Good morning, everyone, and welcome to the Wyndham Hotels & Resorts Second Quarter 2025 Earnings Conference Call. I would now like to turn the call over to Mr. Matt Capuzzi, Senior Vice President of Investor Relations. Please go ahead, sir.

Thank you, operator. Good morning, and thank you for joining us. With me today are Geoff Ballotti, our CEO; and Michele Allen, our CFO and Head of Strategy. 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'll 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, filings submitted with the SEC and any public conference calls or webcast. With that, I will turn the call over to Geoff.

Thanks, Matt. Good morning, everyone, and thanks for joining us today. We reported another strong quarter of progress with global system growth of 4% and sequential net room growth across every region we operate in. We grew comparable adjusted EBITDA by 5% and we grew EPS by 11% despite the challenging RevPAR environment. We drove an increase of nearly 20% in our ancillary fee streams, and we saw continued expansion in both our U.S. and in our international royalty rates. Year-to-date, our resilient, highly cash-generative business model has produced approximately $170 million of adjusted free cash flow, and we've returned nearly $220 million to our shareholders. The second quarter reaffirmed our team's OwnerFirst commitment as we registered over 6,000 owners and strategic sourcing partners for the Wyndham Global Conference in May. As one of the largest gatherings of hoteliers in the world, our conference was designed to empower our owners with major new initiatives to increase their revenues and guest service, to lower their costs and to strengthen their operating performance. We unveiled several new cutting-edge technology-driven tools, including Wyndham Gateway, a new centralized Wi-Fi login system that creates new ancillary revenue opportunities and eliminates loyalty program enrollment requirements for participating hotels. And building on our very successful guest engagement platform, Wyndham Connect, we launched Wyndham Connect PLUS, an AI-driven guest engagement platform designed to enhance the guest experience and improve hotel operations. Utilizing automated text messaging and voice assistance to facilitate bookings, answer questions and provide tailored recommendations, this platform is also designed to drive more direct bookings, reduce front desk workloads and create personalized guest experiences. Since being launched at our conference, over 1,100 of our over 5,000 hotels already on Wyndham Connect have now enrolled in Wyndham Connect PLUS. We introduced Wyndham Marketplace with PriceIQ to reduce procurement costs, access better pricing and simplify supply chain processes. We debuted new strategic food and beverage partnership integrations with Grubhub, Applebee's, and sbe's Everybody Eats to increase guest satisfaction by offering chef-driven, restaurant-quality offerings without the need for extensive equipment or large back-of-the-house operations. We launched affordable, high-quality insurance programs through a partnership with HUB International to provide tailored solutions to improve coverage and lower costs at a critical moment for franchisees amidst rising insurance premiums. And we introduced Wyndham Rewards Experiences, leveraging partnerships with world-renowned sports and entertainment brands like Madison Square Garden, Radio City Music Hall, and Minor League Baseball, allowing our 120 million members to use their points to bid on premier live events as well as unforgettable, once-in-a-lifetime memories. Franchisee satisfaction with what they learned and how they believe this conference will improve their business was higher than in any past conference, as was their confidence in the years ahead. And last month, we released our first annual Hotel Owner Trends Report, a multi-month effort that surveyed hundreds of developers and owners from the United States, Canada, and the Caribbean. The results reveal an industry full of owners who remain confident in its resilience and long-term growth prospects. Nearly all of those surveyed responded that they are open to exploring branded offerings underscoring the value that strong brands deliver compared to operating independently. When ranking the most critical factors in selecting a brand, these owners and developers pointed to support and executive leadership as top priorities, followed by a strong loyalty program and access to best-in-class technology. More than 90% of respondents expressed optimism about the next 5 years. And while they acknowledge the challenges posed by the current macro environment, 4 out of 5 owners also indicated plans to expand their portfolios via either new construction or new unit additions. Our owners' confidence in their brands and their future with Wyndham was once again reflected in our growing openings, signings, and net room growth this quarter. We opened over 16,000 rooms in Q2, bringing June year-to-date new additions to over 30,000 rooms, a record first half of openings for our company and 3% higher than last year. Q2 contract signings increased 40% to the prior year, driving another 5% growth in our global development pipeline to a record 255,000 rooms. This was the 20th consecutive quarter of pipeline growth, a development pipeline with an average FeePAR premium approximately 30% higher domestically and