Good day and welcome to the Wyndham Hotels & Resorts Fourth Quarter and Full Year 2023 Earnings Conference Call. At this time, all participants have been placed on a listen-only mode and the floor will be opened for your questions following the presentation. I would now like to turn the call over to Matt Capuzzi, Senior Vice President of Investor Relations. Please go ahead.

Thank you, operator. Good morning and thank you for joining us. With me today are Geoff Ballotti, our CEO; and Michele Allen, 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 will be 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 in the future. Accordingly, we encourage investors to monitor our website in addition to our press releases, filings submitted with the SEC, and any public conference calls or webcasts. We have also created a separate website at staywyndham.com to provide additional information relating to the ongoing situation with Choice Hotels. With that, I will turn the call over to Geoff.

Thanks, Matt, and thanks everyone for joining us this morning. 2023 was an exceptional year for Wyndham, marked by outstanding operational achievements and a series of record-breaking performance metrics. But before delving into our results, we want to take a moment to discuss the ongoing matters with Choice. As we shared in our public response, Choice has nominated directors with the sole purpose of advancing its inadequate, hostile, and risk-laden offer, an offer which our Board has unanimously determined is not in the best interest of our shareholders. Our Board is well constituted combining decades of experience in areas critical to overseeing the execution of our strategy including hospitality and more specifically, global hotel franchising, M&A, governance, and risk oversight. As we've consistently communicated, Choice's offer fails to address three principal concerns; FIRST, the inadequacy of the value of the offer compared with our future growth prospects; second, the significant amount of Choice stock included in the consideration mix, which would expose our shareholders to an over-leveraged pro forma company with slower long-term growth prospects; and third, the asymmetrical risks to Wyndham and our shareholders resulting from a prolonged and uncertain regulatory review. On the regulatory topic, our concerns regarding the unique risks of this transaction have only increased as the process has unfolded, starting with the Federal Trade Commission's unsolicited outreach to us in subsequent investigation even before Choice launched its exchange offer. Moreover, State Attorneys General from Washington, Colorado, Kansas, and Vermont have also now opened their separate investigations. The expansive second request we received from the FTC on January 11th is requiring us to provide virtually every communication and every piece of data that relates in any way to our competition with Choice. To put this into context, second requests are issued for only around 1% of deals reviewed by the FTC, and they require additional time-consuming back-and-forth discussions and meetings with the agency. Regulatory interest has undoubtedly peaked due to the continued opposition of franchisees and the Asian American Hotel Owners Association, which represents more than two-thirds of both companies' domestic hotel owners. In a recent AHOA survey of members who own either a Choice or a Wyndham Hotel, over two-thirds say that they consider leaving were the merger to occur. The uncertain timeline and outcome facing our shareholders compounded by the risk that they are left with no deal and a damaged business at the end of a very long regulatory review process is highlighted by a recent report showing that over 90% of significant merger investigations in 2023 resulted in a lawsuit by the government to block the deal or the abandonment of the transaction, with the FTC not accepting any pre-lawsuit settlements involving a divestiture or other remedy. This trend has continued in recent months with the transactions such as JetBlue, Spirit, and its merger, the IQVIA, Propel merger, and Amazon's proposed acquisition of iRobot, all of which were either blocked or now face significant delays and challenges. The potential value destruction that could arise from this ongoing and elongated process remains significant. Choice continues to try to take advantage of the uncertain timeline and outcome to exploit franchisee uncertainty for its own competitive advantage. And Choice's unsolicited offer also has significant real dollar costs for our shareholders, currently estimated at approximately $75 million, which includes approximately $15 million related solely to the FTC review. More fundamentally, as our 2023 results and longer-term progress demonstrate, Wyndham is positioned to generate shareholder value well in excess of Choice's current offer. Over the last three years, we've consistently grown our system, our market share, and our earnings while also expanding our pipeline to support future growth. As Michele will cover in further detail, our strategy, which is well underway, is expected to generate an organic adjusted EBITDA CAGR of 7% to 10% over the next three years. We also expect to produce over $700 million of excess cash over the next two years. This resilient cash flow, along with our incremental leverage capacity, assuming only a 3.5 times net leverage ratio could generate a total of $1.4 billion of excess liquidity, which can be deployed strategically for both organic and inorganic growth opportunities, further supporting additional value creation for Wyndham shareholders beyond our 7% to 10% EBITDA growth expectation. And now on to the results. We were extremely pleased to report another strong quarter with a host of record-breaking full year metrics. We opened 66,000 rooms, the largest year of organic room additions in Wyndham's history against the backdrop of hotel transaction volumes nearly 50% below last year, which are important to our business since each time a hotel transacts or changes hands, the new owner has a brand decision to make. We achieved this success despite the distraction over the past 10 months caused by Choice. Our global retention rate, which includes all terminations, reached 95.6%, a 30 basis point improvement year-over-year, and an over 250 basis improvement since our spin-off. With the growing support and the growing engagement of our franchisee community, along with investments that we've made in our brands, we're now within reach of our targeted 96% retention rate, and we expect that our direct franchising retention rate will continue to improve. We delivered 3.5% of net room growth with Q4 marking the 12th consecutive quarter of organic net room growth. We grew our development pipeline for the 14th consecutive quarter to a record 240,000 rooms. In our brands, all powered by Wyndham Rewards ranked number one by USA TODAY for six