and any subsequent reports filed with the SEC. We will also be referring to a number of non-GAAP measures. Corresponding GAAP measures and a reconciliation of non-GAAP measures to GAAP metrics are provided in our earnings release and investor presentation, which are available on our Investor Relations website at investor.wyndhamhotels.com. We are providing certain measures discussing future impact on a non-GAAP basis only because without unreasonable efforts, we are unable to provide the comparable GAAP metric. In addition, last evening, we posted an investor presentation containing supplemental information on our Investor Relations website. We may continue to provide supplemental information on our website and on our social media channels in the future. Accordingly, we encourage investors to monitor our website and our social media channels in addition to our press releases, file submitted with the SEC and any public conference calls or webcast. With that, I will turn the call over to Geoff. Geoff?

Thanks, Matt. Good morning, everyone, and thanks for joining us today. We're very pleased to report a strong start to the year with first quarter results highlighting the strength of the value proposition we deliver to our owners in a faster-than-expected RevPAR recovery for our U.S. select service brands. Our development momentum continued with net room growth of 4% and a pipeline which increased for the 23rd consecutive quarter to a record of over 259,000 rooms. We delivered 21% growth in ancillary revenues. We generated $64 million of free cash flow, and we returned $85 million to our shareholders. Global RevPAR improved 450 basis points sequentially from the fourth quarter. Domestic RevPAR, excluding last year's hurricane impact, improved over 600 basis points to essentially flat and ahead of our down 2% to down 3% expectation as demand continued to pick up throughout the quarter. January's 4% RevPAR decline improved to plus 1% growth for February and also for March. Our 3 largest states of Texas, California and Florida which account for 1/4 of our U.S. room count improved by 800 basis points sequentially from down 11% in Q4 to down only 3% in Q1. The Q4 strength we saw in our Midwest and industrial states continued into Q1 without performance in Iowa, Illinois, Michigan, Oklahoma and Wisconsin. Immigration and trade policies that created an environment of uncertainty appear to have stabilized and strong leisure demand over the spring break travel season has provided improved confidence among many franchisees as they approach the peak leisure summer travel season. April month-to-date RevPAR growth has been consistent with February and March. International RevPAR growth was consistent with the fourth quarter at down 1% in constant currency. In Canada, RevPAR increased 8% on increased pricing power and improved demand. In EMEA, RevPAR grew 1% with strong performance in Turkey, Greece and Spain, offset by softness in the Middle East, which declined from plus 18% in Q4 to down 5% in Q1. RevPAR in Mexico fell with lower U.S. inbound travel driving pricing pressure and dropping our Latin America RevPAR by 4% versus prior year. Excluding Mexico, our Latin America region saw an 11% RevPAR increase, driven by strong pricing and demand growth in Argentina, Brazil and the Caribbean. Asia Pacific RevPAR improved nearly 700 basis points from down 7% in Q4 to down 1% in Q1. Strength in Thailand and Vietnam was offset by China where RevPAR improved 540 basis points sequentially from down 10% in Q4 to down 5% in Q1, driven by continued occupancy improvement, which remains a significant tailwind at only 88% of pre-COVID levels. Earlier this month, the large contingent of our franchise sales, operations and technology team members attended a [indiscernible] '26 the Asian American Hotel Owners Association Conference in Philadelphia, which aside from Wyndham's Global Hotel Conference is the largest gathering of select service hotel owners in the U.S. our booth at [indiscernible] trade show was the busiest it's ever been, and developer enthusiasm for our brands and our AI-driven technology offerings designed to capture revenue at every touch point of the guest journey was strong. Developers are increasingly noting that our best-in-class technology, powered by providers like Sabre, Oracle, Salesforce, Canary Technologies is making our brands ever more efficient and less expensive to operate and that our rapidly expanding AI-enabled shared service approach is lowering their breakeven point and making their hotels more profitable to run. This increased interest in our brands is certainly reflected in our first quarter results where new hotel contracts awarded in the United States increased by 8% and where our global development pipeline grew to a record of over 2,200 hotels as the most asset-light player in the industry, with the development pipeline whose domestic and international rooms carry a 30% PPAR premium. We're structurally upgrading Wyndham's long-term earnings power as we continue to move towards higher tier and higher RevPAR segment brands. As we previewed on our last call, net rooms were flat domestically, which included legacy affiliated room exits from the sale of Vacasa Vacation Rentals to Casago, along with T&L's closure of 17 vacation resorts from our Blue Thread Partners previously announced resort optimization initiative. On the opening side, momentum was driven by strong conversion activity from upscale Travelers' Choice Award winners like the Vapi Palm Springs, which joined our Dolce by Wyndham brand, and [indiscernible] boutique Island Sky Ocean Hotel, which joined our trademark collection by Wyndham, a brand that has grown to over 100 hotels in the U.S. with 99 hotels in its global development pipeline. Domestic new construction activity was again fueled as it will be for the decade ahead with new Echo Suites by Wyndham hotels opening in markets like Colorado Springs, our seventh in the past 6 months, with our 20th opening 2 weeks ago in Bozeman, Montana. We also saw more new construction upper mid-scale dual-branded La Quinta Hawthorn Suites prototypes, opening and popular tourist destinations like 11 Worth Washington and more new construction upper upscale hotels like the Dolce by Wyndham opening in the heart of South Beach, Florida. Internationally, we increased the number of net rooms by 9%. And EMEA grew net rooms by 7% with standout new conversions like our 90th Ramada by Wyndham in Turkey with the opening of the Ramada Encore Mid yacht along with several new construction additions, including the Remosa Plaza Tashkent located in the heart of Uzbekistan's capital. Latin America and the Caribbean grew