nearly 15% higher internationally versus the existing domestic and international rooms in our system. Domestically, our midscale and above brands grew 3% with new construction openings like the La Quinta Olive Branch located just minutes from Graceland, Elvis Presley's historic home in Memphis, Tennessee; and strong conversion activity with new additions like the Hilo Hawaiian Hotel on Big Island; and the Airport Honolulu Hotel on the island of Oahu, both converting to our Trademark Collection by Wyndham brand. Internationally, we increased net rooms by 8%. EMEA grew net rooms by 5% with several new construction additions like the beautiful new Wyndham Alanya Resort on Turkey's Mediterranean coast, while also growing their development pipeline by 34%. And just last week, we announced the development agreement with Gurgaon-based Cygnett Hotels who will be developing our La Quinta and Registry brands across India, Bangladesh, Sri Lanka, and Nepal. Latin America and the Caribbean grew its pipeline by 16% and increased net rooms by 4% with new construction openings like the Dazzler by Wyndham Salta in the cradle of Argentinian history and folklore and set new high-quality conversions like the first HQ Hotels & Residences by sbe, a $100 million development on the northern tip of Antigua; and Hodges Bay Resort & Spa, a proud member of our growing Registry Collection brand in the lifestyle luxury segment. In Southeast Asia and the Pacific Rim, net rooms grew by 13% with new build additions like the Wyndham Soleil Danang resort, highlighting our rapid expansion in Vietnam, where our system size now exceeds 7,000 rooms. In China, our team grew net rooms by another 16% in our direct franchising system with high-quality new conversions and stunning new construction additions like the Days Hotel by Wyndham Suzhou Dushu Lake; and the Wyndham Garden Shanghai Pudong, our 50th Wyndham Garden in China. As we've shared on our last two earnings calls, our Super 8 master licensee in China has struggled to add new units and retain existing ones. Following an operational review this quarter, we identified violations of the license agreement by this master licensee and subsequently issued them a notice of default, a potential outcome of which could include termination. As a result, we revised our reporting basis to exclude the impacts of these rooms from our reporting metrics. And as a reminder, the financial impact of this portfolio is immaterial to our overall results, as Michele will discuss in a moment. As we focus on our development of higher FeePAR brands and geographies, on building scale in markets where we have a strong footprint and strong growth potential, and on expanding direct franchising in regions previously reliant on master license agreements, we're adding hotels with stronger economics that drive meaningful royalty rate accretion. This quarter, our royalty rate increased by another 6 basis points domestically and by 13 basis points internationally. By continuing to focus our development on higher FeePAR properties and geographies, we're enhancing the continued long-term earnings potential of our system. On a global basis, RevPAR declined 3% in constant currency. International RevPAR grew 1% with strength across all regions except Asia Pacific, which was down 9% on continued softness across China. EMEA RevPAR grew 7% with strength across Europe and the Middle East. Latin America and the Caribbean RevPAR grew by 18%, driven by strong ADR and higher FeePAR additions in Brazil, Mexico, and the Caribbean. And Canada RevPAR grew by 7% with lower U.S. outbounds. U.S. RevPAR declined 4%. About 150 basis points of this decline was driven by the lapping effect of the solar eclipse in April of last year and the timing of the Easter holiday, which shifted into the second quarter of this year. On a normalized basis, our second quarter RevPAR declined approximately 2.3%, consistent with our expectations and a 60-basis point improvement from the 3% normalized RevPAR decline we reported for March. Higher-for-longer interest rates, persistent inflation, and uncertainty around immigration and trade have created an environment of ongoing economic volatility for economy and midscale guests who remain especially sensitive to these dynamics. Also, as expected, we saw a significant acceleration in our ancillary fee growth this quarter given the full quarter benefit that our renewed co-branded credit card agreement delivered, combined with our growing strategic partnership initiatives and our significant and ongoing technology innovations. Collectively, our ancillary revenues have now grown 13% for the first half of the year, pacing in line with our full-year expectations. Before Michele takes us through the financials, we'd like to take a moment to thank and recognize our teams around the world. The continued success of our OwnerFirst operating philosophy, which was on full display at our Wyndham Global Conference this quarter, is a direct result of their unwavering commitment and dedication. We're incredibly grateful to our team members who consistently put our owners at the very heart of everything we do. Their passion fuels our momentum, and their confidence in the road ahead reinforces our ability to deliver exceptional value to our shareholders, our guests, and our franchisees each and every day. And with that, I'll now turn the call over to Michele.