consecutive years, continue to grow their market share with our economy brands outperforming the STR US chain scale by another 60 basis points, helping to drive 5% global RevPAR growth in constant currency along with 7% growth in Wyndham Rewards membership to a record 106 million members. Full year adjusted EBITDA reached an all-time high of $659 million and we generated $339 million of free cash flow in 2023. We also returned over $0.5 billion to our shareholders, representing over 8% of our market cap from the beginning of the year. Our owner-first philosophy continues to attract a wide variety of franchisees to the Wyndham portfolio of brands. We opened an average of two hotels each business day in 2023, and the 500 hotels we opened this year were 11% more than the number we opened last year. In the process, we introduced 13 of our brands in 24 new countries around the world, including our first La Quinta in Ecuador, our first Super 8 in the United Kingdom and our first Hawthorn suites in China and all of these brand launches in new countries can support more hotels from each brand going forward. And more importantly, we're sold on a direct versus a master license franchising basis with no royalty share, driving international direct net room growth in excess of 10% along with a 30 basis point improvement in our international royalty rate. Our teams awarded 864 contracts globally for approximately 104,000 room additions, which was 30% more than what we signed back in 2019. In Q4 alone, we executed 33% more contracts domestically than we did back in 2019 when transaction volumes were over 30% higher than it was this year. And Q4 signings internationally increased by 35% year-over-year and by over 30% compared to 2019, with the largest increase coming from EMEA, our global region with our second highest RevPAR. Our development pipeline increased 10% year-over-year to a record 240,000 rooms. Mid-scale and above brands in the pipeline increased 6% to a record 170,000 rooms and now represent nearly 70% of our pipeline. Our pipeline represents approximately $125 million of royalty fees over the next four years, with domestic hotels weighted more to upscale and higher RevPAR brands and with our international pipeline concentrated in higher RevPAR regions like Europe and Latin America. These RevPAR accretive rooms will come into the system over the next four years with fee PARs, on average, 30% higher than our current system average, providing us with another tailwind for growth that Michele will cover in more detail. Echo Suites by Wyndham, the industry's fastest-growing new brand launch, grew by nearly 60% in 2023 with over 33,000 rooms now in our development pipeline. During the fourth quarter, we began to selectively award contracts for the brand to experienced individual developers in addition to the many institutional developers we have contracted with thus far. We have nearly a dozen Echo Suites now under construction which we expect to open by year-end and 75 are expected to be opened by the end of 2026. Last month at the Americas Lodging Investment Summit, we announced a new partnership with SBE Entertainment. We're combining SBE's unmatched culinary and unmatched lifestyle experience with Wyndham's distribution and technology platform to fuel Project HQ's development under our growing registry collection Hotels brand. This partnership expands our platform and fills a white space in our portfolio for hotel owners searching for a differentiated yet approachable lifestyle brand that will immediately benefit them from the scale and resources of the world's largest hotel franchisor. Project HQ plans to open 50 registry collection hotels by 2030, delivering approximately 7,500 rooms designed uniquely for what millennial and Gen Z travelers are seeking. The partnership represents the latest example of our shifting mix to higher RevPAR segments and increasing fee PAR at a faster rate than our system average. US RevPAR, which was down 4% year-over-year, increased 10% versus 2019, which is a 120 basis point acceleration from Q3 performance. Q4 trends represented a continued moderation of the revenge leisure travel that we saw last year, which largely favored select service chain scales. Internationally, Q4 RevPAR was 7% higher than last year in constant currency and 44% higher than Q4 of 2019, relatively consistent with the strong performance from Q3. In our quest to maximize franchisees' top and bottom lines and to improve owner engagement and retention, this year, we implemented a number of innovative tools. We developed Wyndham Community, a state-of-the-art mobile-enabled platform that seamlessly connects our owners to the day-to-day performance of their hotels while delivering a constant connection to Wyndham's scale and resources to help maximize their profitability. We delivered a segment-leading guest engagement platform, allowing our franchisees to sell room upgrades and services like early check-in and late checkout, along with beverages or snacks and other local amenities for in-room delivery upon a guest's arrival, a first for select service hotel owners that will provide significant incremental room revenue opportunities for them. We completed the rollout of our mobile next-generation property management systems at unprecedented pricing from best-in-class suppliers, which drove RevPAR increases of over 170 basis points on average for franchisees using these systems. And we provided an OTA commission reconciliation tool, helping to put thousands of dollars back into the pockets of franchisees on a monthly basis by reconciling OTA bookings that either never show up or that depart early. Before handing the call over to Michele, all of us at Wyndham would like to take a moment to honor the passing of an industry icon. In late December, we lost Ron Rivett, Co-Founder of the Super 8 brand. Ron leaves an indelible mark on the industry with the creation of Super 8. We acquired the brand in 1993, and by following Ron's owner philosophy of being available, approachable, and accountable, Super 8 is now the largest economy brand in the world with 2,663 hotels in nine countries. We're honored that not only is the very first Super 8 in Aberdeen, South Dakota, still in our system, but it's also run by Ron's family, who keeps his memory and his dedication to this industry alive every day. And as we commemorate Super 8's 50th anniversary this year, we will celebrate Ron Rivett and his many accomplishments. We would also like to extend our heartfelt appreciation to all of our team members and all of our franchisees. Our record-setting achievement would not have occurred without their dedication and their support. Their enthusiasm for the opportunities that lie ahead, coupled with their commitment to our initiatives to deliver exceptional value remains the key to our success. And with that, I'll now turn the call over to Michele. Michele?

