Wyndham Hotels & Resorts Inc Stock

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

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 webcast.

With that, I will turn the call over to Geoff. Geoff?

Thanks, Matt, and good morning, everyone. We appreciate you joining us today. And many thanks to those of you who've reached out over the past few months, my treatment for multiple myeloma is going as well as I could have hoped. The doctors are happy with my progress and I'm seeing exceptional clinical results. I feel great, my energy is high and our leadership team has never been more focused on execution and driving shareholder value.

And on that note, our Q3 results reflect yet another successful quarter, executing against our long-term growth strategies. We reported strong earnings with comparable basis adjusted EBITDA and EPS growth of 5% and 9%, respectively. U.S. RevPAR grew 6% and we grew our system by 4%, excluding Revo. On a year-to-date basis, our resilient, highly cash generative business has produced nearly $270 million of free cash flow and we've returned over $290 million to our shareholders.

In addition, last month, our Board increased our share repurchase authorization by $400 million demonstrating continued confidence in our ability to generate significant cash flow and its commitment to continued shareholder returns. Global RevPAR increased 2% in constant currency, a nearly 400 basis point improvement sequentially, driven primarily by domestic RevPAR, which also improved nearly 400 basis points sequentially and to up 6% year-over-year. This 6% growth was well ahead of our second half growth expectations and included a favorable impact of approximately 10 basis points from the World Cup.

Consistent with historical trends, travel demand for our middle-income consumers remains strong despite elevated gas prices. RevPAR growth was fueled by stronger demand with occupancy increasing approximately 300 basis points, driven by everyday business travel and broad-based leisure demand. Importantly, our franchisees also experienced continued pricing power with ADR increasing approximately 280 basis points. Combined strength in demand and pricing created meaningful revenue and margin improvements for our small business owners.

We saw sustained growth across nearly all regions, including our 3 largest states, Texas, California and Florida, representing approximately 1/4 of our U.S. room count, which together improved roughly 400 basis points sequentially to up 8% RevPAR growth in Q3. We continued to see strong performance across our Midwest and industrial states with significant growth in Iowa, up 16%. Illinois, up 15%; Ohio, up 10% and Indiana, up 9%, highlighting a portfolio well positioned to benefit from increasing infrastructure-related demand with nearly 80% of the infrastructure built yet to be deployed.

Higher midweek demand is driving much of this strength, especially at hotels and markets near major transportation, manufacturing, AI, data center and industrial projects. As these investments continue to ramp up, they're creating a durable growth tailwind for our franchisees. October month-to-date U.S. RevPAR has remained relatively consistent with third quarter results, reinforcing our confidence in underlying demand trends as we close out 2026.

International RevPAR continued to recover, declining 3% year-over-year in constant currency in the third quarter, an improvement of nearly 400 basis points sequentially. Canada RevPAR increased 7%, supported by sustained pricing power and improving domestic demand. Southeast Asia and Pacific Rim RevPAR increased 5%, led by Korea, Thailand and Indonesia. Latin America RevPAR rose 2%, improving 900 basis points sequentially, driven by Mexico. EMEA RevPAR grew 2% year-over-year, driven by strong performance in Turkey, India and Spain. This growth represents an 800 basis point sequential improvement which reflects a substantial recovery in Germany, where performance improved 1,100 basis points sequentially.

Coupled with RevPAR stabilization in the Middle East, where RevPAR improved from down 45% in Q2 to down 13% in Q3. Strength across these international markets was offset by China, where RevPAR declined 10% and as softer travel demand, most notably in Tier 2 cities continues to pressure performance.

On the development front, Wyndham's owner-first value proposition continues to drive strong openings and net room growth. We opened over 18,000 rooms in the quarter or 3% more than we opened in the third quarter of last year. Our development pipeline grew for the 25th consecutive quarter to a record of approximately 264,000 rooms across nearly 70 countries with a PPAR premium of approximately 30%, both domestically and internationally reflecting our strategy of adding hotels and higher chain scales and in geographies and markets with stronger long-term economics.

