Wyndham Posts 18 Percent EPS Gain in Q2

Wyndham Hotels & Resorts (WH 0.68%), a global leader in hotel franchising with approximately 8,300 hotels across nearly 100 countries, reported its second quarter 2025 results on July 23, 2025. The company posted adjusted diluted earnings per share (EPS) of $1.33, surpassing analyst expectations of $1.16 (non-GAAP), while revenue (GAAP) reached $397 million, above the $386.64 million GAAP estimate. These results reflect growth in global system size and an expanding development pipeline, though U.S. RevPAR softened compared to the prior year. The period highlighted the ongoing stability of Wyndham’s asset-light model and strategic focus on higher-value segments, even as domestic demand trends presented new challenges.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.

Business Overview and Strategic Focus

Wyndham operates as a hotel franchisor. Rather than owning the real estate, it sells franchise rights to independent hotel owners, giving them access to Wyndham’s brands, reservation systems, and loyalty programs. This “asset-light” structure minimizes its capital investment while emphasizing predictable, recurring cash flows from franchise fees.

Its competitive advantage centers on a large, diversified portfolio. Wyndham’s 25 hotel brands, from economy to upper-midscale and a few upscale properties, serve a broad customer base globally. Recent efforts have targeted expanding the international footprint, increasing royalty rates, and developing new revenue streams such as credit card partnerships. A robust loyalty program, Wyndham Rewards, supports customer retention and franchisee profitability.

Quarter Highlights: Growth and Shifts Across Metrics

Second quarter adjusted EPS reached $1.33, which exceeded analyst consensus by $0.17 (14.7%) (non-GAAP). Fee-related and other revenue (GAAP) of $397 million came in $10.36 million above estimates. This reflected a 19% increase in ancillary revenues, higher royalties and franchise fees, as well as higher pass-through revenues due to the company's global franchisee conference in May. Adjusted EBITDA grew 10% to $195 million, and adjusted net income advanced 13% to $103 million. These gains reflected a 19% increase in ancillary revenues. Free cash flow was $81 million.

Global system size expanded 4% year over year to 846,700 rooms as of June 30, 2025, driven by robust growth in international markets. Pipeline rooms hit a record 255,000 (+5%) as of Q2 2025, with 58% of pipeline rooms were located outside the U.S. as of June 30, 2025, and 70 % in midscale or above hotel segments, reinforcing efforts to improve average revenue per room.

RevPAR saw contrasting trends. Global RevPAR, a key metric reflecting hotel revenue generated per available room, fell 3% year-over-year to $47.55 in Q2 2025. In the U.S. RevPAR dropped 4% to $53.32, affected by holiday timing and a solar eclipse—excluding these, the decline was around 2.3% in U.S. RevPAR, which management attributed to softer demand. Meanwhile, international markets reported RevPAR gains of 1%, led by 7% year-over-year growth in the EMEA (Europe, Middle East, Africa) region and 18% expansion in Latin America, although China saw RevPAR drop 8 %.

Ancillary revenue sources, such as partner licenses and the Wyndham-branded credit card, grew by 19% compared to Q2 2024, outpacing the company’s overall revenue growth. Management said much of this is tied to long-term contracts, making these revenues steadier than lodging-based income. Global royalty rates were 4.0% for the three months ended June 30, 2025, with increases in both U.S. and international averages, reflecting a focus on higher FeePAR (franchise revenue per available room) contracts in the development pipeline.

A reporting change excluded approximately 67,300 rooms under the Super 8 master licensee in China from headline metrics, which management cited as a result of data quality issues but with minimal financial impact. Marketing fund revenues exceeded expenses by $3 million. The company returned $109 million to shareholders through share repurchases and dividends.

The quarterly dividend was held steady at $0.41 per share. No increase or decrease was announced.

Product Family and Segment Performance

The segment reported adjusted EBITDA of $214 million. The segment’s product types span economy and midscale hotels, extended stay properties, and a growing suite of ancillary services including technology solutions and co-branded credit cards.

Within its brands, international development remained a bright spot. EMEA and Latin America experienced year-over-year RevPAR growth of 7% and 18%, respectively. Extended stay hotels, which are designed for longer-term guests, made up 17% of the pipeline as of June 30, 2025. Approximately 76% of the pipeline consists of new construction as of June 30, 2025, with 35% of those projects now underway as of June 30, 2025. Midscale and above segments in the U.S. grew 3% in room count for the twelve months ended June 30, 2025, while economy segment rooms declined 2% over the same period, showing a shift in mix toward higher-value segments.

Wyndham Rewards, the company’s loyalty program, remains an important driver. Recent data shows membership at roughly 114 million, supporting over 37% of global and 50% of U.S. check-ins as of FY2024. While specific updates were minimal in this release, the program is frequently cited as a major advantage in customer retention and franchisee profitability.

The company again emphasized its limited use of “key money” (incentives for new hotel owners), preferring direct franchising deals, especially in international markets.

Looking Forward: Guidance and Monitoring Points

Management raised its full-year 2025 net room growth outlook to 4.0–4.6%, up from 3.6% at the low end, while other key guidance metrics—global RevPAR, total fee-related revenue, adjusted EBITDA, and adjusted net income—remained unchanged for FY2025. The company now expects adjusted diluted EPS for FY2025 to come in between $4.60 and $4.78, a slight increase tied to ongoing share buybacks. Guidance for global RevPAR remains at a change of (2%) to up 1% for FY2025, reflecting continued caution about U.S. demand weakness and China market softness. The company reaffirmed expectations for “low teens” growth in ancillary fees for 2025, much of which is stable due to contract structures.

Management highlighted the sensitivity of results to demand trends, noting that each one-point move in RevPAR shifts annual fee revenue by approximately $10 million and adjusted EBITDA by $4 million, based on management guidance for FY2025. Investors should watch closely for any acceleration or further weakening in U.S. or Chinese RevPAR, occupancy trends, and continued developer demand in high-fee segments. On capital allocation, net leverage remains at 3.5x as of June 30, 2025, with total liquidity at $580 million as of Q2 2025. No changes in dividend policy or payouts were announced for the period.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.