Wyndham Hotels & Resorts, Inc. Q1 FY2026 Earnings Call

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

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

Thanks, Matt. Good morning, everyone, and thanks for joining us today. We're very pleased to report a strong start to the year with first quarter results highlighting the strength of the value proposition we deliver to our owners in a faster-than-expected RevPAR recovery for our U.S. select service brands. Our development momentum continued with net room growth of 4% and a pipeline which increased for the 23rd consecutive quarter to a record of over 259,000 rooms. We delivered 21% growth in ancillary revenues. We generated $64 million of free cash flow, and we returned $85 million to our shareholders. Global RevPAR improved 450 basis points sequentially from the fourth quarter. Domestic RevPAR, excluding last year's hurricane impact, improved over 600 basis points to essentially flat and ahead of our down 2% to down 3% expectation as demand continued to pick up throughout the quarter. January's 4% RevPAR decline improved to plus 1% growth for February and also for March. Our three largest states of Texas, California and Florida, which account for one-quarter of our U.S. room count, improved by 800 basis points sequentially from down 11% in Q4 to down only 3% in Q1. The Q4 strength we saw in our Midwest and industrial states continued into Q1 with performance in Iowa, Illinois, Michigan, Oklahoma and Wisconsin. Immigration and trade policies that created an environment of uncertainty appear to have stabilized and strong leisure demand over the spring break travel season has provided improved confidence among many franchisees as they approach the peak leisure summer travel season. April month-to-date RevPAR growth has been consistent with February and March. International RevPAR growth was consistent with the fourth quarter at down 1% in constant currency. In Canada, RevPAR increased 8% on increased pricing power and improved demand. In EMEA, RevPAR grew 1% with strong performance in Turkey, Greece and Spain, offset by softness in the Middle East, which declined from plus 18% in Q4 to down 5% in Q1. RevPAR in Mexico fell with lower U.S. inbound travel driving pricing pressure and dropping our Latin America RevPAR by 4% versus prior year. Excluding Mexico, our Latin America region saw an 11% RevPAR increase, driven by strong pricing and demand growth in Argentina, Brazil and the Caribbean. Asia Pacific RevPAR improved nearly 700 basis points from down 7% in Q4 to down 1% in Q1. Strength in Thailand and Vietnam was offset by China where RevPAR improved 540 basis points sequentially from down 10% in Q4 to down 5% in Q1, driven by continued occupancy improvement, which remains a significant tailwind at only 88% of pre-COVID levels. Earlier this month, a large contingent of our franchise sales, operations and technology team members attended the AAHOA 2026 conference in Philadelphia, which aside from Wyndham's Global Hotel Conference is the largest gathering of select service hotel owners in the U.S. Our booth at the trade show was the busiest it's ever been, and developer enthusiasm for our brands and our AI-driven technology offerings designed to capture revenue at every touch point of the guest journey was strong. Developers are increasingly noting that our best-in-class technology, powered by providers like Sabre, Oracle, Salesforce and Canary Technologies, is making our brands ever more efficient and less expensive to operate and that our rapidly expanding AI-enabled shared service approach is lowering their breakeven point and making their hotels more profitable to run. This increased interest in our brands is certainly reflected in our first quarter results where new hotel contracts awarded in the United States increased by 8% and where our global development pipeline grew to a record of over 2,200 hotels as the most asset-light player in the industry, with our development pipeline whose domestic and international rooms carry a 30% PPAR premium. We're structurally upgrading Wyndham's long-term earnings power as we continue to move towards higher tier and higher RevPAR segment brands. As we previewed on our last call, net rooms were flat domestically, which included legacy affiliated room exits from the sale of Vacasa Vacation Rentals to Casago, along with T&L's closure of 17 vacation resorts from our Blue Thread Partners previously announced resort optimization initiative. On the opening side, momentum was driven by strong conversion activity from upscale Travelers' Choice Award winners like the Vapi Palm Springs, which joined our Dolce by Wyndham brand, and the boutique Island Sky Ocean Hotel, which joined our Trademark Collection by Wyndham, a brand that has grown to over 100 hotels in the U.S. with 99 hotels in its global development pipeline. Domestic new construction activity was again fueled, as it will be for the decade ahead, with new Echo Suites by Wyndham hotels opening in markets like Colorado Springs, our seventh in the past six months, with our 20th opening two weeks ago in Bozeman, Montana. We also saw more new construction upper mid-scale dual-branded La Quinta Hawthorn Suites prototypes opening in popular tourist destinations and more new construction upper upscale hotels like the Dolce by Wyndham opening in the heart of South Beach, Florida. Internationally, we increased the number of net rooms by 9%. EMEA grew net rooms by 7% with standout new conversions like our 90th Ramada by Wyndham in Turkey with the opening of the Ramada Encore Midyat, along with several new construction additions, including the Remosa Plaza Tashkent located in the heart of Uzbekistan's capital. Latin America and the Caribbean grew net rooms by 12% with several notable Trademark Collection conversions, including the new Parka Boutique Hotel in the heart of Cartagena's Old City, along with the Decameron Baru, a TripAdvisor-award-winning resort near Playa Blanca. In Southeast Asia and the Pacific, we grew net rooms by 11% driven by exceptional new construction additions such as the Wyndham Garden Manila Bay, which marks our first Wyndham Garden property in the Philippines. And in China, we