net rooms by 12% with several notable trademark conversions, including the new parka Boutique Hotel in the heart of Cartagena's old City, along with the Decameron Baru, a TripAdvisor Holly Fame award-winning resort near Playa Blanca. In Southeast Asia, in the Pacific Room, we grew net rooms by 11% and driven by exceptional new construction additions such as the Wyndham Garden Manila Bay, which marks our first Wyndham Garden property in the Philippines. And in China, we once again delivered double-digit net room growth for our direct franchising system and 13% net room growth across Mainland China in total, with several new construction additions, including the Wyndham Grand Tongcheng Hot Springs, our first Wyndham Grand in the Tongcheng Yanan province and the Wyndham Fuzhou Guo [indiscernible] which marks the first Wyndham 5 Star Hotel in the bustling downtown of Fuzhou's capital. Ancillary revenues increased 21% in the quarter fueled by our renewed and very successful suite of Wyndham Rewards credit card products, along with the continued expansion of our strategic partnership initiatives and ongoing technology innovations. Key to this growth is our award-winning loyalty program, where Wyndham Rewards occupancy contribution increased 120 basis points to a record 54% domestically. Global membership enrollments grew another 10% year-over-year and the collective length of stay for our 124 million members grew by 6%. Our Wyndham Rewards experiences platform is increasingly helping to drive that growth as well as deeper member engagement. In the first quarter, we introduced exclusive new opportunities for members to redeem for even more unforgettable experiences like a private tasting with Chef Lorena Garcia at our Miami culinary Loft, who stays at our new registry collection Valor Miami Beach Hotel, and private suite tickets for Harry Styles and Lady Gaga concerts at Madison Square Garden. Looking ahead, we'll continue to leverage our premier partnerships to deliver these once-in-a-lifetime moment. Next month, Wyndham Reward members will have the exclusive opportunity to redeem points to play in the program with PGA Tour professionals at the 20th Wyndham Championship the last stop on the PGA Tour prior to the FedEx Cup playoffs. As our technology innovations have increasingly helped our franchisees operate more efficiently and more profitably, we're rapidly deploying AI, making it easier for guests to discover and book Wyndham hotels. Today, every property that utilizes Wyndham Connect+ effectively has its own AI-powered voice agent. With more than 1,100 hotels live on this platform domestically and now ramping globally. That's over 1,100 AI agents answering calls and chats on behalf of our owners, helping to drive nearly 300 basis points of incremental direct contribution for these hotels through agenetic voice channels while also driving meaningful cost savings for these owners by taking labor out of their hotels and front offices. In addition, nearly 5,000 franchisees already live on Wyndham's proprietary AI-powered Wyndham Connect platform, are collectively earning millions of incremental dollars by autonomously generating revenue from early check-in, late checkouts, room upgrades and pet fees, incremental amenities and services and so many other creative upsell opportunities they develop themselves. Together, these initiatives are creating a durable competitive advantage that we expect to compound as adoption continues to ramp. Building on this momentum, AI is transforming our marketing economics and booking process performance, amplifying our reach, transforming our digital acquisition model and optimizing our unit economics by allowing us to drive significant reservation volume growth while consistently compressing our cost per click and cost per acquisition by embedding AI across the full guest engagement journey and leveraging our partnership with Adobe, we are dramatically increasing personalization while keeping guests engaged longer, driving higher conversion rates shifting demand into direct booking channels and improving the foundational profitability of our business. Our strategy to meet guests wherever their travel intent is formed is working. And increasingly, that's beginning inside of OpenAI's ChatGPT, inside of Anthropics Cloud and inside of Google search AI mode. Wyndham's distribution engine has expanded into these important channels where our growing demographic of younger guests are progressively searching, planning and booking. Last quarter, we announced our direct integration with Anthropics Cloud enabling subscribers to conduct intent-driven searches. This quarter, we're excited to share that we've launched Wyndham apps on both Cloud and ChatGPT, delivering that same functionality through a more visual and interactive experience. including dynamic mapping, rich property tiles and detailed hotel pages, representing a highly interactive hotel discovery and decision journey. And we're pleased to report that we continue to make strong progress with Google to develop our direct booking genic AI experience in AI mode, allowing our guests to experience the full value of booking directly with Wyndham through natural conversational interactions without ever leaving Google's AI mode. In closing, the over $450 million investment we've made in technology, which is enabling our AI innovation and which is detailed in our investor presentation posted last night to our Investor Relations website, serves as a powerful engine for franchisee profitability regardless of the economic climate. As we look ahead, we're incredibly optimistic and see clear signs of strengthening consumer and business confidence, which we're well positioned to capitalize on as RevPAR in the select service segments continues its recovery. Most importantly, we want to extend our gratitude to our team members worldwide whose unwavering commitment and resilience throughout the challenging macro environment over the past year has been the bedrock of our success. And now I'm very pleased to formally introduce Amit Sripathi, our newly appointed Chief Financial Officer. Amit's been in the lodging industry for most of his distinguished career and with Wyndham for the past 5 years in a variety of roles, leading our M&A, our strategic development and our franchise sales efforts, most recently as our Chief Development Officer. Amit's combination of deep finance and capital markets expertise his firsthand operational leadership at Wyndham and his strong relationships with our franchisees, have positioned him very well to take over as our CFO. And with that, Amit will now walk us through our financial highlights and full year outlook. Amit?