Thanks, Geoff, and good morning everyone. I'll begin my remarks today with a detailed review of our fourth quarter and full year results. I'll then review our cash flows and balance sheet, followed by our longer term growth prospects, and finally, our 2024 outlook. As Geoff mentioned, we were delighted with our operational progress in 2023. At the same time, we're pleased to put the tough year-over-year financial reporting comparisons behind us since 2023 was our first year of reporting without the inclusion of the lower-margin select service managed business and owned hotels and was also impacted by lapping the revenge travel that occurred in 2022 following COVID. In the fourth quarter, we generated $320 million of fee-related and other revenues and $154 million of adjusted EBITDA. Fee-related and other revenues increased 3% year-over-year, reflecting global net room growth as well as higher license and ancillary fees, partially offset by a year-over-year RevPAR decline. Adjusted EBITDA increased $28 million, including a favorable marketing fund timing impact of $21 million as expected. On a comparable basis, adjusted EBITDA grew 6%, primarily reflecting our revenue growth. Fourth quarter adjusted diluted EPS was $0.91, reflecting the adjusted EBITDA growth as well as benefits from our share repurchase activity, which were partially offset by higher interest expense. For the full year, we generated $1.38 billion of fee-related and other revenues, in line with our expectations compared to $1.35 billion last year, which included $50 million from the sold, managed, and owned businesses. On a comparable basis, fee-related and other revenues increased 6% year-over-year, reflecting global RevPAR and net room growth as well as higher license and ancillary fees. Adjusted EBITDA was also in line with our expectations at $659 million in full year 2023 compared to $650 million last year, which included an $18 million contribution from the sold, managed, and owned businesses. The year-over-year change was further impacted by $11 million of unfavorable marketing fund variability. On a comparable basis, adjusted EBITDA increased 6% year-over-year, primarily reflecting our revenue growth and our adjusted EBITDA margin remained consistent at 80%. Full year adjusted diluted EPS increased 8% on a comparable basis to $4.01, reflecting our adjusted EBITDA growth as well as benefits from our share repurchase activity which were partially offset by higher interest expense. We generated $114 million of free cash flow in the fourth quarter and $339 million for the full year. Importantly, in line with our target, we converted 51% of our adjusted EBITDA to free cash flow, which is the adjusted net income line translated to nearly 100%. We returned $515 million to our shareholders in 2023, representing 8% of our market cap through $397 million of share repurchases and $118 million of common stock dividends. We ended the year with approximately $650 million in total liquidity, and our net leverage ratio of 3.2 times within the lower half of our target range. Amidst the prevailing higher interest rate environment, we continue to limit our exposure with only about 25% of our long-term gross debt at variable rates. We now have our variable rate debt locked in at an effective interest rate of approximately 5.6% through 2027. As Geoff mentioned, our ongoing strategic initiatives will continue to provide a significant runway for accelerated earnings growth over the next several years. In October, we shared with you our expectation that our strategic plan will result in an adjusted EBITDA CAGR of 7% to 10%, which translates to $150 million to $210 million of incremental adjusted EBITDA between 2024 and 2026. This plan assumes 2% to 3% RevPAR growth and 3% to 5% annual net room growth over the planned period. These numbers should sound familiar to you. The RevPAR assumption in the US is anchored to current industry outlook for our chain scales and consistent with long-term hospitality sector performance. The net room growth assumption reflects the 75 Echo hotels we expect to have opened by 2026, along with continued improvement in our direct franchising retention rate. On top, with 70% of our pipeline now in the higher RevPAR, midscale and above categories, these properties will come into the system with higher fee PAR. Combined, we expect these drivers to contribute over $100 million or over half of the incremental EBITDA during the planned period. The remainder will come from our other growth initiatives. As you know, Wyndham is uniquely positioned to benefit from the increased government spending tied to the infrastructure and CHIPS Act. No hotel company has more