once again delivered double-digit net room growth for our direct franchising system and 13% net room growth across Mainland China in total, with several new construction additions, including the Wyndham Grand Tongcheng Hot Springs, our first Wyndham Grand in the Tongcheng area, and the Wyndham Fuzhou Guoji which marks the first Wyndham five-star hotel in the bustling downtown of Fuzhou's capital. Ancillary revenues increased 21% in the quarter fueled by our renewed and very successful suite of Wyndham Rewards credit card products, along with the continued expansion of our strategic partnership initiatives and ongoing technology innovations. Key to this growth is our award-winning loyalty program, where Wyndham Rewards occupancy contribution increased 120 basis points to a record 54% domestically. Global membership enrollments grew another 10% year-over-year and the collective length of stay for our 124 million members grew by 6%. Our Wyndham Rewards experiences platform is increasingly helping to drive that growth as well as deeper member engagement. In the first quarter, we introduced exclusive new opportunities for members to redeem for even more unforgettable experiences like a private tasting with Chef Lorena Garcia at our Miami culinary loft, stays at our new Registry Collection Valor Miami Beach Hotel, and private suite tickets for Harry Styles and Lady Gaga concerts at Madison Square Garden. Looking ahead, we'll continue to leverage our premier partnerships to deliver these once-in-a-lifetime moments. Next month, Wyndham Reward members will have the exclusive opportunity to redeem points to play in the program with PGA Tour professionals at the 20th Wyndham Championship, the last stop on the PGA Tour prior to the FedEx Cup playoffs. As our technology innovations have increasingly helped our franchisees operate more efficiently and more profitably, we're rapidly deploying AI, making it easier for guests to discover and book Wyndham hotels. Today, every property that utilizes Wyndham Connect+ effectively has its own AI-powered voice agent, with more than 1,100 hotels live on this platform domestically and now ramping globally. That's over 1,100 AI agents answering calls and chats on behalf of our owners, helping to drive nearly 300 basis points of incremental direct contribution for these hotels through agent voice channels while also driving meaningful cost savings for these owners by taking labor out of their hotels and front offices. In addition, nearly 5,000 franchisees already live on Wyndham's proprietary AI-powered Wyndham Connect platform are collectively earning millions of incremental dollars by autonomously generating revenue from early check-in, late checkouts, room upgrades and pet fees, incremental amenities and services and so many other creative upsell opportunities they develop themselves. Together, these initiatives are creating a durable competitive advantage that we expect to compound as adoption continues to ramp. Building on this momentum, AI is transforming our marketing economics and booking process performance, amplifying our reach, transforming our digital acquisition model and optimizing our unit economics by allowing us to drive significant reservation volume growth while consistently compressing our cost per click and cost per acquisition by embedding AI across the full guest engagement journey. By leveraging our partnership with Adobe, we are dramatically increasing personalization while keeping guests engaged longer, driving higher conversion rates, shifting demand into direct booking channels and improving the foundational profitability of our business. Our strategy to meet guests wherever their travel intent is formed is working. And increasingly, that's beginning inside of OpenAI's ChatGPT, inside of Anthropic's cloud and inside of Google search AI mode. Wyndham's distribution engine has expanded into these important channels where our growing demographic of younger guests are progressively searching, planning and booking. Last quarter, we announced our direct integration with Anthropic's cloud enabling subscribers to conduct intent-driven searches. This quarter, we're excited to share that we've launched Wyndham apps on both Anthropic Cloud and ChatGPT, delivering that same functionality through a more visual and interactive experience, including dynamic mapping, rich property tiles and detailed hotel pages, representing a highly interactive hotel discovery and decision journey. And we're pleased to report that we continue to make strong progress with Google to develop our direct booking generative AI experience in AI mode, allowing our guests to experience the full value of booking directly with Wyndham through natural conversational interactions without ever leaving Google's AI mode. In closing, the over $450 million investment we've made in technology, which is enabling our AI innovation and which is detailed in our investor presentation posted last night to our Investor Relations website, serves as a powerful engine for franchisee profitability regardless of the economic climate. As we look ahead, we're incredibly optimistic and see clear signs of strengthening consumer and business confidence, which we're well positioned to capitalize on as RevPAR in the select service segments continues its recovery. Most importantly, we want to extend our gratitude to our team members worldwide whose unwavering commitment and resilience throughout the challenging macro environment over the past year has been the bedrock of our success. And now I'm very pleased to formally introduce Amit Sripathi, our newly appointed Chief Financial Officer. Amit's been in the lodging industry for most of his distinguished career and with Wyndham for the past five years in a variety of roles, leading our M&A, our strategic development and our franchise sales efforts, most recently as our Chief Development Officer. Amit's combination of deep finance and capital markets expertise, his firsthand operational leadership at Wyndham and his strong relationships with our franchisees, have positioned him very well to take over as our CFO. And with that, Amit will now walk us through our financial highlights and full year outlook. Amit?