Thanks, Geoff, and good morning, everyone. I'll begin my remarks today with a detailed review of our second quarter results. I'll then review our cash flows and balance sheet, followed by our outlook. Before we 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 second quarter of this year, marketing fund revenues exceeded expenses by $3 million compared to expenses exceeding revenues by $5 million in the second quarter of last year. To enhance transparency and provide a better understanding of the results of our ongoing operations, I will be highlighting as usual, our results on a comparable basis, which neutralizes the marketing fund impact. Additionally, as Geoff mentioned, beginning this quarter, we've revised our reporting methodology to exclude the full Super 8 China master license portfolio from our reported system size, RevPAR, royalty rate, and related growth metrics, given the operational challenges of obtaining accurate information from this master licensee and the uncertain outcome of this compliance process. While we work through our compliance actions, we'll continue to recognize fees due to us under the master agreement, which contributed less than $3 million to our full-year 2024 consolidated adjusted EBITDA. We also updated our full-year net room growth guidance to reflect this reporting change, raising the low end of that range by 40 basis points. Historical results for comparability can be found in Table 6 of our earnings release with additional background and context provided on Slide 25 of our investor presentation. Now moving to second quarter results. In the second quarter, we generated $397 million of fee-related and other revenues, and $195 million of adjusted EBITDA. Fee-related and other revenues increased $31 million year-over-year, primarily reflecting higher royalties and franchise fees, a 19% increase in ancillary fee streams and higher pass-through marketing reservation and loyalty revenues due to our global franchisee conference in May, which is held about every 18 months. The increase in royalties and franchise fees reflects system growth of 4%, higher other franchise fees, and royalty rate improvement, partially offset by a 3% decline in global RevPAR. Ancillary revenue growth meaningfully accelerated this quarter as expected, driven by the full quarter impact of our renewed long-term co-branded credit card agreement, which is also fueling stronger loyalty engagement across our portfolio. Adjusted EBITDA grew 5% on a comparable basis, reflecting our revenue growth, partially offset by higher operating expenses primarily related to the growth in our credit card program and the absence of insurance recoveries recognized in the second quarter of last year. Adjusted diluted EPS for the quarter was $1.33, up 11% on a comparable basis, driven by our EBITDA growth, the benefit of share repurchases, and lower depreciation and amortization, partially offset by higher interest expense. Adjusted free cash flow was $88 million in the second quarter and $168 million year-to-date with a conversion rate from adjusted EBITDA of approximately 50%. At our current trading levels, our adjusted free cash flow yield of 6% remains the highest in the lodging sector. Development advance spend was $23 million in the second quarter, bringing our year-to-date total to $51 million. We continue to see an increased appetite for our brands with global openings up 3% so far this year, and we're happy to put our excess cash to work in order to position us in key markets and high-demand locations that attract FeePAR-accretive properties into our system. We returned $109 million to our shareholders during the second quarter through $77 million of share repurchases and $32 million of common stock dividends. Year-to-date, we have now repurchased 1.7 million shares of our stock for $153 million. We closed the quarter with approximately $580 million in total liquidity, and our net leverage ratio of 3.5x remains as expected at the midpoint of our target range. At this leverage ratio, our current outlook implies up to $550 million of capital available for deployment this year after dividends. Of that, we've earmarked $110 million for key money, leaving nearly $400 million for share repurchases or strategic transactions. Through the first half of the year, we've deployed about $200 million, largely taking advantage of a depressed stock price, leaving ample capacity for additional capital return or opportunistic investment in the back half of the year. Turning now to outlook. As we've already mentioned, our net room growth outlook is now 4% to 4.6%, up from 3.6% to 4.6% to reflect the removal of our Super 8 master licensee in China. We are also raising our EPS outlook to a range of $4.60 to $4.78 to reflect the impact of second quarter share repurchases. This outlook is based on a lower diluted share count of 77.8 million shares and as usual, assumes no additional share repurchases or incremental interest expense associated with any potential borrowing activity to maintain our leverage at 3.5x. We are reaffirming our expectation that full-year constant currency global RevPAR growth will range between down 2% to up 1%. As we shared last quarter, we purposefully set a wider range to account for ongoing volatility and uneven demand across markets, and we continue to believe that range remains appropriate today. When normalized for the headwinds from the solar eclipse and Easter timing, second quarter performance was within that range. Should we see a near-term resolution to global trade tensions, consumer sentiment and demand could recover as quickly as it softened. And with our largest volume month still ahead, we believe this outlook reflects a range of potential outcomes in today's environment. There are no changes to the remainder of our outlook nor to our expectations for the marketing fund to break even on a full-year basis, give or take a few million dollars. With respect to seasonality, we expect the marketing funds to underspend by roughly $10 million in each of the third and fourth quarters in order to land at approximately breakeven for the full year. In closing, our second quarter results reflect steady execution across key priorities, growing our system with high-quality FeePAR-accretive rooms, accelerating ancillary revenues, expanding our royalty rates, and delivering on our earnings targets. With a strong balance sheet and highly cash-generative business model, we're well positioned to navigate near-term headwinds while continuing to invest in long-term value creation. As always, we remain committed to disciplined capital allocation and generating consistent, meaningful returns for shareholders. With that, Geoff and I would be happy to take your questions.