We are increasingly focused on adding higher-fee par hotels that strengthen system quality and strategic positioning while increasing revenue potential that supports long-term fee and adjusted EBITDA growth. The termination of substandard rooms, which cited for the majority of our rooms leaving the system this quarter creates an opportunity to secure franchise agreements for higher-quality hotels in attractive markets.

In the third quarter, U.S. room openings carried a PPAR premium of more than 45% over terminations, while international openings carried a premium of nearly 40%. In the United States, conversion openings included the Hayes Street Nashville Hotel in the heart of Music City and The Blennerhassett, an 1889 Landmark boutique hotel in downtown Parkersburg, West Virginia, both proud new members of our rapidly growing trademark collection by Wyndham.

Since introducing Dazzler Select 1 year ago, we converted the Big Horn lodge last month in historic downtown Moab, Utah in the heart of Red Rock Country. It's our 14th Dazzler Select opening, validating demand for our latest brand extension and our distribution network, along with our ability to bring more high-quality independent economy hotels into the Wyndham Global system. New construction openings this quarter included the La Quinta Roanoke, Virginia, the La Quinta Shonto, Arizona, the La Quinta Tracy, California and the Microtel by Wyndham Nephi, Utah, in the Topaz Mountain range.

We also opened 3 new construction Echo suites, which USA today readers recently named the #1 extended stay hotel brand in the United States including our 23rd Echo Suite by Wyndham in Middleburg outside of Jacksonville, Florida. EMEA net room growth was 13%, excluding Rio and notable new construction openings included the Ramada Encore, Kochi, our first Ramada Encore in Kerala, India and a trip by Wyndham in the Netherlands, a newly renovated beachfront property in the Hague. Conversion activity was also strong in EMEA highlighted by over a dozen new hotel additions, including the Wyndham Residences Piraeus, Marina Zeas in Athens, overlooking the super yacht marina Zea Marina on the Aegean Sea.

Latin America and the Caribbean also delivered 13% net room growth. Notable new construction openings included the Wyndham Garden San Paulo further strengthening our presence in 1 of Brazil's largest urban markets and over 2 dozen conversion openings, including the Wyndham Garden Resort along the Belize City River side, featuring fine dining casino, pools and fitness facilities. In Southeast Asia, in the Pacific Rim, net room growth reached 10% for the second consecutive quarter.

Notable new construction openings included the luxurious Orion Kuala Lumpur, our first Registry collection hotel in Malaysia, located in the heart of KL's premier shopping, dining, nightlife and entertainment district. In China, our direct and overall franchising system also again delivered double-digit net room growth. We opened 16 new Days Hotels, bringing this former master license brand to 177 directly franchised hotels, nearly triple the size or a 17% compounded annual growth rate since 2019.

Conversion openings included the Wingate by Wyndham Foshan, our 20th Wingate in Greater China and the La Quinta Lishui, our ninth La Quinta now open in China and our 12th in Asia Pacific since introducing La Quinta in this part of the world. Ancillary revenues have increased 10% year-to-date. Growth has been supported by expanded strategic partnerships, ongoing technology innovations and the continued adoption of our refreshed and award-winning suite of Wyndham Rewards credit cards.

Our Wyndham Rewards Earner Card has been named the #1 travel and hotel credit card in the U.S.A. Today, 10 Best Readers Choice Awards for the ninth consecutive year and our card portfolio has gotten even better with our new Earner Premier Card, our first -- our very first premium card whose success is driven by its ability to easily offset its $395 annual fee through 30,000 guaranteed annual anniversary points over $400 in everyday lifestyle statement credits, complementary Wyndham Rewards insider membership, top-tier diamond stites and a 25% discount on awards stays.

Wyndham Rewards is central to ancillary revenue growth with members contributing more than 1 out of every 2 domestic check-ins. Global enrollments grew 10% year-over-year, bringing total membership to approximately 129 million members. As our membership grows, we remain focused on creating new ways for members to engage, to access differentiated travel experiences and benefit from a program consistently ranked as the #1 hotel loyalty program in the industry by the readers of both USA TODAY and U.S. News and World Report.