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

We'll go first this morning to Michael Bellisario with Baird.

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

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

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

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

Sure. Thanks, Brandt. There is a lot of optimism out there in the United States, both on the development side and on the consumer demand side. Cancellation rates are improving. Booking lead times are really solid. Lengths of stay are getting longer — they're up versus prior year and are up significantly compared with pre-COVID, improving by 540 basis points. We're seeing guests drive further than last year and a lot further than they were immediately post-COVID with revenge travel coming back. Whether it's a C-shaped or an E-shaped economy, our middle-income segment — our sweet spot — is feeling better. They are gaining confidence in purchasing power. Our franchisees across the country feel it. You referenced tax refunds. Those second-half tax refunds absolutely have the potential to unlock further discretionary spending. U.S. Travel published a research report earlier this month that estimates that one out of every nine dollars of the estimated $57 billion of tax refunds will be spent on travel. Their research shows that middle-income guests will drive about 70% of that, meaning an extra $3.5 billion to $4 billion that is expected to be spent on domestic travel this year. Our internal consumer research shows our middle-income guests continue to express higher intent to travel this year versus last year. Wage growth, as we saw yesterday, is robust enough to support increased discretionary spending, which small business owners are seeing. While Amit noted limited back-half visibility in his outlook comments, we know our comps ahead get easier. We're expecting a stronger June and July with FIFA, where our hotels within 20 miles of event sites are already pacing considerably ahead of prior year, contributing an estimated 20 basis points of uplift. We also have events planned for the Route 66 and America 250 celebrations this summer and fall, and our PR, sales and marketing teams are targeting drive-to guests with mobile offers to boost room night demand across many of our hotels along highways like Route 66. So there's meaningful leisure demand, and we're also seeing strengthening blue-collar and infrastructure business, which is driving weekday occupancy. Overall, a lot to be confident about.

We go next now to Steve Pizzella with Deutsche Bank.