select service hotels located in the states where infrastructure spending will be concentrated. Over the estimated eight-year spend period, we expect that capturing just our fair share of this spend will generate $150 million of incremental royalties for Wyndham shareholders, about $30 million of which will contribute to the planned 7% to 10% EBITDA CAGR over the next three years. Additionally, ancillary revenue streams provide multiple opportunities for incremental growth to supplement our core business model. These areas include our suite of co-branded credit cards, marketing partnerships and other monetization opportunities, which we expect to contribute approximately $40 million of incremental EBITDA over the planned period. Finally, as Geoff mentioned, our business model generates strong free cash flow, and we have significant leverage capacity, which provide additional capital to drive incremental growth opportunities over and above our 7% to 10% EBITDA CAGR for the three years ending 2026. Turning now to 2024 outlook. We expect our direct franchising business will grow global net room growth 3% to 4%, including 20 to 30 basis points of expected improvement in our retention rate. We are projecting global RevPAR growth of 2% to 3%. RevPAR growth is expected to be at its lowest quarterly level in Q1 as we lapped the toughest comp period in 2023, specifically, the first half of the quarter, which is already behind us, where global RevPAR trailed 2023 by about 3 points in January, but is expected to improve as we enter March and the spring break leisure travel season. Year-over-year comps become progressively easier throughout the remaining quarters. Fee-related and other revenues are expected to be $1.43 billion to $1.46 billion. You'll recall that in 2023, we hosted our Global Franchisee Conference, which generated EBITDA-neutral marketing revenue of $18 million. Since the conference is held every 18 months, these revenues will not repeat in 2024 and therefore, negatively impact our year-over-year growth rate by about 2 points. Adjusted EBITDA is expected to be between $690 million and $700 million, consistent with our October outlook and reflecting comparable basis growth of approximately 6% to 8% based on our 2023 actual results. Adjusted net income is projected to be $341 million to $351 million, and adjusted diluted EPS is projected at $4.11 to $4.23 based on a diluted share count of 83 million, which as usual, excludes any future potential share repurchases. Free cash flow conversion before development advances is expected to approximate 60%. 2024 development advance spend is expected to increase to $90 million from $72 million in 2023. This increase primarily reflects the ramping of development efforts for our Echo brand as expected. Given the challenging macro backdrop this past year, we had an opportunity to attract more owners and higher chain scales and accretive RevPAR market by using key money as a tool to alleviate some of their debt burden. This is a trend we expect to continue throughout 2024. We also use more key money to navigate the uncertainty and disruptions created by Choice and we anticipate continuing this approach while the current situation persists. Today's outlook excludes the $75 million of currently anticipated costs related to Choice's hostile offer. In addition to the cash we generate from operations, we also have the benefit of a strong balance sheet. Holding leverage flat to the 3.2 times we ended 2023 with will provide another $150 million of available capital in 2024 to either invest in the business or to return to shareholders. Leveraging to 3.5 times just the midpoint of our stated target range would provide $330 million, and leveraging to the high end of 4 times will provide $675 million of capital to deploy. Finally, while we expect our marketing funds to break even on a full year basis, we will continue to see timing differences in the quarterly results as we deploy incremental spend to capture building leisure demand for the spring break season ahead. For Q1, we expect the funds to overspend $10 million to $15 million. And like last year, we expect Q2 will also overspend and then those amounts will reverse in the back half of this year. In closing, we are extremely proud of our 2023 performance. We successfully executed on our key business objectives, achieved a host of record-breaking performance metrics, grew adjusted EBITDA 6% and generated significant capital return for our shareholders. Looking ahead, we approached 2024 with a compelling strategy poised to accelerate our growth and enhance returns for our shareholders. With that, Geoff and I would be happy to take your questions.