Through Wyndham Rewards experiences, members are increasingly redeeming points for memorable events and behind the scenes access. These offerings are especially effective at attracting younger, more affluent travelers who book earlier, who stay longer and who engage with us more intently through this program. This experiential focus also continues to shape the evolution of our brand portfolio. And earlier this month, we announced the expansion of our partnership with Travel & Leisure to bring Sports Illustrated Resorts into the hotel sector.

Together, we see an opportunity to create immersive year-round destinations in college towns in major urban markets, featuring distinctive programming, premier sporting events and unique guest experiences. For Wyndham Reward members, these properties will provide access to new sports-focused destinations and new travel experiences. Supported by our loyalty distribution and marketing platforms we believe Sports Illustrated resorts will become a differentiated and attractive offering among our growing affiliate base of aspirational hotels that further deepens member engagement and expands our reach across high-growth segments.

Beyond expanding our brands and loyalty ecosystem, we continue to invest in technology that helps franchisees grow revenue, lower costs and improve the guest experience. Wyndham Connect, our Wyndham trained LLM powered guest engagement platform is now deployed at more than 5,100 hotels and has generated tens of millions of dollars in year-to-date upsell opportunities for participating franchisees. Wyndham AI Concierge, our AI-powered voice platform is autonomously handling costs. At more than 1,700 hotels worldwide today, up 17% sequentially. The platform is answering tens of thousands of previously missed calls and services guests immediately with no hold times.

Additionally, Wyndham AI Concierge converts reservation requests at an average daily rate that is 15% above hotel book rates, generating meaningful incremental revenue and driving over 500 basis points of increased direct contribution for franchisees as former loss calls are captured before migrating to third-party channels.

And finally, Wyndham Gateway, our new guest WiFi portal that is standardizing the log-in experience in providing franchisees with revenue-generating upsell opportunities is also ramping, and it's now live at more than 1,100 hotels, up 35% sequentially. Wyndham Gateway has become 1 of our most effective new member enrollment channels for Wyndham Rewards, providing valuable first-party guest insights that help drive repeat business, while importantly creating new local advertising and ancillary revenue opportunities for franchisees.

The investments that we've made over the years in our technology stack, that moved us off of multiple legacy central platforms onto 1 that consolidated dozens of property management systems onto 2 have optimized and accelerated our AI readiness via a 100% cloud-based, fully optimized infrastructure across best-in-class partners like Oracle, AWS, like Salesforce, Adobe, like Canary Technologies. This investment has allowed us to deploy AI at scale across all guest touch points and establish ourselves as a leader within our industry and within the AI space as booking behavior continues to evolve. Google AI mode is now live alongside our apps in chat GPT and Cloud supporting end-to-end direct booking, including payment without ever leaving the LLM conversation.

We're also now bookable on Muse, on Instinct and on OpenAI's newly launched dot as we continue to enhance agentic booking flows that drive increased direct contribution and help hotels lower costs and increase revenue. These technology investments exemplify how we're turning innovation into stronger hotel level economics with franchisee profitability and engagement remaining our top priority.

In recent years, we've introduced owner focused reimbursement and incentive programs that reward hotels for strong guest satisfaction and strong quality scores. These include performance base reductions and guest response fees, enhanced Wyndham Reward reimbursement opportunities and loyalty fee incentives tied directly to the guest experience combined with industry-leading and cost-effective technology. These programs are lowering the total cost of ownership, improving hotel level economics and further differentiating Wyndham's owner-first value proposition for our franchisees.

Looking ahead, we are very encouraged by the accelerating RevPAR recovery across both our domestic and our international markets. Our teams are well positioned to build on this momentum through the scale of our network, our award-winning loyalty program our industry-leading technology platform and our presence in markets benefiting from continued infrastructure and industrial investment. And as always, we thank our team members around the world for their dedication and their commitment to our franchisees and guests the very foundation of our success.

And with that, Amit will now walk us through our financial highlights and full year outlook. Amit?

Thanks, Geoff, and good morning, everyone. I'll begin my remarks today with a detailed review of our third quarter financial performance followed by an update on our cash flows, balance sheet and 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 third quarter of this year, marketing fund revenues exceeded expenses by $1 million, while revenues exceeded expenses by $18 million in the third 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 third quarter, we generated $410 million of net revenues and $207 million of adjusted EBITDA. Net revenues increased 7% year-over-year primarily due to higher royalty and franchisees, increased ancillary revenues and revenue from our 2 owned hotels.