We'll go first this morning to David Katz of Jefferies.

First, I want to briefly mention China. Although it's not the main topic, I recognize this has been a concern since 2018, and I hope for a positive resolution. My question for Geoff and Michele is about RevPAR in your segments. We have been observing the weekly numbers, and there has been some pressure. I would appreciate if you could provide more details on what's happening with RevPAR, which is facing challenges in several areas but not everywhere, and when we might expect to see some growth.

Sure. Thanks, David. As we've always heard you say, RevPAR lasts for a day and pipeline lasts for a lifetime. And this has been more than a day. Q2 RevPAR was down 2.3% normalized versus the down 2.9% we ran in March. So a bit better. Slide 11 in our investor presentation lays that out. July month-to-date has been generally consistent with the STR results with continued softness in the Sunbelt states like Texas, Florida, and California, where we have about a quarter of our system, but it's been offset by strength in oil markets like Ohio, up 4% in the quarter and up July to date, Oklahoma up double digits and natural gas states like Pennsylvania, which was up 6% in the quarter. Combined with strengths in the large Midwest industrial states, Matt put a greenshoots chart in 11 where we're seeing strength, RevPAR-wise in states like Wisconsin, Michigan, Minnesota, and Missouri, all indicating steady demand from our blue-collar everyday travelers. So softness more leisure focused in those large Sunbelt and border states that I just mentioned. In terms of going forward, the next 2 weeks of July are, as you all know, our most important weeks of the year. And in August, we'll see a stronger summer travel season, which we're happy about, given the favorable school calendars with more schools starting later this year than last year per STR. And while the demand shift happened very quickly, and while optimism certainly abounds for continued resolution of the global trade tensions and improved consumer sentiment, we're not seeing anything structurally that concerns us. Pricing is holding steady. ADR year-over-year was essentially flat in the quarter and is up 17% to 2019, which is trailing inflation by a full 7 points, but we're not seeing any trade down opportunities or impact. In fact, the gaps between those chain scales continue to strengthen with little signs of any discounting or compression. If you just look at the last quarter, $50 gap between economy and upper midscale, it's now over $65. And the $80 gap last quarter between upper mid and upper upscale has moved up as well. So nothing structurally that concerns us. Our most booking lead times of late are essentially flat to last year. The average length of stay is consistent with last year, in fact, up about 3% to pre-COVID. And our cancellation rates have actually improved somewhat over the last year by about 60 basis points. Economy is still humming. Our guests are more employed. They have healthy balance sheets and household incomes that continue to strengthen. Each month, David, we run internal research on our guests that point towards more optimism on travel intent and less concerned about economic worries than both last year and even last month. We look at all the research we get our hands on, syndicated research that's out there, and we continue to see consumers with more plans to travel in the next 6 months. I think it was 94%, 95%, up from 89% in the first quarter. Consumer spending on travel is continuing despite the macro headlines, and we remain optimistic that that RevPAR long-term 2% to 3%, Smith Travel domestic RevPAR CAGR is going to return, especially given the historical low levels of supply that we've been seeing.