Thanks, Jeff, and good morning, everyone. I'm excited to step into the Chief Financial Officer role and to speak with all of you today. In my prior role as Chief Development Officer and collaborating with our regional presidents, I gained a strong understanding of the value proposition we deliver to owners and developers through the Wyndham Advantage. The continued development momentum we've seen across our system and our pipeline reinforces my confidence in the strength of our brands and our ability to achieve our long-term growth outlook. Turning to results. My remarks today will include a detailed review of our first quarter financial performance followed by an update on our cash flows, our balance sheet and our outlook. Before I begin, let me remind everyone that the comparability of our financial results continues to be impacted by the timing of our marketing fund spend. In the first quarter of this year, marketing fund expenses exceeded revenues by $9 million compared to expenses exceeding revenues by $22 million in the first quarter of last year. to enhance transparency and provide a better understanding of the results of our ongoing operations, I'll be highlighting our results on a comparable basis, which neutralizes the marketing fund impact. In the first quarter, we generated $327 million of net revenues and $156 million of adjusted EBITDA. Net revenues increased 3% year-over-year primarily reflecting a 21% increase in ancillary revenues and system growth of 4%, partially offset by lower other franchise fees and the deferral of fees from Riva Hospitality Group. Ancillary revenue growth was driven by the full quarter impact of our renewed long-term co-branded credit card agreement, which occurred at the end of first quarter last year. Adjusted EBITDA declined 1% on a comparable basis primarily reflecting the absence of onetime cost reductions, partially offset by our revenue growth. Adjusted diluted EPS for the quarter was $0.96, down 3% on a comparable basis. as a 1% comparable adjusted EBITDA decline, a marginally higher effective tax rate and increased interest expense was partially offset by the benefit of share repurchase activity. Development in advanced spend totaled $29 million in the first quarter, roughly consistent with our spend in first quarter 2025. We continue to see an increased appetite for our brands, and we're happy to put our excess cash to work to bolster our footprint in some of the PPAR accretive markets Jeff mentioned earlier. We continue to be disciplined with the use of development in ANSYS and underwriting above our cost of capital. With these hotels historically entering our system at a PPAR premium of roughly 40% above our systems PPAR. We returned $85 million to our shareholders in the first quarter through $51 million of share repurchases and $34 million of common stock dividends. In February, we issued $650 million of senior unsecured notes at 5.625% and primarily used the net proceeds to fully repay our then outstanding revolver borrowings and term loan [indiscernible] bonds. Pro forma for the transaction are nearest maturities in the second half of [indiscernible] and nearly all our debt is fixed at attractive rates. We ended the quarter with approximately $1.1 billion in total liquidity, and our net leverage ratio of 3.5x remained as expected at the midpoint of our target range. Now turning to outlook. We are reaffirming our expectation for full year global net room growth of 4% to 4.5%, excluding any potential termination impact associated with Revo's ongoing insolvency. As Jeff mentioned, first quarter U.S. RevPAR trends exceeded our expectations, and we've seen sustained 1% growth in the U.S. over the past 3 months. As such, we've updated our expectations to include our first quarter U.S. outperformance as well as assumptions that the U.S. maintains this level of growth through the second quarter. Our expectations for the back half of the year in the U.S. remain unchanged at approximately flat until we gain further visibility in the peak leisure summer months. Accordingly, we're raising our global RevPAR outlook to a range of up 1% to down 1%. As part of our efforts to pursue all available remedies related to Revo's ongoing insolvency proceedings, and optimize the recoverability for our shareholders, we exercised our rights during the first quarter to foreclose on and take ownership of 2 properties in Europe that were previously owned by Revo. We expect these properties to generate approximately $10 million of net revenues in full year 2026, with a limited impact to earnings as we work to stabilize operations and implement an asset management plan to maximize value. As such, net revenues are now expected to be $1.47 billion to $1.5 billion. The impact from our increased RevPAR outlook falls within our adjusted EBITDA outlook range of $730 million to $745 million, which therefore remains unchanged. We've updated our adjusted net income range to $351 million to $365 million to reflect the impact of increased interest expense resulting from our issuance of senior unsecured notes, which is offset in adjusted diluted EPS by the impact of share repurchases. As such, our adjusted diluted EPS outlook range of $4.62 to $4.80 remains unchanged. Our expectation for the marketing fund to break even on a full year basis also remains unchanged. With respect to seasonality, we expect the funds to underspend by approximately $10 million to $15 million in the second quarter, bringing the first half under spend to approximately $0 million to $5 million, which we then expect will reverse in the back half of this year. In closing, our first quarter results underscore the strength and appeal for brands to guests, developers and owners as reflected in the meaningful recovery in U.S. RevPAR and continued growth in our system size and development pipeline. We've remained disciplined in our capital allocation approach, prioritizing investments in high-return growth opportunities and digital technology advancements while consistently returning excess capital to shareholders. We're confident that our resilient asset-light business model and strong balance sheet position us well to drive solid results in 2026, while providing clear visibility into our long-term growth trajectory. With that, Jeff and I would be happy to answer your questions. Operator?

[Operator Instructions] We'll go first this morning to Michael Bellisario with Baird.

Amit, congrats on the new role. Can we start big picture on the demand side? Just first, sort of where and when did you begin to see the RevPAR improvement in the first quarter? And then second part, how much of what you've seen through April is maybe actual underlying demand improvement versus maybe just easier year-over-year comparisons.