Importantly, royalty and franchise fees grew in line with the underlying revenue drivers of our business. On a year-to-date basis, ancillary revenues grew 10%, driven by higher credit card and partnership fees. We expect full year ancillary revenue growth of low double digits supported by accelerating fourth quarter performance as the impact from our credit card program refresh and our new premier earner card continues to ramp and drive increased member engagement.

Adjusted EBITDA increased 5% on a comparable basis, primarily reflecting higher revenues, partially offset by the timing of variable costs and the lapping of onetime variable cost reductions made during third quarter of 2025. Adjusted diluted EPS for the quarter was $1.43, a 9% increase on a comparable basis reflecting growth in comparable basis adjusted EBITDA and the benefit of share repurchase activity.

Free cash flow was $100 million in the third quarter and $269 million year-to-date. We continue to expect full year free cash flow to convert at approximately 55% to 60% of adjusted EBITDA. At our current trading levels, our free cash flow yield of over 7% continues to lead the lodging sector. Development advanced spend totaled $18 million in the third quarter reflecting our consistent and disciplined approach to investing in higher PPAR hotels that enhance the quality of our portfolio and drive long-term adjusted EBITDA growth. We continue to see strong demand for our brands with year-to-date openings up 3% year-over-year and our pipeline up 4%, excluding Revo.

Historically, hotels with development advances have entered our system at a PPAR premium of approximately 40% relative to our system average. We returned $123 million to our shareholders in the third quarter through $91 million of share repurchases, which increased 30% year-over-year and $32 million of common stock dividends. In the third quarter, we opportunistically repurchased nearly twice the number of shares as we did in the second quarter. Year-to-date, we've repurchased 2.5 million shares for $196 million.

We ended the quarter with nearly $1 billion in total liquidity, and our net leverage ratio of 3.6x remained near the midpoint of our target range.

Now turning to outlook. As Geoff mentioned, third quarter U.S. RevPAR growth of 6% exceeded our second half expectations. Based on our Q3 performance, we've increased our global RevPAR outlook to 0.5% to 1% or up 50 basis points from the previous low end of our range. Our revised outlook assumes Q4 U.S. performance is consistent with Q3 as well as continued improvement internationally.

We've narrowed our outlook for net room growth from 4% to 4.5%, excluding Revo to approximately 4%, reflecting the termination of substandard quality rooms and accelerating shift of our portfolio towards higher value opportunities. While this approach modestly impacts net room growth in 2026, it aims to improve the overall quality of our system and support stronger royalty generation and long-term economic value. As previewed on last quarter's earnings call, we expect the majority of Revo related rooms to terminate before year-end.

Net revenues are now expected to be $1.48 billion to $1.5 billion, increasing the bottom end of the range by $5 million. Adjusted EBITDA is now expected to be $740 million to $745 million, raising the bottom end of the range by $5 million, reflecting a flow-through of strong U.S. RevPAR performance in the third quarter and the continuation of those trends through the remainder of 2026.

Our expectation for the marketing fund to breakeven on a full year basis remains unchanged. Adjusted net income is projected to be $363 million to $369 million and adjusted diluted EPS is projected at $4.84 to $4.92, which is based on a diluted share count of 74.9 million shares. And as usual, does not assume future share repurchase activity or incremental interest expense from any potential new borrowings. There are no changes to our outlook for development advance spend or free cash flow conversion.

In closing, our third quarter results underscore the continued strength of our asset-light business model and accelerating momentum in U.S. select service RevPAR trends. Our royalties and franchise fees increased year-over-year in line with our algo. We delivered comparable basis growth in adjusted EBITDA and adjusted EPS, and we maintain a strong balance sheet and disciplined leverage profile.

Additionally, we continue to balance targeted investments in high-return development opportunities and meaningful shareholder returns through stock buybacks. Our increased outlook for RevPAR, adjusted EBITDA and EPS reflects our expectation for continued strength in the U.S. and further recovery in international regions. And we remain confident in our ability to drive sustainable, long-term value for our shareholders.