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

Geoff, I want to discuss net unit growth expectations and how your outlook for the year has changed since the beginning. We know that construction in the U.S. has faced challenges and that starts have been impacted for several reasons. Has there been any change in the mix of your expectations between new construction openings and conversions? How are these aspects evolving for you throughout the year?

Thanks, Brandt. Go ahead, Geoff, you start.

I'll begin and then you can discuss the outlook for the year. Our near-term optimism continues to grow regarding openings, executions, and pipeline starts, along with net room growth both in the U.S. and internationally. From a high-level view on openings, we are very pleased with the accelerating net room growth in the higher FeePAR segments. There is a notable slide in our investor presentation that highlights record openings ahead of last year, as well as impressive performance in the first half of NRG. Execution-wise, we are extremely satisfied with how our teams have performed this year. The pipeline is larger and stronger than ever, and our franchise sales teams worldwide have been more productive than in the past. This pipeline continues to trend higher domestically, with domestic contributions growing from about 35% to 42% in recent years, driven by robust domestic executions, which are up 6% from last year, and international executions totaling 11,000 rooms, significantly up by 400 basis points.

Yes. I would like to add that our expectations for net room growth have remained mostly consistent throughout the year, although the quality and visibility have improved as the year has progressed. At the beginning of the year, we projected a range of 3.6% to 4.6%, which has now been adjusted to 4% to 4.6%. This change reflects the removal of the Super 8 master license agreement, as well as the ongoing strength in development activities and the record number of openings in the first half of the year, along with growth in our pipeline and a 23% year-to-date increase in execution. We are very pleased with the development momentum.

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

So this is more of a strategic question, but how does the incident with the Super 8 master licensee in China change your approach to China or other international markets going forward? Does it increase the urgency for direct franchising?

Yes. I mean we've been saying, Dany, thanks for the question, consistently that we're no longer signing master license agreements to grow, and that these agreements that were entered into over 20 years ago with local developers before we had franchise sales teams located in those markets as we do today, were why we did it back then. We have very strong teams, as we've talked about before on these calls, in China. I believe we have the biggest, largest, most successful franchise sales team over there today, and so we're absolutely committed. And as we've been talking about consistently, we've seen continued development acceleration in our direct franchising business, to your question on both the openings and the executions front. No slowdown. It's grown 12% on a compounded annual growth rate since 2020. That's our direct franchising business. It's on pace this year to deliver double-digit growth again. And we have increased our direct franchising business in China by over 100% since spin to nearly 100,000 rooms, and that is at 3x the royalty rate, and we have about 400 direct hotels now in our pipeline. Q2 is another great example. We opened 5% more rooms direct, and that drove the 16% net room growth in our direct FeePAR-accretive rooms. And our teams executed really strongly again, 26 new deals, more than last year, with a new construction pipeline that's growing. And these are contracts that are about 3/4 weighted to new construction, and 1/4 to conversions. So there is a lot of excitement. There's a lot of development out there. We continue to add new brands to Wyndham, Wyndham Grand, Wyndham Garden, Wingate, Ramada, they've all been really performing well for us. We took back a master license Days Inn, and we just signed our 110th Days Inn over there. We've added 25 Microtels. Nobody thought we'd be adding La Quintas, but I think the team just opened their fifth over there. And the team is very committed. We're very committed to growing across the country, and they're firing on all cylinders.

We'll go next now to Steve Pizzella of Deutsche Bank.