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

A lot in there, Steve. It's something I discussed with owners in Southeast Asia and the Pacific last month. Whether I was in New Zealand talking to a developer building La Quinta or in Singapore in a full-service hotel, there's nothing they're more excited about in terms of incremental revenue and more direct bookings. AI is moving quickly. Our AI-forward six-year investment, roughly $450 million, led by our technology team, has accelerated our AI readiness. We are now 100% cloud-based and fully optimized across our platforms with partners like AWS, Salesforce, Oracle and Adobe. That foundation enables products like Wyndham Connect AI with Canary, which we launched earlier and which gave us an early lead in removing friction across the guest journey for franchisees. It delivered commercial value to our owners, allowing them to focus more on hospitality. Because we're deploying AI at scale across all guest touch points, we're no longer piloting. We're driving incremental NOI for engaged full-service hotels and delivering material improvements for economy hotels as well. For example, engaged full-service hotels have captured up to $25 million of additional NOI ancillary revenue from these initiatives; engaged economy hotels are seeing incremental spend in the low six figures that flows straight to their bottom line; and some mid-scale hotels are seeing similar high-impact results. We're rolling this out: 1,100 hotels live on Wyndham Connect+ now and ramping globally, and nearly 5,000 franchisees live on Wyndham Connect. These products are taking millions of guest calls and labor out of hotels and front desks, resulting in no dropped calls, faster handle times (improving around 25%), and better guest interactions. That AI product is driving around 300 basis points of increased direct contribution for the franchisees using it. Owners are very excited about that combination of revenue upside and cost savings.

We go next now to David Katz with Jefferies.

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

The incremental revenue upside is the most important measurement for our franchisees. We're looking at everything that drives incremental revenue to their hotels, the margin from taking guest service agents off payroll, and the percentage of direct bookings captured because calls weren't dropped or lost. That 300 basis point KPI we're tracking right now applies to the 1,100 hotels live on the platform — only a portion of our roughly 8,000 hotels — and we're rolling it out across the world in over 100 languages. Our job is to ensure small business owners are engaged with these tools that can drive hundreds of thousands of dollars — up to over $100,000 in engaged economy hotels and more in larger properties — and deliver meaningful incremental revenue from suite upgrades, early check-ins, late checkouts, and other upsell opportunities. We also track guest satisfaction, which has seen about a 400 basis point uptick because calls are answered right away and interactions are more personalized. We now have a single source of truth about our guests' preferences, which enables autonomous agents to answer questions, recommend preferred rooms and upsells, and handle requests in moments rather than minutes. We're measuring direct bookings, incremental revenue, operating cost savings, and guest satisfaction as primary KPIs. We're scratching the surface with LLM platforms like OpenAI, Anthropic, and Google, and we have many new initiatives underway.

And David, if I could add on your customer uptake question: studies are showing that almost 40% of travel searches are coming through LLM-driven experiences. We want to meet guests wherever they're choosing to search and book and offer Wyndham hotels through our web, our Wyndham mobile app, and by interacting with properties and front desks. We're seeing strong increases in engagement. Guests are embracing these channels and we're right there to meet them.

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

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

I'm excited to be in the new role. Ancillary had a strong quarter — 21% year-over-year growth — primarily driven by the credit card program. For the full year we guided low- to mid-teens growth in ancillary, and that outlook still stands. The 21% in Q1 is driven in part by lapping the timing of our renewed credit card agreement with Barclays in March of last year, so this quarter benefited from a full quarter versus just a month in the prior year. For the full year, we're still expecting low- to mid-teens growth. We're also excited about continued growth opportunities in ancillary driven by credit card expansion into new markets like Canada later this year, and other international markets in Latin America and Asia with strong Wyndham Rewards membership and hotel presence. We're also driving ancillary growth through AI products and other initiatives that help franchisees generate new sources of incremental revenue. We launched a Wyndham debit card as well, the first in the industry, which we think is another differentiator. Overall, we see a long runway for the credit card and other ancillary opportunities.

We go next now to Patrick Scholes with Truist Securities.

Wonder if you could give us more color on your performance out of China. Across the industry in 1Q we've seen wide volatility in RevPAR results out of China. You folks were negative 5%. A little more color on what drove the negative 5% versus the industry and your expectations for the near to midterm for China?

Looking at the industry and STR, our brands in China were among the first to recover coming out of the lockdowns, and overall RevPAR versus pre-COVID is in line with STR. China RevPAR improved significantly — a 540 basis point sequential improvement from Q4 to Q1. Occupancy was a tailwind and improved a full 12 points, up 8% versus prior year. ADR remains the issue in China due to continued deflationary pressure; ADR is still depressed versus pre-COVID levels. However, there are signs that should soon turn. With PPI turning positive for the first time in 41 months and government measures to boost service consumption and travel demand, plus visa-free entry and increasing flight capacity, we're optimistic. Our expectation is for continued improvement and that China RevPAR will move toward flat to positive for the full year. Where we're particularly optimistic is in development: Q1 net room growth was double-digit for our direct franchising system and double-digit across the overall system, with direct franchise signings up solidly. We've increased our direct franchising business — it's up meaningfully since the spin and is approaching about 100,000 rooms with over 400 direct hotels in the pipeline. Direct franchising royalty rates are higher than legacy MLA rates, helping royalty revenues. Our brands resonate in major Chinese cities and tech centers, and our development team continues to deliver strong results.