With that, Geoff and I would be happy to answer your questions. Operator?

[Operator Instructions]

Our first question comes from Brandt Montour with Barclays.

I wanted to start with the domestic U.S. strength. And maybe you can talk a little bit, Geoff, on what's really driving that sequential step up, whether it's more business travel or more leisure that you're seeing? And then there's a lot of calendar noise and uneven comparisons when you look at last year between third quarter, fourth quarter or even year before that with the hurricane comps. So I wanted you to maybe scrub that for us in terms of what the underlying U.S. run rate growth is here in the back half? And what the implications are for that and how we should think about 2027 based on that?

Sure. Thanks, Brandt, for the question. And there are a lot of calendar noise. Hanukkah, Christmas, New Year's, but it's all positive. Our days of the week shift that should help, we believe, and many of you have been reporting more leisure versus last year for the remainder of the year. And looking ahead -- well, for the -- and for the remainder of the quarter, of course, our comps continue to get easier. As you know, our 3Q comp was down 5%, our 4Q last year we're comping again is down 8%. And so we're feeling good about the comps. We're feeling good about the noise and the calendar shifts for the remainder of the year.

And looking ahead to 2027, really all of our leading indicators, which we look at daily remain just so strong. I mean, if we look at the economy demand over the last 8 weeks, it's outperformed the industry by 50 basis points as we had talked about on the last call, we were starting to see, we're seeing it. Our booking windows have improved from June into July, from July into August, August into September. And our booking pace, while it is short term, hasn't been stronger since coming out of COVID. We have now over 7% more business on the books for the next 60 days versus the same time last year. Cancellation rates, they continue to improve. Average drive distance continues to go up from the second quarter to the third quarter, and it should continue to.

As airfares, as we all know, are running 30% ahead for Thanksgiving, $0.25 they're saying for Christmas, people are driving and our lengths of stay continue to lengthen. We think that the second half tax refunds, we talked about this on the last call are unlocking increased discretionary spending and our middle-income consumers, they remain financially resilient. And we think fundamentally healthy. And that is driven by -- and we see no change to that going into next year, strong employment, strong wage growth, which is supporting increased leisure spending.

And the banks reporting last week, they all talked about travel spend growing, especially that drive to leisure. And all of the research that's out there, MMGY fall travel Edition just came out. and it confirms the same. Travel demand is bouncing back this fall. And consumers are becoming more strategic about when they go and what they can or worth paying for and with rising costs, pushing more consumers to travel domestically versus internationally, we see the continued truism is that vacations for these consumers have remained this quarter, next quarter, into next year, a priority.

And so we're feeling really good on the leisure side. And of course, on the biz side for us, GBTA just came out in its September survey last week saying that business confidence is at its highest level since October of 2024, with a continued focus on cost and justification. And there's no better business travel justification then that blue collar essential infrastructure-related frontline travel that we cater to. So for the remainder of the year, we're feeling good. And looking ahead into 2027, all the trends are positive.

Yes. And Brandt, if I could just put some numbers around your question on weekday business versus leisure, weekdays really -- we saw strength in both weekdays were ahead by 150 basis points over a weekend. So it was broad-based demand strength and both ADR and Aker strong about equally. So that kind of gives us confidence about not only into Q4, a continuation of the trends, but really the momentum into 2027 to return to kind of like the select service CAGR we've seen over the last 20 years, so 2.5% to 3% RevPAR growth.

That's a great point, Amit. I mean the ADR opportunity ahead for our economy and our mid-scale franchisees, they have a ton of room to grow rate. The ADR differential right now between the chain scales has never been higher, and it just presents a huge opportunity. for these franchisees to recover that lost ground as we're starting to see. So yes, we're very bullish about being able to continue to recover demand, but more importantly, pick up rate, great point of it.

Thank you. We'll move on now to Steve Pizzella with Deutsche Bank.

On fees, the royalty and franchise fees accelerated nicely in the quarter, growing north of 6%, which was above the implied algorithm. Can you unpack the drivers of that strength and how we should think about the fee growth relative to the algorithm moving forward?