We began to see it, Mike, really, as we talked about on our last call in January, we're midway through February. The Q4 RevPAR, as we talked about in the script of down 8% was down 4% in January. And then it just jumped to plus 1% for February and March. And April month-to-date is continuing with that same strong demand, that same February and March improved performance. We saw it specifically in states like Texas, which we talked about the combination of Texas, Florida and California improving 800 basis points. But Texas alone was a 700 basis point improvement, and it was up 2% year-over-year, which was great to see -- and we have 700 hotels in Texas, 2% up for the quarter. That was a big deal. -- improvement, of course, in California and Florida. We saw it, as we talked about, across the Midwest infrastructure states, collectively a big group of them, up 8%, we're seeing corporate contracted in that everyday business pick up. And sequentially, it was both occupancy and rate. We saw nongovernment infrastructure pick up oil and gas pickup. Our oil and gas market tracks, which are 12% of our room count picked up by 400 basis points. And in terms of what we're seeing now in April, if we just look at STR for the last 8 weeks, U.S. economy occupancy is running up 140 basis points to prior year. So that's demand driven, with Wyndham's economy brands outperforming over those last 8 weeks, the STR economy industry occupancy by 120 basis points. And our economy brands are continuing to drive rate index gains. And we talked about in the last call, and we continue to see it ADR being the biggest opportunity for our small business owners moving forward, especially in select service. Our economy and mid-scale brands continue to gain rate index. There's a lot of runway ahead. We know that economy ADR has a long way to recover. It's only up 11% to 2019 versus higher-end segment like luxury being up 30%. So as wage growth continues to outpace inflation and consumer confidence continues to stabilize, the pricing opportunity for our franchisees to catch up on both the demand side, which we're seeing and now looking forward on the rate side is significant.

We'll go next now to Brandt Montour with Barclays.

Maybe we'll just keep that thread going, Jeff. If we were to sort of read between the lines in terms of business travel versus leisure travel, sequentially, it sounds like business travel might be driving some -- a little bit more of the majority of the sequential strength. So maybe talk a little bit more on the leisure side. do you feel like you're seeing closer to home trends pick up? Do you think that you're seeing tax refunds sort of more than offset sensitivity to gas prices? What are you kind of seeing near term in terms of like booking trends and booking window, the length of the booking window. Any other sort of KPIs you're looking at leases that would be helpful.

Sure. Thanks, Brandt. There is so much optimism out there in the United States, both obviously on the U.S. development side, but on the consumer demand side, specifically cancellation rates are improving. They're getting better. Booking lead times are really solid. And the lengths of stay interestingly are getting longer. They're up to prior year, and they're up significantly, 540 basis points to where they were pre-COVID. And we're seeing guests drive a bit further than last year and drive a lot further than they were post-COVID with that revenge travel coming back. And whether it's a C-shaped or an E-shaped economy with that middle tier of middle-income consumers, our sweet spot feeling better. They are gaining confidence in purchasing power. And our franchisees across the country, you're feeling it, you referenced tax refunds. Those second half tax refunds absolutely have the potential to unlock further discretionary spending. U.S. travel published a research report earlier this month, which estimates that one out of every $9, 9% of the estimated $57 billion of tax refunds will be spent on travel. And that middle-income guests U.S. travel believes and their research shows will drive 70% of that, meaning an extra 1 out of 9 on $57 billion, 70% of that, $3.5 billion, $4 billion that their research estimates will be spent on domestic travel this year. And our internal consumer research shows that our middle-income guests continue to express a higher intent to travel this year, certainly than they were at this point last year. Wage growth, as we saw yesterday, is robust enough to support increased discretionary spending, which, again, are small business owners are seeing -- and while Amit mentioned in his outlook comments that while we have limited back half visibility, we know our comps ahead get easier. And we're expecting a stronger June. We're expecting a stronger July with FIFA, where we're already seeing our hotels within 20 miles are pacing considerably ahead of prior year, which should contribute. We're estimating about 20 bps of uplift right there. And then we have events planned for the Route 66 and the America 250 celebrations this summer and fall that have our -- here in this building, our PR, our sales teams, our marketing teams targeting drive-to guests with mobile offers to boost room night demand across the hundreds and hundreds of our hotels along U.S. highways and byways like Route 66. So it was more leisure to your question, but it was similarly and we could save it for another question. blue collar and infrastructure business, which is strengthening government showing signs of improvement, a lot of optimism out there with oil and gas in those markets that we're in. But there is a lot to be confident about.

We go next now to Steve Pizzella with Deutsche Bank.

Just wanted to follow up on AI. How have your initiatives benefited Wyndham and your owners? What have you seen in terms of increasing direct bookings? And what are the upside cases you're hearing for your owners in terms of additional ancillary spend?