Thank you. The floor is now open for questions. We are currently waiting for Mr. Ballotti to reconnect. Please hold on for a moment. We now have Mr. Ballotti back in the conference. We'll go first to Joe Greff with JPMorgan. Please go ahead.

Good morning everybody. Geoff, just trying to get a sense of maybe how disruptive the Choice offer is in the developer community. Obviously, not an issue in the fourth quarter with pipeline and actual room openings. But here in the fourth quarter, are you seeing an impact in either elongated construction timelines or interest in partnering with you, particularly maybe with the Echo brand? Maybe asked differently, would your net room growth be higher were it not for maybe this perceived distraction on the part of developers with this Choice offer? And how much of the $90 million in development advances is a function of you're having to do that to grow because of maybe a distraction with Choice and maybe that impact there? Any color would be helpful. Thank you.

Yes. Thanks Joe. We could assign deals in the fourth quarter to your question. We've seen both deals and groundbreaks pause. Many of these small business owners have experience with Choice and they want to see this resolved certainly before moving forward. I mean with Echo, we were thrilled with the 268, I believe, we executed in 2023, that was 90% of what we committed to do last year. Our focus has shifted on Echo from the large multi-unit developers to individuals. And we certainly had some progress. I think we executed three in the quarter. But we could have executed more. But look, we're thrilled with the tremendous success in selling through this uncertainty. I mean it really began back in May with the Wall Street Journal leak, and we expect to continue to do the same in 2024. Our franchise sales teams around the world, I could tell you, are fired up. Fourth quarter, as you say, was a record of openings, but more deal noise, to your point, certainly creates a more challenging sales environment, which really comes in two forms. Owners, as I said, moving more slowly on committing to deals with us. And a second sort of increased competitive deal landscape, to your point on Dan's, is becoming more prevalent as Choice pushes through, really reverse its declining system. But yes, we know our record Q4 could have been better, both domestically and internationally without the noise.

Yes. In response to your last question, I would estimate that the budget for Choice accounts for less than 10% of the total $90 million allocated for 2024.

Thank you. Our next question will come from David Katz with Jefferies. Please go ahead.

Hi good morning everyone. Thanks for taking my question. I do want to talk about sort of the NUG environment in a broader sense. Obviously, there's a lot of discussion out there about conversions and conversion competitiveness. If you could color in for us just a little bit sort of where you fit in that landscape. And obviously, we look at this through a public company lens. But give us a sense for just how competitive that conversion environment is as well as sort of new builds like in your segments, given the Street's perception, right, that it's become much more competitive.

Sure. I think if you were talking to our Chairman, Steve Holmes, would tell you, David, it's always been competitive. But the biggest question aside from the strength of our brands and how our franchisees are feeling about us, and they're certainly feeling great about us with our attention at record highs. We have a saying that people do business with us because they know us, they like us, and they trust us. It's really when it comes down to competition, it's all about the size and the strength of our franchise sales team. And our franchise sales team has never been larger, and it's never been stronger, and that's really around the world, whether we're in Europe, Africa, the Middle East, Asia-Pacific, down in Latin America. They are, as I said, putting up record numbers right now. On the conversion front, we had a great year. We had a great quarter. We didn't slow down. Our quarter was up 60% versus 2019. And in conversion signings with transaction volumes, as we pointed out in the script, were a lot lower. And on the new construction side, look, our pipeline grew 8% to prior year. We have a record 1,400 new construction hotels in our pipeline. And we saw no slowdowns in new construction starts. Those were also up year-to-date. Developers are seeing very strong ROIs despite higher interest rates, our in-ground percentage improved. It was up, I think, 90 basis points from the third quarter. So, projects are still getting built. And yes, developer advance notes are being used on competitive deals. But we're really pleased with our brand offerings, how our brands are performing. And from a competitive standpoint, just how our franchisees are feeling and our sales teams are selling our products.

Thank you. As a follow-up, I noticed that Choice released a preliminary proxy yesterday that includes some open-ended commentary. Do you have any thoughts or comments you could share about that? I'm sure everyone would be interested in hearing your insights.

Yes. No surprise. To your question, it was completely expected by our team and really just a procedural moment and a nonevent. I mean this was Choice's first step, of course, to hold a preliminary proxy for a special meeting of the shareholders, required to approve the issuance of Choice's shares in connection with a deal that they believe they could do. The filing didn't change the offer. It didn't remove any of the numerous conditions to it like the financing contingency or, I don't know, their due diligence out or most importantly, their need for FTC clearance to name just a few. Their offer, David, remains highly conditional and it still does not address adequately our Board's three key issues that we talked about in the script.