Steve, thanks for the question. Geoff touched on the RevPAR strength, and that was really a momentum we had throughout the year, exceeding expectations. when we give our outlook at the beginning of the year and the other quarter as well as in the last quarter, -- we really -- we had some noise from Revo and the lapping of that as well as some timing of franchise fees. And we said our expectation was that we would kind of be back in line with Algo starting in the back half of the year. And so we were really pleased to see that happen.

As you noted, royalty and franchise fees were up 6%. Comparable adjusted EBITDA was up 5%. And as we look ahead to your question about, yes, we expect to be back in line with Algo. You look at our full year guidance, what that implies for Q4 is also royalty and franchise fees kind of consistent with growth with Q3 and same thing with comparable adjusted EBITDA. So we expect that to continue into Q4 and beyond.

And the only thing in terms of the puts and takes in Q4 is marketing fund. We obviously are going in with about $7 million of underspend into Q4, and our expectation is we will end up at breakeven for the full year. So right in line, all the drivers should be, we expect will be in line with Algo.

Thank you. We'll move on now to Shaun Kelley with Bank of America.

Geoff, glad to hear about the health update best wishes and the continued recovery there. So for me guys, I'd love to just touch on some of the comments you made around AI actually. I think in the prepared remarks, you talked a little bit about you're now live in Google AI mode, some of your integrations with the LMs. But I specifically wanted to ask about agents. You talked about some integrations or your bookable from us and Instinct.

I'm wondering if you could tell us a little bit more about how that actually works? Just specifically, are agents able to see your inventory through some sort of direct connection? Are they going through the front door? And then I think more strategically, what incentives are you providing to kind of get agents to make sure that they book direct don't go through an OTA channel. I think this is a quite big debate in the industry.

And then lastly, if you could talk at all about just traffic you're seeing from these channels? Are they starting to move the needle at all? I know it's extremely early, but the types of adoption curves we're hearing out there are significant.

It is extremely early. Thanks, Sean, for the wishes. And yes, it's low traffic, but it's a great question. I mean it's this morning's skipheadline. -- tiding travel as a top use case and listening to their call last night. So Meta Muse, Instinct AI, OpenAI dots, we now have a new type of guest and these are our new autonomous agents, as you referred to, who we are built to service and we're excited about this. And we're embracing it. We're embracing these agents through our brand websites through our MCP engines which we can do with very little investment, given the technology forward, best-in-class foundation that Scott Strickland and his team have put in place.

We are providing our inventory, to your question directly to these agents. As they query and they come in to our CRS via brand web via our MCP or via our voice channels. On the brand web queries, they're acting just like a guest would. On voice queries, they are talking to our Wyndham Connect agents that we've talked a lot about, who are interacting with these Muse agents or he's in state agents or these dot agents who want to talk to our hotels, just like a guest might want to talk to a hotel front desk agent for any special request, if you think about it that way. So the team is working with various AI labs. We're making these bookings faster and easier for these agents.

And to the last part of your question, in terms of incentives, with Wyndham Rewards becoming our differentiator from the OTAs, given the personalized data, the context that we can provide, the third parties simply can't. We envision a future in which these new autonomous agents are explicitly instructed by our guests and especially by our Wyndham Reward members to use our hotel loyalty program as preferences as a requisite in their search criteria. So we think it it's a big deal, and we think it could really help us grow when it comes to driving direct traffic to our franchisees as the other tools that we outlined in our IP are already doing.

Thank you. We'll move on now to Michael Bellisario with Baird.

Thanks. Good morning, everyone. Geoff, I want to focus on sort of franchisee feedback and what you're hearing from particularly our U.S. partners. Any feedback on sort of higher rates, weighing on sentiment. Any change in development starts and conversion activity there? And then similarly, in Europe, sort of what's the health of the franchisee there? Any lingering Middle East impacts? And then just can you quantify France for us just in terms of system-wide earnings in your pipeline?

Yes. A lot in there. France is a very limited impact for us. We have very few hotels. As I think you know, in France right now. So that has not been and won't be an impact for us going forward. The Middle East fluid situation, but really no disruption to opportunities and business continuity. It remains intact across the portfolio. It's still negative, as we said in the script, but certainly improving. We're down 45% in Q2, down 13% in Q3.