A lot in there, Steve, and it's something I was sitting with owners in Southeast Asia and the Pacific last month, and it's -- whether I was in New Zealand talking to a developer building La Quintas or in Singapore, in a full-service hotel, there is nothing that they're more excited about in terms of everything you asked in that question, incremental revenue and more direct bookings. I mean, AI is moving so quickly. And our whole AI forward 6 year, we've talked a lot about it on these calls, a $450 million investment that Scott Strickland and the team has led has really accelerated our AI readiness. We are now 100% cloud-based. We're fully optimized across all of our platforms with best-in-class partners like AWS and Salesforce, Oracle, Adobe. And the foundation is enabling us to launch products like we've talked a lot about. I won't go into it, the Wyndham connect AI with Canary, it's in our investor deck powered by Open AI. That was launched 2 years ago. And that gave us a very early lead in removing friction across the guest journey for franchisees. And it delivered to your question, commercial value to our owners, allowing them to focus more on hospitality. Because we're deploying it at scale across all of our guest touch points, we're no longer piloting. We're driving up to in an engaged full-service hotel up to $25 million of additional NOI ancillary revenue, that is real money for those hotels. We've got engaged economy hotels driving $120,000 of incremental spend incremental spend from guests, which is flowing straight through to their bottom line and incremental mid-scale hotels driving a $150,000 through that 1 product. And so it's -- it's really exciting in terms of what it's driving for them, and it's certainly helping us. It was a big topic of conversation when we were at the AoA conference I referenced in my remarks today in terms of what's differentiating Wyndham from -- in the Select service space, their competitive sets to do business with us. And we're really excited about to your direct contribution question. I think that's, for us, the biggest benefit that as we roll this out, we talked about 1,100 hotels right now and rolling it out across the world with our Wyndham Connect+ product that's also in the investor deck, we are taking millions and millions of dollars of costs out of those hotels front office. We're taking millions of guest calls, millions of questions away from people that would have to answer them. And we're autonomously handling those labor-intensive tasks that they no longer have to stack to. That's what's saving the money. But it's also resulting in better or interactions with our guests. We have no drop calls, faster handle times, handle times have improved by 25%. And it's that AI product that we've deployed that's driving that. We talked about in the script, 300 basis points of increased direct contribution to those franchisees, which they're very excited about.

We go next now to David Katz with Jefferies.

Just following on the AI thing, given the slides that you have in your deck and the amount of commentary put on it. Do you have any statistics or any perspectives on customer uptake? I think that's obviously going to be one of the gating factors for how much and how soon and how fast -- how are you measuring that?

Yes. The incremental revenue upside that I'm talking about, David, is with with Steve's question is the most immediate important measurement for our franchisees. I mean we're looking at everything that we could do to drive incremental revenue to their hotels. We're looking at how much margin we could drive by taking a guest service agent, perhaps or a PABX operator. off of their payroll and allow them to free up staff for others. We're looking at the percentage that we're able to drive to the hotel from a direct booking basis because the call wasn't dropped or it wasn't lost, and that's that 300 basis point KPI that we're tracking right now for the 1,100 hotels, only 1,100 so far of our 8,000 as we roll it across the world in 100 different languages that we're looking at. So our job is to make sure that the small business owners are engaged with these tools that can drive hundreds of thousands of dollars up to 100,000 maybe in a -- or over 100,000 in an engaged franchise economy hotel to $0.25 million in a very engaged leak point of Vista Palace in Orlando that complex is just all over this, and is really, really creative. And we can't underestimate the KPI for guest satisfaction. We're continuing to see -- we've seen an uptick of 400 basis points in guest satisfaction because those calls are answered right away. I mean we have that single source of truth, where David Katz is booking a reservation and we now know that autonomous agent now knows all about David. Before we did not, that front desk agent might not. We have that basic information that was not easily at their fingertips about what David and his daughters like and not having to ask David to give us anything about them in terms of his loyalty is booking behaviors these agents are able to answer any question imaginable that I guess might ask about his stay in moments, not minutes and book the Cat family into their preferred room based on their past day history and then work to sell them a suite upgrade and really check an late checkout or an F&B amenity package. All of this being done autonomously is just so exciting. We would not have had the time to do that before, and it's the revenue generated that we're looking at. It's the it's the direct bookings because that call wasn't dropped and you didn't hop off on to a third-party to book, and it's the increased satisfaction that we're delivering for our guests at time of booking. And then you just multiply that on -- in terms of everything that we're doing. With the LLM in terms of where we're live today with Cloud and Open AI and and Google, and it's really, really, really exciting. I mean we're scratching the surface with so many new initiatives underway that we're not going to talk about or disclose on this call, but we're very well positioned as these platforms continue to evolve.

And David, if I could, if I could just add on your customer uptick and uptake question studies are showing that almost 40% of travel searches are coming through LOM. So really, we want to meet guests wherever they're choosing to book and offer Wyndham hotels and their engagement through our Wyndham mobile app through interacting with the properties, front desk and all of that, we're seeing strong increases. So guests are definitely embracing it as -- and we're right there to meet them.

We go next now to Dany Asad with Bank of America.

And congrats on the new role. My question for you is more on the ancillary side. Can you just help us understand the big drivers of that increase in the quarter? And then more importantly, I think how should we think about that opportunity long term here?

I'm excited to be in the new role. Ancillary, we had a strong quarter this year, 21% year-over-year growth, primarily driven by the credit card program. As you kind of think about that, we have -- we've guided to low to mid-teens for the full year. That's still the outlook for the full year Q1, the 21% is really driven by lapping. We renewed the credit card agreement with Barclays in March of last year. So as you look at it for this quarter, we had a full quarter versus just a month last year. So that's really the lapping. But with -- as far as the full year, it's still the low to mid-teens guidance that we provided, and we're excited about [indiscernible] continued growth in the ancillary side.

We'll go next now to Patrick Scholes with Truist Securities.