I wanted to focus more on the credit card. You noted ancillary fees grew 19% in the 2Q. And in the deck, I believe you expect low teens growth for 2025 overall. How should we think about the acceleration in the second half of this year and into 2026?

Steve, we were really, really pleased with the performance of our ancillary revenues in the second quarter. They were, as you mentioned, up 19%, right in line with the acceleration that we had expected. And a large portion of that growth came from our co-branded credit card program. In the first half, we saw a 5% increase in new accounts alongside a 2% lift in average spend per cardholder. These are really strong indicators of engagement, and we expect that momentum to continue throughout the remainder of the year. On a year-to-date basis, we're at that 13%, which again is right in line with our low teens full-year expectation, and we expect that the back half is going to produce similar results.

And we'll go next now to Lizzie Dove of Goldman Sachs.

I just wanted to ask about the key money environment, what you've been seeing recently, whether it's gotten more competitive, whether more kind of money per deal has been required now?

Hi, Lizzie. I'd say it's pretty consistent. We're really pleased with how successful the teams have been penetrating the midscale and above space, bringing in higher FeePAR deals; strategies working, and we can't think of a better place. We're really thrilled to be putting some of our excess free cash flow to work here. Our openings are up 4% year-to-date. Our contract signings are up again, that 23% year-to-date. We're at every table and this tool is helping us win deals. The deals this year so far have brought in FeePAR that's 36% higher than our existing system. So there's real value in this money that we're deploying, and I think it's a pretty consistent environment.

We'll go next now to Michael Bellisario of Baird.

No, not yet. Patiently or maybe impatiently waiting. Geoff, you haven't talked about ECHO Suites yet. Maybe just what's the latest and greatest there in terms of signings and starts for that brand? And then also maybe just the latest update on the growth trajectory for the brand with your multi-unit owners who are the initial developers versus maybe thinking about doing more one-off deals going forward?

Sure. We're increasingly engaging in one-off deals, and our team is maintaining strong performance. The new construction executions are showing growth, with the overall pipeline up 9% compared to last year. Contrary to some perceptions of a slowdown, our new construction pipeline is actually up 4% year-over-year, reaching a record of 1,500 hotels. ECHO has been instrumental in this, with its new construction pipeline growing by another 3% from the previous quarter. We signed contracts for 1,600 new rooms with various developers, bringing our total to over 30,000 rooms, and we are actively expanding this pipeline. Recently, we've had openings in Texas, Tennessee, and Virginia, with another ECHO Suites just opened in Katy, Texas. New signings occurred this quarter in states like Oregon, Utah, and Washington, involving multiple new developers. Currently, we have nearly a dozen properties open, another dozen under construction, and about 30 sites in active development in promising markets such as Sterling, Virginia; Fort Worth, Texas; Pasadena; and Naples, Florida, where we expect to see great new units. Performance is on track, with several hotels already achieving RevPAR index levels exceeding 100%. Although not all are there yet, they are progressing well. It's exciting that these developers are introducing midscale, upper midscale, and sometimes upscale competitors into their markets as they aim to raise average daily rates and RevPAR, particularly for extended stays, achieving levels unprecedented for our brands. We've consistently stated our goal of having 300 open by 2032, and with over 280 executed contracts in our pipeline, along with continued engagement from both multi-unit and one-off developers, we feel optimistic about reaching that target.

And then just one follow-up. I guess, when do you expect to take the brand international? And that's all for me.

Yes. We are talking. In fact, we're meeting with our divisional presidents next week about Latin America, perhaps Mexico being the first, but probably in the next year.

And we already have agreements in place in Canada.

We'll go next now to Patrick Scholes of Truist.

Wonder if you can lay out what you see as the range of the various possible outcomes with the China notice of default. I'm not asking what you see as the most likely or the most desirous, but really, what are the possible outcomes that you see in this current scenario?

Yes, Patrick, this is an active compliance process. I don't think it would be appropriate for us to discuss those details publicly. However, we can say that this could lead to a variety of outcomes, including termination of the master.

Okay. Is it possible any of those outcomes could end up being a net positive for you folks?

Sure. It's just too early to speculate on potential outcomes, but I can definitely see a few paths where this could be a positive for Wyndham for the sub-licensees and even potentially for the master.