And our teams there on the ground, they're expecting gradual stability. We're not assuming any further escalation, but our hotels in the KSA, in Dubai across the UAE, Abu Dhabi Bahrain, Qatar, they're all -- they've all seen obviously some improvement with a pickup from some inbound group travel from China, some military personnel. And I think most importantly, from a development standpoint, the pipeline is strong. We have over 2 dozen hotels in our development pipeline in the Middle East, and we've recently executed 5 new contracts across Saudi Arabia and the UAE. And all of those projects are still moving forward.

In terms of the U.S., we're feeling very good about our franchisees, our attention and internationally picked up sequentially about 20 bps internationally, 20 bps domestically. And so far, we've opened a record of over 50,000 rooms globally, 4% more than last year, excluding Revo. International opens have been really strong and should continue to be so. I mean we're -- we've been ramping actually and accelerating. We're 10% up year-to-date. That accelerated to 24% more opens in Q3 than last year.

And domestically, I mean, we had a record year of domestic openings last year. Q1 was a record. Q2 was a record, both record quarters. And we've opened, I think, it's about 19,000 rooms year-to-date versus last year. We're about I think, 20,000 rooms. So we're tracking the last year's record despite the rising interest rates and a significant drop in buy-sell transactions which slowed us down in the economy segment. But we're obviously very pleased with the 2% net room growth in the mid-scale, upper mid-scale segments. And yes, we're looking forward to a strong Q4 and a good '27.

Thank you. We'll move on now to David Katz with Jefferies.

Good to hear from you, Geoff, and the update. Look, I think there's a lot in the quarter -- and so I'd love Geoff for you to just pull out for us what you think is really the most important development. I know I've asked this question in the past, but I always value your perspective on what's your favorite part right, out of the whole report. And frankly, just following on the AI stuff, to the degree that you can help us measure statistically franchisees that are either engaging or actually signing up based on those initiatives, which obviously are industry-leading, those would help.

Sure. David, I would say the most favorite part for all of us in the quarter was looking at the outperformance of our domestic RevPAR, which we've been waiting for talking a lot about. And really how well I think what was exciting for us was how well our brands are performing, especially from a market share standpoint and an overall satisfaction standpoint. I mean the quality this past quarter and really throughout the whole year, we have seen our strongest year-over-year gains in our overall satisfaction and our quality scores since going public. And that's just huge for us.

Our economy brands are seeing some of the highest Net Promoter Score growth and improvement year-over-year that we've ever seen. Super at up 800 basis points, days in, up 900 basis points, we're seeing huge gains in our overall satisfaction, which was up over 400 basis points and Net Promoter Scores up 600 basis points. So these brands are resonating with our consumers. Our Medallia OSR index, which is our overall social review index we look at every month comparing our overall social review scores to our peer competitors is running well over a fair share and it continues to grow.

And that's just a great testament to our franchisees, obviously, in terms of their engagement with our teams and importantly, to our directors of franchise operations who don't all always receive the credit that they deserve. Relationships in this franchise world matter, and there is no more important relationship that franchisees have then their relationship with their Director of franchise operation. It is consistently ranked at the very top of what owners value the most. And these directors of franchise operations they're out there traveling all the time. It's nonstop. They do over 10,000 site visits annually.

And we survey after every visit to each franchisee, how is your visit, not all of them respond, but many of them do. And they are running a 98.9% overall satisfaction score, which -- that's year-to-date, which just blows me away. And what franchisees tell me all the time, is how great their DFO is, citing their responsiveness, their professionalism, their willingness to listen to. And so that just results in franchisees or being more engaged than ever today.

I mean over 6,000 of our 75% of our hotels had their customer service fees wave last month due to higher quality because they are engaged. So that's for me, passionate about that and very excited about that. And when it comes to these franchisees in terms of what they're most excited about to the last part of your question, it's really the achievements that they're starting to see with just massive rollouts of these tools.