If I could add, Patrick, on recovery pacing: we have recovered on pace with 2019 versus the industry, and at times we've recovered ahead of the industry. So the sequential improvement year-over-year is notable — last year we were down 9% in China, and this year we expect to see flat to positive growth on a full-year basis. It's a significant sequential improvement.

We go next now to Ben Chaiken with Mizuho.

On the U.S. demand front, you touched on leisure and infrastructure. Was the infrastructure improvement more forward-looking? And in states like Texas that are seeing rapid improvement, how long do you need to see stabilization for that to show up in pipeline or net unit growth?

Leisure improved about 100 basis points versus business in the quarter, but we're seeing broad improvement. Infrastructure was down year-over-year but improved 10 points sequentially from Q4, and nongovernment infrastructure revenue increased double digits in Q1, which helped our total business segment. The improvement boosted weekday occupancy to flat for February and March, and we're seeing that in April as well. Oil and gas and energy infrastructure spending increased notably for Q1, and contracted infrastructure revenue on the books is pacing well ahead of last year. Regarding pipeline impact, while affiliate exits and certain legacy room removals impacted Q1 net rooms, our development momentum continues. U.S. signings were up 8%, the domestic pipeline is up, and rooms entering now are generally at a significant PPAR premium to rooms leaving the system. We're optimistic that the stabilization and stronger RevPAR trends will support continued net room growth over time.

Ben, to add on net rooms growth: even with the RevPAR backdrop last year we had record openings in the U.S., which underlines the strength of our brands through RevPAR cyclicality. This year, U.S. signings are up 8% and the global pipeline is at a record 259,000 rooms and 2,200 hotels. We're seeing continued growth and remain disciplined with our development underwriting.

Our franchise sales team has maintained momentum through these transitions. The rooms being added are often higher-tier and more accretive, carrying an average 30% higher PPAR than our system average. Our extended-stay and upper-midscale pipelines are particularly strong and represent a large share of the pipeline. We're feeling good about the pipeline composition and the prospects for long-term net room growth.

We go next now to Stephen Grambling with Morgan Stanley.

On AI, do you find any difference in the impact across property type or customer type — for example, high-end versus low-end properties, leisure versus business customers, or different geographies?

It depends mainly on property engagement and what each owner chooses to market. If you're an arriving guest early in the morning, it's easy to sell early check-in and an amenity package. Higher-chain-scale properties have more opportunity in food and beverage and experiences, which is where we're seeing big success in full-service hotels. But AI is impactful across all chain scales, especially for small business owners where it offsets rising labor, brand and distribution costs. The value is a combination of incremental revenue and operating cost savings across property types and geographies. The most immediate benefits tend to show up in properties that actively deploy and market the AI-generated upsell opportunities and use the automation to remove labor burden from front desk activities.

We go next now to Dan Politzer with JPMorgan.

You gave a little color on the development front. How do you think about net rooms growth in the U.S. for this year and the potential to grow there? Can you give more detail on the affiliate rooms that came out in the quarter and how to think about that going forward?

We previewed the affiliate exits in February. The U.S. system was impacted in Q1 by the removal of legacy travel and leisure rooms, including affiliate Vacasa vacation rental rooms following that company's sale. The outsized removal impacted net rooms in the quarter. Openings were generally in line with last year. Looking ahead, we had a record number of openings last year and we expect continued openings and strong signings. The pipeline and signings are growing, and the rooms being added are more accretive in terms of PPAR. Economy gross additions were up 4% and retention rates are stabilizing. We continue to add sellers to promote new brands and premium economy and extended-stay concepts, and the extended-stay pipeline is at a record level where demand outstrips supply. Overall, while Q1 was impacted by affiliate exits, we see strong momentum to generate positive net rooms growth over the full year.

To add to Jeff's point, openings and signings remain strong and disciplined. The composition of our pipeline continues to shift toward more mid-scale, extended-stay and higher-fee segments, which should support higher-quality net room growth going forward.