We'll go next now to Dan Politzer of JPMorgan.

I wanted to discuss the growth in net rooms. Clearly, this is an area where you have some visibility. How are you assessing the growth rate as you look towards 2026? Do you believe that a growth rate of 4% to 4.5% is attainable? Additionally, could you provide some insights into the growth breakdown between the U.S. and international markets, considering the momentum of ECHO Suites? Also, a quick question for Michele: regarding the net rooms growth outlook for this year, you raised the low end by 40 basis points but kept the high end unchanged. Were there any other changes aside from the MFA that might have influenced both ends of the range?

There's a lot to cover. I’ll start with the last question. Our outlook for net rent growth reflects increased confidence as we reach the midpoint of the year. We have better clarity on production and more reliable information, which strengthens our confidence in achieving our net room growth guidance. This also includes a 20-basis point increase at the midpoint of the guidance due to adjustments made for the Super 8 master licensee. While it's still early to discuss 2026, our long-term growth goal has consistently been between 3% and 5%. We're already exceeding the 3% mark in 2025 and anticipate being able to meet those growth targets. We have a strong construction pipeline, with a significant amount already underway. There's ongoing momentum in the midscale and extended-stay segments, which show positive fundamentals, strong demand, and available financing. Additionally, we are seeing increased contributions from international markets, particularly in regions with higher FeePAR under our direct franchising model, with more growth expected in high FeePAR areas like EMEA. Overall, we are optimistic about the quality of net room growth projected through 2026 and beyond.

We'll go next now to Stephen Grambling of Morgan Stanley.

Two quick follow-ups. First, on Lizzie's question around key money. Just given the success here, do you generally anticipate potentially loosening up the purse strings or I guess in the past, you talked about it as an eye dropper to deploy more? Or what are the guardrails investors should be thinking about with that deployment?

I hope our development team is not listening. Yes, I referred to it as an eye dropper. I'd say we are always very judicious in how we deploy our capital. And we want to make sure that any key money that we're deploying is returning the proper economic value to our shareholders. And any deals would be assessed kind of through that lens. I don't anticipate needing to increase the key money meaningfully beyond the levels contemplated in our current outlook. Our strategy hasn't changed, right? So we still want to prioritize investment in high-quality growth and make sure that those returns are meeting or exceeding our hurdle rate. And I think we're fortunate enough to be able to be judicious, but also opportunistic.

We go next now to Ian Zaffino of Oppenheimer.

This is Isaac Sellhausen on for Ian. I think we've covered a lot already, but my question is just on the positive RevPAR trends you're seeing in the Midwest and industrial markets. If you could just touch on if that mix is being driven by both ADR and occupancy or is there anything to call out as far as sizing the occupancy uplift from infrastructure?

The rate has remained steady, with our figures for the quarter and July so far being flat compared to last year. We're starting to notice a resurgence in spending across the Midwest and nationwide. Our global sales and contracted room nights are increasing, currently about three times higher than what we've consumed, indicating we're ahead on business. Specifically, the eight Midwest states highlighted in our investor presentation experienced RevPAR growth of over 500 basis points in the second quarter, with more than 100 basis points attributed to hotels located near significant infrastructure projects. Although infrastructure growth has been slower than what we saw in the fourth quarter, it's comparable to the broader trends from that time. As national priorities become clearer, we expect business to improve. The current focus from the administration is on accelerating highway and bridge projects. Additionally, we're witnessing strong growth in public and private data center construction, energy projects, and semiconductor investments. Our teams have identified 150 planned data center projects within a 15-mile radius of Wyndham Hotels, actively pursuing these opportunities through various means. Data shows that the revenue performance index for our hotels located near the top 10 data center construction projects has outperformed other hotels in more distant markets by 500 basis points year-to-date. New data center projects are being announced regularly, and we view this trend as a significant multi-year advantage for our hotels, owners, and sales teams.

Yes. And in those Midwest states, you mentioned, Geoff, I think we're up about 100 basis points in RevPAR on the infrastructure market.

We go now to Alex Brignall of Redburn.