Wonder if you could give us a little bit more color on your performance out of China. Certainly, across the industry and 1Q results, we've seen just a very wide volatility in RevPAR results out of China, certainly, Smith Travel sort of implied up low single digits, some companies reported, we're doing up in the teens. You folks were negative 5%. A little bit more color on what drove the negative 5% versus, say, the industry where perhaps what you know about the other companies? And then your expectations for the near to midterm for China.

Sure. looking at the industry, looking at STR, and we've talked about this before, Patrick, our brands in China were much like here in the U.S., the first to recover coming out of the lockdown. And looking at our overall RevPAR today versus where it was pre-COVID were in line with STR. Certainly, we want to see that minus 5% become positive in overall, China RevPAR did improve. It was 540 basis points of improvement from last quarter to this quarter. And what was great to see was occupancy improving a full 12 points to being up 8% to prior year. ADR is still the issue over in China, continued deflation. The deflationary environment in China is the longest it's been since a long, long time, back in the '60s. But -- it is estimated to likely soon turn, and we're looking forward to that RevPAR continuing to improve and get back to a positive, which I think is our expectation for the full year. Occupancy is the big tailwind. It's still trailing by a long, long margin where it was pre-COVID. But with PPI turning positive for the first time in 41 months at up 1%. And with the government boosting service consumption and travel demand visa-free entry in international inbound is a lot of our peers have been talking about as that picks up with increased flight capacity, we're optimistic. But where we're most optimistic in China is the continued growth on the development front. Our Q1 NRG double digits for both our direct franchising system and our overall system with direct franchise signings up a solid 5%. We've increased our direct franchising business. We continue to grow it. It's up 100% since spin. It's sitting at about 100,000 rooms with over 400 hotels -- direct hotels now in our pipeline. And this accelerating double-digit net room growth is helping grow our international royalty rates. And as we pivot from MLAs to direct franchising agreements, it's at a significantly higher, 3x higher royalty rate is what it was for Q1. So we're really pleased with how things are going in China. We've got strong direct development owner relationships. 12 of our 25 brands are now registered for sale in China. And we've taken back these legacy MLAs like days in, which has grown significantly since we did that, and we're growing across the capitals of Beijing and Shanghai, our brand really resonates tech centers we talk about on every call as we did this. The Elite 8 cities, great growth. We've just -- we're very proud of what our Chief Development Officer over there, Bill Wang and his team's significant growth has been delivering and continues to deliver and achieve for us.

Just if I could just add on. As Jeff mentioned, we have recovered on pace with 2019 versus the industry. Patrick, I think you look at it, we recovered ahead of the industry. So we're right now kind of in line with the industry. So the recovery is just the timing of it. And then for the full year basis, last year, we were down 9%. And as we said, we expect to see that kind of like flat to positive growth this year. So it's really a huge sequential improvement year-over-year to almost 10% to get to that level.

We go next now to Ben Chaiken with Mizuho.

Maybe on the U.S. demand front, you touched on it briefly earlier. I think in response to a previous question, you mentioned that leisure was improving. And then if I call you correctly, you also suggested that kind of like blue collar infrastructure was improving. Am I correct that that latter comment, infrastructure in blue collar was more of a forward-looking comment? And then especially in states like Texas that are seeing rapid improvement, I guess how long do you need to see the stabilization improvement for that eventually show up in pipeline or net unit growth.

Leisure was up about 100 basis points versus business in terms of improvement, but we're seeing we're still seeing it improve. I mean our overall infrastructure business that I touched on, Ben, was while it was still down to prior year, improved 10 points sequentially from Q4. And the nongovernment infrastructure revenue increased double digits in the first quarter, which helped our total business segment, if you think about 70% of our business being leisure, 30% being business, we were down 7% year-over-year for Q4, and we were flat for Q1. So significant improvement. And it helped boost our weekday occupancy, our weekday demand to flat for both February, March, and we're seeing that again in April. A piece of that is oil and gas and energy infrastructure spending, that, as we talked about, increased really, really impressively for Q1. And in terms of forward-looking, our GSO consumed infrastructure revenue for the quarter grew 12%, while the contracted infrastructure revenue, what's on the books forward-looking continues to pace well ahead of the same time last year. And the second part of the question, Amit, did you pick that up?

Yes. I think you were asking about, I think, Ben, about net rooms growth. I think if you look at it, the even last year with the RevPAR backdrop that we had we had record openings in the U.S., just kind of underline the strength of our brands and the performance. Really, our brands are resilient through periods of RevPAR cyclicality and then turn looking at this year, you see U.S. signings up 8% global pipeline up to a record 259,000 rooms and 2,200 hotels. So yes, we're seeing continued growth.

Yes, mid former franchise sales team, now led by David Willner, Jared Medan, Brian Parker and Brad Gant, they did not miss a beat as Amit was promoted, and they saw very strong momentum domestically. The 8% they signed, more U.S. development contracts than last year. I think what impresses us all is how they are coming in for more upscale and more accretive rooms, significant PPAR premium growth of 30% above our U.S. system average. And yes, we're just thrilled right now with a pipeline that grew by domestically 300 basis points. It's sitting at a record 110,000 rooms. And openings as well, opening 6,300 domestic rooms being in line with last year's record Q1 openings, all fueled by extended today, which we know there's going to be a lot of demand in stabilizing economy base and increasing upscale executions, is something that we're feeling good about.

We go next now to Stephen Grambling with Morgan Stanley.

On AI, do you find that all these benefits sound really encouraging, but do you find any difference in the impact as we think about either property type or customer type, meaning high-end or low-end properties, maybe have different impacts or leisure versus business customers or even thinking through different geographies.