Our next question comes from Patrick Scholes with Truist Securities. Please go ahead.

Hi, good morning Geoff and Michele.

Good morning Patrick.

Two questions. My first one, Geoff, you briefly touched on the feedback you had been receiving from your large or top shareholders. Can you just give us a little bit more color on what specifically the feedback has been?

Sure. I mean Michele and I, there's not a day that goes by we're not talking to our large shareholders. And the feedback consistently has been from them, and I'm sure we'll be on the phone with many of them this afternoon is that they're generally supportive of the risks, the asymmetrical risks that are out there that we've been talking about that our Board has objected to certainly would want to see addressed before continuing discussions.

Okay. Secondly, I have a question about the 2% to 3% RevPAR growth for this year. Can you explain how that is divided between international and domestic? You mentioned that you expect a significant acceleration, though I wouldn't say that's true for January in the domestic market. Domestic hotels, particularly in the economy and midscale segments, have performed exceptionally well. Could you elaborate on what drives that acceleration domestically and what your expectations are for the international numbers? Thank you.

Sure, Patrick. I believe that international growth will surpass that of the U.S. throughout the year. In January, for instance, international was up around 4%, while the domestic sector showed a decline. This performance in January wasn't unexpected due to the challenging comparisons from last year, where RevPAR increased by 6%. January is always going to be our hardest month to compare against. As we progress through the quarter, the comparisons become easier, especially by the end of the quarter. In March, RevPAR only increased by 1%, which shows a decline from our starting point of 6%. Moving forward, the comparisons for the remainder of the year become significantly more favorable. For our full-year forecast of 2% to 3%, particularly for the domestic side, we anticipate three key drivers. First, we'll benefit from ongoing infrastructure projects that are gaining momentum from 2023 and see new approvals happening regularly. Second, we're expecting some tailwinds from occupancy, as we're still about 9 points below 2019 levels, which we think could add a small impact—around a point—to our 2024 results. Lastly, from an ADR standpoint, we're looking at modest growth globally, with ADR trailing inflation in the U.S. by 3 points and slightly behind internationally. The limited new supply in the economy and midscale sectors supports pricing. Overall, RevPAR growth is closely tied to GDP, which we expect to increase by 2% to 3%. Importantly, our fundamentals remain robust. Despite the headlines, our middle-income consumers are growing significantly faster than ADR growth. Their savings are still around 30% above pre-pandemic levels, and unemployment remains low. Most significantly, the intention to travel and prioritize travel spending is on the rise. A recent survey indicated that 60% of respondents plan to take one to four additional trips this year, which is quite substantial. While we may not see this reflected in January results, it's understandable given that it's our toughest year-over-year comparison. All things considered, including international growth, we see various pathways to reaching our full-year assumption of 2% to 3%.

Okay, Michele. Thank you for the detail. I'm all set.

Thank you. Our next question comes from Michael Bellisario with Baird. Please go ahead.

Thanks everyone. Good morning. First question, just can you help us understand what is the FTC asking for? How long is the list? Maybe any examples on customer-facing or franchisee-facing type questions and requests would be helpful.

Sure. The list is long, Michael. We are complying expeditiously with the second request, which we predicted all along would occur and which happens in less than, as we said, 1% of FTC reviews. And of course, we're also working with four State Attorney Generals who we mentioned who are also now investigating it. It is a tremendous effort. It has over 300 different work streams and data requests generated by a 44-page letter that we received from them. Boy, in terms of examples, Michele, can you think of a good one from your side?

Yes, I can certainly provide an example. I experience it every day. For instance, one of the 300 work streams involves compiling a list of every bid we've submitted for any franchise service over the past five years. They are looking for information by brand, including details such as any previous brand affiliations, the specifics of each negotiation in various states, and the initial, interim, and final bids for each deal. The request is extensive, covering all factors that influenced the pricing of those bids, as well as our costs associated with the negotiations—whether those costs are fixed or variable, which chain scale the hotel switched to, and who our competitors were. This is just one of the 300 work streams, indicating the complexity of that single request. As Geoff noted, it represents a significant undertaking.

Helpful. And then just my follow-up, maybe a clarification on sort of the spending commentary. Are you putting more dollars into the same number of deals? Or are you having to put more dollars into more deals? And then is it really just Echo or is it across the brand portfolio? Thank you.