Could you provide more details on your retention rate, particularly regarding the existing portfolio, which has shown positive growth this year? Looking ahead to future years, do you have any new insights? Additionally, can you share any information on any project dropouts in the pipeline, or are things proceeding as expected? There were also discussions yesterday about Hilton's optimistic outlook for Q4, and while RevPAR trends might differ due to your tier, do you have any thoughts on the challenges for Q4 in the U.S.?

Okay, Alex. I will start and then Michele could fill in anything that I missed, and I'll let her talk about the Q4 RevPAR expectations. You asked about pipeline and pipeline fallouts. We're not seeing anything as Michele rightly alluded to. We're seeing an increase in starts, and just great additions to that pipeline where our teams from an execution standpoint are really adding to it as we talked about 229 contracts signed in the quarter, 40% up to last year. And domestic rooms executed, we're really happy about what's happening. In the U.S., it is now pacing 7% ahead of the same time last year, but no fallouts. You asked about retention, and we're really pleased with the steady progress that we've seen since then. And really nothing different in terms of our narrative on retention. We've always said that we've had a long-term retention goal in these segments we operate in of about 96%. And when we spun out, we were in the 93s. We've moved it to the 94s to 95s last year. And right now, at 6/30, we're running 95.8% on our rolling 12-month retention rate, which is how we look at it. And importantly, we have the highest Net Promoter Scores and quality scores our brands have ever seen or enjoyed. Our overall satisfaction rate with our brands domestically was up 350 basis points year-on-year. So a huge shout out to our DFO teams, our directors of franchise operations who are out there across the country every day. Saying goodbye to franchisees that aren't living up to our quality standards after trying to work with them to get there, but continually improving the quality and improving along those lines, along with everything else we're doing, especially on the technology front, our retention rates. Michele, you want to talk about Q4?

Sure. Undoubtedly, it is a tougher comp. Last year, we benefited from hurricane-related relief efforts, elevated demand that we saw in the Gulf Coast and the Southeast market, it was about 150 basis points. So that is a headwind to the fourth quarter comp in the U.S. And that's already reflected in our guidance for the full year. And we're certainly not expecting to repeat at that same level.

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

I was wondering if you might speak to the slide that discusses the $550 million that could potentially go to shareholder returns or business development? I know you mentioned sort of earmarked for key money, but sort of what you're thinking in terms of opportunities there and what that might be?

Sure. I think that slide really represents the art of the possible with respect to this year's capital allocation. If we look at our excess free cash flow and then the leverage capacity that we had, we would have about $550 million to deploy in the year. I think about $110 million of that is earmarked for key money. And so that leaves a considerable amount remaining for whether it's share repurchase or what we call strategic transactions of further investment in the business. And I think about half of that has been deployed already, including for opportunistic share repurchases. As we've always said, investing in our business is our top priority. We are doing that primarily through the DAN program today. We continue to allocate capital towards those higher quality deals that help us grow our system and then increase our FeePAR, which is a key pillar of our long-term strategy. So as we look to the back half of the year, I think you can expect us to continue to balance an active deal environment with opportunistic share repurchases, and that's how we would expect to deploy our capital this year.

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

Well, thank you very much, Leo, and thanks, everyone, for your questions and for your interest in Wyndham Hotels & Resorts. Michele, Matt, and I look forward to talking to and hopefully seeing many of you in the weeks and months ahead. In the meantime, we'd like to remind all of you golf fans to tune into the Wyndham Championship next week. It is the final tournament of the PGA Tour's regular season before the playoffs begin, it's become a playoff in and of itself, where there is a lot at stake. Coverage begins one week from today, July 30, next Thursday on the Golf Channel and continues over the weekend on CBS with Jim Nantz and his incredible crew, where you'll be able to catch our new linear TV advertising spots where we're very proud of Where There's a Wyndham, There's a Way. Have a great rest of your summer, everyone, and thanks again for joining us today.

Thank you, Mr. Ballotti. Thanks, Ms. Allen. Again, ladies and gentlemen, this does conclude today's Wyndham Hotels & Resorts Second Quarter 2025 Earnings Conference Call. Please disconnect your line at this time, and have a wonderful day. Goodbye.