It really gets back to the engagement of the property in terms of what they could think of, Stephen, to market to the Grambling. If you're flying across the country and you're arriving in -- on the West Coast and it's still early in the morning, it's pretty easy to sell you that early check-in an amenity package to get you in the Grambling kids to their room. Obviously, the higher up the chain scales, you move, there are increasing opportunities from what you could do with food and beverage in the hotels. I mean that's where we're seeing a lot of our success in full-service hotels like the one I mentioned in Orlando, where you do have food and beverage outlets and experiences. But it's just a really great opportunity from an incremental revenue standpoint for really all chain scales to drive. And it's most impactful, I think, to the small business owner that is able to drive something that's in their minds, really offsetting the rising labor costs and the rising brand fee costs and the rising distribution costs that obviously the whole industry always talks about. I mean it's a massive, massive offset for them.

We go next now to Dan Politzer with JPMorgan.

You gave a little bit of color a few minutes ago on the development front. I was wondering if we could just kind of circle back there. How do you think about net rooms growth in the U.S. for this year and the potential to grow there? And can you maybe give a little bit more detail on the affiliate rooms that came out in the quarter? And how we should think about that on a go-forward basis?

Yes. We -- I mean, we had -- as we previewed to all of you in February, affiliate rooms come out. The U.S. system was certainly pressured in Q1 with the outsized removal of what were legacy travel and leisure rooms that they've talked a lot about publicly and a legacy all the way back to our worldwide days of our Vacasa vacation rental affiliate room product as that company was sold, which could always happen from time to time. But when we look ahead with net room growth domestically to the first part of your question, I mean, we had a record 72,000 room openings last year. We had a big piece of that being domestic. And as rooms open, they come out of the pipeline, but we also had the ability to really add to that pipeline as I was just talking about in terms of the the team that have it built by signing 8% more U.S. contracts than they did last year for those more upscale and accretive rooms. Our economy segment, which saw stabilization last year, to a large degree. It still has room to go, but our economy rooms were up 4% on a gross additions basis. We're running a best-in-class economy retention rate still that's been stabilizing. And as we put more sellers on the street to sell new brands like our premium economy [indiscernible] brand that has so many competitive advantages going for it like its lowest cost, AI-enabled PMS CRS technology stack able to drive the type of incremental revenues that we're just talking about. We're looking forward to that domestically, but we're really seeing growth is an extended stay in mid-scale and above. Our extended state pipeline is up over 4% year-over-year to a record 45,000 rooms in a segment where we know demand outstrips supply by 3x and is going to for years to come. We're seeing really strong interest in our Echo Suites extended-stay product, our Hawthorne Suites extended stay product and our upscale water walk brand that its pipeline is up 2x from last year on small numbers, but a lot of interest and a lot of demand. And our upper mid-scale and upscale brands are resonating in markets so often oversaturated with larger peer supply. We're seeing good increases for our Wyndham Grand brand, our Dulce. We recently opened 3. It's on the cover of our investor presentation we put out yesterday and a good double-digit growth for our registry collections domestic pipeline. So -- with 85% of our pipeline in the U.S either extended-stay, mid-scale, upper mid-scale, upper up or luxury as we continue to push our system into higher fee part segments, We're, again, feeling good. Our domestic pipeline at spin was 1/3 of our total pipeline, and it's now over 43% of our pipeline and growing.

We go next now to Ian Zaffino with Oppenheimer.

Question, I guess, will be on the RevPAR guide, kind of a lot of puts and takes here, right? We have a few attacks refunds. We have the IIJ kind of finishing out here. But then we have the comments about your optimism. So -- how do we kind of put that all together to kind of arrive at that RevPAR growth? And then if I could just sneak in one more about the credit card business. How much runway do we have in that business? What's sustainability of it? And any other levers that you can pull any initiatives that you plan to roll out going forward?

I'll start with your RevPAR puts and takes. I think you kind of look at the Q1 outperformance relative to our expectations of down to down 3%, we're 250 basis points ahead of that. That's about 30 basis points on a full year global basis. And then Jeff kind of touched on April momentum and kind of what were continuation of the trends we're seeing. So that kind of -- we're assuming those continue into the second quarter. We don't really -- and so we're assuming about another 20 basis points from that plus 1% in Q2 on our full year outlook. So that's kind of how we got to the 50 basis points shift in the low end of the high end to kind of get to flat on the midpoint. As far as like the puts and takes, look, we don't have -- you know the booking windows. They are just over 2.5 weeks, they remain short. We certainly have a lot of catalysts, FIFA and other things. But until we kind of get to odontoid the summer season, we don't want to be -- we don't want to predict what that's going to look like. So we're being measured in what that is. As far as your low end and high end, you look at. Q1 was down minus 1% and if you -- for full year to kind of be there, you just assume the rest of the year, is that minus 1. It gets to the high end of plus 1 million you basically need to make up the minus 1 you had in Q1. So assumed like plus 1.5% for the rest of the year to kind of get to that. And then your second question around credit card business, look, we are credit card and loyalty really tie in well together. We had a very strong order on ancillary overall, and that was largely driven by the credit card. Some of it was the lapping that I mentioned from Q1 of last year. When you look at the sustainability of the credit card and the ancillary business as a whole, we have -- this year, we're projecting low to mid-teens for that long-term outlook for ancillary growth is kind of the, call it, the high single digits. And then there's multiple catalysts within the credit card. We are -- there is markets like Canada where we have strong presence, which we -- as we previewed, we're expanding into later this year. We've also got other markets in Latin America and Asia with strong Wyndham Rewards members and hotel presence that are also opportunities for that. And then there's other -- within ancillary, there's others with some of the AI technology and other initiatives that can also kind of help fuel that growth. So credit cards. We think there's a long runway as well as these other things to kind of get us to a high single-digit ancillary growth going forward. And we also -- we launched the Window debit card, which is we were the first in the industry to do that. And so yes, we feel very good about the prospects for ancillary growth going forward.