We go next now to Ian Zaffino with Oppenheimer.

Question on the RevPAR guide: there are a lot of puts and takes — tax refunds, comps, and your expressed optimism. How do you put that together to arrive at the RevPAR guidance? And a follow-up on the credit card business: how much runway do we have and sustainability? Any other initiatives you plan to roll out?

On the RevPAR puts and takes: Q1 outperformance relative to our prior expectation of down 2% to down 3% put us about 250 basis points ahead, which translates to roughly 30 basis points on a full-year global basis. We see continuation in April momentum and assume that into Q2, adding about another 20 basis points, which helps explain the 50 basis point shift to the midpoint being essentially flat. Booking windows remain short, just over 2.5 weeks, so we are measured in our assumptions until we get into the core summer season. To move from minus 1% in Q1 to plus 1% for the full year, you would need stronger performance in the back half. On the credit card business: credit card and loyalty tie together well. Ancillary growth for the year is expected to be low- to mid-teens, and long-term ancillary growth is expected to be in the high single-digits. Credit card expansion into Canada and other international markets is a meaningful opportunity, and AI and other initiatives will further fuel ancillary growth. We launched a Wyndham debit card and see additional levers to drive growth. Overall, we view a long runway for the credit card business and ancillary revenue expansion.

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

I was hoping you could flip to international. You mentioned strength in Turkey; have you seen any shifting of demand that could be trips diverted to Wyndham elsewhere? And second, could you speak about the plans for the Revo properties you foreclosed on and how you might leverage that opportunity?

Turkey has shown great demand and growth with strong occupancy and demand throughout the quarter. It's a bright spot from both development and performance perspectives, and our European development team is seeing strong activity there. We have a growing royalty base and strong openings and conversions. Amit has been very involved on Revo and can comment on the two properties we foreclosed on.

Meredith, the Middle East represents only a very small portion of our global portfolio — roughly 1% of our properties — and Turkey's exposure to conflicts outside the region has limited impact. Regarding Revo, as I mentioned in prepared remarks, we exercised remedies to foreclose on two properties in Europe to recoup investment. On a consolidated basis, the gross value is about $36 million with about $23 million of net asset value. These properties are expected to contribute about $10 million in revenue in 2026; we've revised our outlook to account for that. There's limited earnings impact as we work to stabilize operations, improve profitability and explore strategic options for these assets.

We go next now to Lizzie Dove with Goldman Sachs.

On U.S. rooms growth, you flagged about 3,000 rooms lost from T&L and affiliates, but it looks a bit lower this quarter. Are you expecting to make that up for the rest of the year and still expect U.S. rooms growth to be positive this year?

Yes. The Q1 net rooms impact was primarily driven by legacy affiliate reductions from Vacasa and the T&L affiliated rooms adjustments tied to their resort optimization. Openings were generally in line with last year. Looking forward, development momentum is strong: U.S. signings are up 8%, the domestic pipeline is up 3%, and the rooms being added are at a significant fee premium to those leaving the system — over 30% higher PPAR. We manage net rooms growth on a full-year basis, and Q1 was expected to be impacted in this way. We remain confident in the pipeline and our ability to deliver positive net rooms growth over the year as openings and conversions continue.

We go next now to Trey Bowers with Wells Fargo.

Quick accounting question: the $114 million of reported royalty and franchise fees — can you provide a walk of that number without the Revo impact and any outsized items, what that number would look like on a more normalized basis?

The royalties and franchise fees line has a few components. About $3 million of the line related to a revised deferral we previously communicated. We also had slightly higher amortization year-over-year, which offsets some of the RevPAR increase in the quarter. Franchise fees are not linear to RevPAR and can vary quarter-to-quarter — we had outsized franchise fees in Q1 last year that we're lapping this year. On a full-year basis, we expect franchise fees to be down a few million and Revo will have an estimated $12 million impact on that line for the full year; both items are factored into our guidance.

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

Well, thanks and thanks, everyone, for your questions and your interest in Wyndham Hotels & Resorts. Amit, Matt and I look forward to talking to and seeing many of you in the months ahead at upcoming investor and industry conferences such as NYU's HIF on May 31. In the meantime, have a great weekend ahead, and thanks for joining us.

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