Sure. When we compare the 2024 budget to 2023, we saw an increase in 2023 compared to our budget, which presented an opportunity to invest more in the business. We opened over 500 hotels this year, but more importantly, it's the kind of hotels we are adding to the system and the pipeline. We grew our midscale pipeline by another 6% this year, largely due to our ability to use key money to attract hotel owners. We're also increasing our presence in the top 25 MSAs, aligning with our strategy to expand in markets with higher RevPAR and fee PAR. This year, we added cities like Chicago, San Diego, and Phoenix, thanks to our investment of more dollars per key in these high RevPAR markets. Additionally, we are investing in our existing system to enhance product quality and improve franchisee engagement and retention. For instance, we doubled the number of renovated rooms through our capital support programs, including nearly 5,000 renovated rooms at Days Inn. We are achieving all this while aiming for returns above WACC, resulting in more hotels and, importantly, the addition of higher fee PAR hotels.

Helpful. Thank you.

Thank you.

Thanks Mike.

Thank you. Our next question comes from Dany Asad with Bank of America. Please go ahead.

Hi, good morning Geoff and Michele. I just wanted to touch on the three-year EBITDA CAGR target of 7% to 10% through 2026. So, if EBITDA is going to grow, let's call it, 5% to 6% for this year, can you help us piece the parts of the business that would help drive the acceleration from the 5% to 6% to 7% to 10% kind of for the full three-year period?

We finished 2023 with a growth rate of 6%. For 2024, we expect to see that growth increase to a range of 6% to 8%, and then further rise to between 7% and 10% over the planned period. To put it in perspective, this means only a 1 percentage point increase at the low end, moving from 6% to 7%, and an average increase of around 2.5%, transitioning from 6% in 2023 to about 8.5% at the midpoint of the 7% to 10% growth range. Firstly, regarding net room growth, we have strong visibility in this area. Our pipeline has been expanding at a rate of 10% year-over-year, and we expect new properties, like those from Echo, to start contributing this year. We’ve also seen a notable improvement in our retention rates, which have increased by a total of 80 basis points over the past three years. We are conservatively estimating an additional 0.5 percentage point of net room growth at the midpoint of our projections. Net room growth for 2023 was recorded at 3.5%, and for the 7% to 10% CAGR, we're projecting this to rise to 4% at the midpoint, which is a conservative estimate given our various growth avenues. As for RevPAR, we anticipate a growth of 2% to 3% during the planned period, aligning with both industry expectations and historical performance. However, this growth may not occur in a straight line but is expected to average out over the planned period. There's additional potential for growth when considering the 9 percentage points of occupancy that still need to be recovered compared to pre-COVID levels. Factors such as our segments having limited new supply and the lag of ADR behind inflation support our pricing power. The expected 2% to 3% growth doesn't fully capture all potential upside; this is a cautious approach that incorporates a buffer. We've also shifted our pipeline focus toward higher chain scales, which results in a higher RevPAR for both domestic and international properties. Additionally, beyond the usual drivers, we see potential for growth through royalty rate expansion, which will be influenced by Echo and our previously mentioned pipeline, as well as the international scaling of our footprint. Some discounts given during the pandemic are now expiring, contributing to a 30 basis point increase in our international royalty rates in 2023. Large investments, as Geoff mentioned, are also yielding benefits with growth in that category exceeding double digits. On the ancillary revenue side, we are entering the plan with a 6% growth in those fee streams for 2023. A target of 8% growth in this area seems attainable given the opportunities available. All of these strategies are already in motion, and we have clarity on each of them. Since we have multiple growth drivers, we’re not reliant on just one single opportunity, which gives us confidence that our midpoint projection is achievable even if a few elements don't meet expectations.

Super helpful. Thank you so much.

Thank you.

Thank you. Our next question comes from Ian Zaffino with Oppenheimer. Please go ahead.

Hi, thank you. I picked up a lot of the comments on the infrastructure bill. Can you maybe tell us how that plays out? Have you started to see anything yet? What areas? Is it mainly extended? Is it select? Where are you seeing that? And then are you also maybe seeing some trends in leisure-related to that as well? Or is it pretty predominantly midweek?

It is mainly midweek, and we are definitely seeing benefits. This is not only for extended stays but also for transient stays. For instance, in Texas, where we have 700 hotels including Days Inns, Super 8s, and La Quintas, we are starting to see gains in market share. Regarding the CHIPS Act, there are numerous hotels near the Intel site in Chandler, Arizona, and the Samsung plant in Taylor, Texas, which is a significant investment of $17 billion that will create 2,000 jobs over the next few years. We are also placing millions of dollars in contracted business into both transient and new build hotels like our Hawthorn Suites and nearby La Quinta. We are particularly excited about the strength of our field sales team, which has been increased by 25% to target these infrastructure accounts. On the technology side, our IT team has introduced effective technology that has identified 3,600 projects within 10 miles of markets with multiple Wyndham Hotels. This is just a small part of the 40,000 infrastructure projects announced by the Federal government, and we are keenly focused on the Federal rail infrastructure bill, which has an estimated $26 billion budget and is already bringing in new accounts on both coasts. Additionally, we are thrilled about the recent announcement regarding airport terminal grants affecting over 40 states. Overall, it's still early, but we are witnessing a double-digit increase in infrastructure bookings and a 20% rise in new accounts so far this year.