We'll go next now to Meredith Jensen with HSBC.

Yes. Quickly, I was hoping you could flip that to international and 2 quick points. You mentioned strength in Turkey, and I know that's an important business for you all, and I was hoping to see if you've seen some sort of shifting of demand that could be sort of rather than trips not taken trips taken with Wyndham elsewhere? And then secondly, if you could just speak a little bit more about the plans for the Rego properties and how you might leverage that opportunity there?

Sure. I'll start and and Amit has been very involved and engaged on -- as it relates to Revo, and I'll ask him to talk about the work that's going on with our finance and legal teams. But yes, Turkey, we are seeing just great demand and great growth and strong occupancy and demand growth throughout the quarter, and we think throughout the year to people looking for great places to vacation. We got a lot of hotels in Turkey right now. It's growing. Certainly from a development standpoint, a pipeline standpoint, an opening standpoint. We've got growing royalty rates as our brand becomes more aware and it's a real bright spot for the European development team over there right now. And Amit, do you want to talk about the update?

Yes. And if I could just kind of close out the Middle East in Turkey. I think Meredith Middle East represents only about 1 -- we've got 50 properties there. really just 1% of our portfolio in terms of EBITDA. And Turkey has limited impact from the war that's outside of the Middle East. So overall, Middle East, we don't really see it having a huge impact that obviously impacts our EMEA, but on a global basis, really not much of an impact. And then turning to Rio the owned hotel set -- the 2 owned hotels in Europe that I mentioned in my prepared remarks, it was really kind of part of exercising all available remedies to recoup our investments. So we foreclosed and took ownership of 2 properties on consolidated books about $36 million of gross value, about $23 million of net asset value. these properties are expected to contribute about $10 million in revenue, which is why we revised our outlook range to account for that. Really no earnings impact there. Our plan is to stabilize and improve profitability of these 2 assets as we kind of explore strategic options for them.

We'll go next now to Lizzie Dove with Goldman Sachs.

I just wanted to go back to the U.S. rooms growth side of things. I know you kind of flagged the 3,000 rooms lost from the T&L rooms. But it looks like it was a little lower than that this quarter. I'm curious just your expectations are making that up for the rest of the year and whether the expectation is still for U.S. rooms growth to be positive this year?

Yes. As you mentioned, the U.S. and our net rooms growth this quarter, that was primarily impacted by the the affiliate rooms from T&L and Vacasa, the openings were generally in line with last year. And so it was really the -- on that side. As we look ahead, as Jeff mentioned, we feel very good about the -- our development momentum across the U.S. portfolio. New signings are up. U.S. pipeline is up 3%. And the other thing is that the rooms we're bringing in are at a significant fear premium to the rooms that are leaving the system in the U.S. almost a full year, that delta was over 30%. And we are seeing continued demand for our brands across really all segments. So we manage net rooms growth on a full year basis. And Q1, as we previewed with you, was expected to be this way. And we look forward to kind of our development team executing the momentum that we have going on from 2025.

I'll go next to now to Trey Bowers with Wells Fargo.

Just I guess a quick accounting question. The $114 million of reported royalty and franchise fees, do you guys mind just kind of providing a bit of a walk of without Revo and maybe kind of initial franchisees, et cetera, what that number would look like on a more normalized basis?

Yes, the royalties and franchise fees line item that you're mentioning, it has a couple of components. I'll go through in sequence about the first 1 on the royalty side, about $3 million of that was related to the revaled deferral which we had previously communicated. And we also had a little bit of higher da amortization just year-over-year, which kind of offsets some of the RevPAR increase we saw in the first quarter. The other item that's in there is franchise fees, and we've always said they're not linear compared with our drivers. So we have some outsized franchise fees in Q1 of last year that we noted at that time and really was lapping those in Q1 of this year. And then you -- on a full year basis, if you look at franchise fees, in particular, like the cadence last year, it was front-weighted and kind of reversed in the back half. We are kind of expecting the inverse this year franchise fee. So aggregate, we expect franchise fees to be down a few million for the full year. and Revo will have a $12 million impact on that line item on the full year as well, both of which are already factored into our full year guidance and what we had kind of guided you guys to previously.

And gentlemen, it appears we have no further questions this morning. Mr. Ballotti, I'd like to turn things back to you, sir, for closing comments.

Well, thanks, [indiscernible] as always, and thanks, everyone, for your questions and your interest in Wyndham Hotels & Resorts. Amit, Matt and I look forward to talking to and seeing many of you in the months ahead at many of the upcoming investor and industry conferences that we'll be attending like NYU's HIF on May 31. And later next month. In the meantime, have a great weekend ahead, and thanks for joining us.

Ladies and gentlemen, this concludes today's Wyndham Hotels & Resorts First Quarter 2026 Earnings Conference Call. Please disconnect your lines at this time, and have a wonderful day.