Okay. Thank you. And then just as a follow-up, maybe a little bit higher level, but then we're hearing a lot of that Echo, but then we're hearing a lot about sort of moving upscale a little bit. So, if we look out three years or something along those lines, how does the portfolio mix look? And what type of either M&A that you need to get there? Maybe just broadly speaking. Thank you.

Yes, sure. So, Echo obviously, will make up a bigger portion of the system as it comes in. Remember, though, it is coming in at an accretive RevPAR to where we are today. So, when we think about our 70% pipeline in the midscale and above and how that's going to come into the system and then how Echo comes in the system, obviously, will be a lot less dependent on just the economy itself, which has been in a very limited new supply environment for quite a long time.

All right. Thank you very much.

Thank you. Our last question comes from Meredith Jensen with HSBC. Please go ahead.

Good morning. Thanks for taking my questions. I wondered, I know you've spoken about the growth possibilities and in the ancillary fee streams. I think on Page 19, there's a nice discussion of it. Could you talk just a little bit more about the co-brand credit card opportunity and some of the other partnerships you're looking into? So, maybe we can build that out a little bit more because I know there's a lot there. Thanks.

Sure. Meredith, we've seen multiple opportunities that are currently underway for which, again, we have a really good line of sight for ancillary fee stream. To name a few, we're working to tap the significant potential in the credit card suite of products, and that's going to include new products. It's going to include expansion internationally. Right now, the card is US-centric, so there's a lot of opportunity as we think about the potential to leverage Wyndham Rewards and the Wyndham Rewards Loyalty across the 95 countries in which we operate. On the partnership opportunity side, I won't get into specifics for competitive reasons. But again, we're working to leverage our global footprint and expand beyond just again, the US-centric partnerships that we have in the house today. And then, of course, we're going to continue to focus on our relationship with T&L and helping them grow their business, including through the use of the Wyndham Rewards points currency. So, there's many levers here on the ancillary side.

Super. Thanks. One quick expansion on the international side in terms of the direct franchise business, which I see, again, the presentation is great. On Page 13, it talks about the increase in the direct franchise business rising again. Is there more to be done there? Or how much left of the transition from the master franchise to direct? And should we build in any particular changes, lifts to fees there? And maybe just a little on China too, if you don't mind. Thanks so much.

I will start with China, and then Michele can discuss how to model it. We are going to continue to see more percentage growth in direct franchising. As a reminder, this accounts for about one-third of our China system and has been growing at double-digit rates, as it did this quarter and this year. This segment is expanding at three times the rate of our master license fees. Moving forward, we will not sell master license agreements anymore. That was something we did 15 to 20 years ago. Our growth, particularly in China, is much faster through direct franchising compared to master agreements. Our overall net room growth in China was 6%, with around 2% coming from master agreements and 13% from direct franchising, and this trend is consistent elsewhere. We have very few masters left, so our primary focus is on direct franchising. Michele, do you have anything to add?

Yes, Geoff, I think you covered it all. I mean at three times the royalty rate coming out of the direct franchising business versus the master franchising business and the vast majority of the growth in China coming out of that direct franchising business, we are going to see royalty rate expansion for sure. You can see that already showing up in some of the 30 basis points improvement in 2023, and we'll continue to see that show up as we move forward. Overall, I'd say, in addition to moving from masters to direct, the other thing we're benefiting from in international is just scaling the footprint so that we can continue to take advantage of pricing opportunity for brands that have scale in specific regions.

That’s super helpful. Thanks again for the color.

Thanks, Meredith.

Thanks, Meredith.

Thank you. At this time, I will turn the floor back over to Geoff Ballotti for closing remarks.

Thank you, Todd, and thanks everyone for your questions, for your interest in Wyndham Hotels & Resorts, and most importantly, your support in our ability to realize our future growth potential. Michele, Matt and I look forward to talking to and seeing many of you in the weeks and the months ahead. We wish everyone a happy President's Day weekend coming up, and we look forward to seeing you soon.

Thank you. This does conclude today's Wyndham Hotels & Resorts fourth quarter and full year 2023 earnings conference call. Please disconnect your line at this time and have a wonderful day.