I mean our Wyndham Connect tool now to think that we're over 5,100 of our hotels, how these franchisees are making extra room revenue and extra ancillary revenue that -- it's just -- it's amazing how easy it is for them as they embrace it, how excited they become as they embrace it. And it's allowing these upscale franchisees to drive, as we said, in Matt's deck, $100,000, $200,000, $300,000 of increased annual revenues. But even for small franchisees, they're generating anyway anywhere between gosh, at the low end, $500 to more like $2,000 per month. That's a big, big deal, especially it has been in this environment, which up until now. We haven't seen the rate growth that we're getting. And so that's obviously making it a lot better.

But it's a really big deal that delights them. And I could go on and on with the other tools. I mean the Wyndham AI Concierge is just huge. It's really early days. 1,700 hotels enrolled on it. And when you think that on average, over 25% of inbound costs are dropped by these franchisees because they can't get to them in time. And we have now AI agents with this tool, preventing that from happening. These AI agents on Wyndham AI Concierge, they answered over 3 million calls year-to-date and that's driving increased direct contribution because we're capturing all those costs, yielding 0 drop calls that might otherwise migrate to an OTA. So a lot of exciting stuff going on and that was a long answer to your question.

Thank you. We'll move on now to Patrick Scholes with Truist Securities.

Great. Good morning, everyone. Geoff, very happy to hear that your treatment is going well. My question, you had briefly mentioned about increased terminations. I think it was in the economy segment. Is that something that you see impacting or continuing into 2027? Or would that alter at all your multiyear net room growth targets? And then a follow-up or related to that, any changes related to key money Strategy?

Okay. I'll let Amit take the key money. No, no changes. I mean, we talked about this on the last call. We do have domestic substandard quality terms. -- in the economy. We've been focused on that, and we are focused on it, obviously. Whenever the OSAT score or the RevPAR, the market share drops below. And when we look at where we've had year-to-date throughout the year, some of the biggest deletions, if you will, of substandard terminations in brands like Howard Johnson's and even Super A -- those 2 brands in the economy space have seen some of the highest OSAT improvements year-to-date of any of our brands.

Howard Johnson's overall satisfaction is up 800 basis points in the quarter over last quarter, and that's been growing as we've been focused on. Supers 8 up 600 basis points. And they've also seen the most significant year-over-year RevPAR index gains. So we'll continue to be focused on that. Our economy brands domestically the industry from a retention standpoint. It's something we're very focused on. We want obviously to continue that. We lead by about 100 basis points. And that, again, is our continued focus, our DFOs focus our operations teams focus on quality. And we are confident that we could get back to that 96% domestic retention, which we've moved into nearly before from 93% the which is where we were at spin. And Amit, maybe you'll talk about the back part of this question.

Patrick. Regarding key money strategy, really no changes to our outlook in terms of the $110 million for the full year. And as far as the sentiment itself, look, Key money has always been a tool we selectively use to prioritize investing in high-quality growth and when returns meet or exceed our hurdle rates. And we continue to -- you look at the sites that we're bringing in with key money and they come in an attractive fee PAR premiums but the priority is always like our development teams, as Geoff touched on, lead with the value proposition of our segment-leading brands, our loyalty program and all of the tech initiatives and the AI initiatives that we've invested in to promote franchisee health.

So really no changes to our key money strategy or outlook. It remains a tool. We have ample balance sheet capacity and within the year as well as outlook for the $110 million we have to deploy that.

Thank you. We'll move on now to Stephen Grambling with Morgan Stanley.

I want to go back to the genic AI question and perhaps consumer use of LM in general. You mentioned the upsell opportunity. We've also heard from some hotel owners that there's been some material declines in top of funnel costs search already. Are you seeing benefits to customer acquisition costs that you can quantify at this point? And then as you think about the magnitude and cadence of various benefits, how would you rank improved mix of direct bookings versus lowering third-party commission rates versus lowering the cost of direct bookings or simply just improving conversion across all channels.

Yes, it's the $1 million question. And I think, first and foremost, Steven, and we sort of lay that out on Page 3, the IP. How we think about it, we always think about it from our own value proposition. First, we think about our franchisees and we think about the benefits that we could drive to them as opposed to driving to our marketing fund. I mean if we could increase their direct bookings, if we could drive increased direct revenues and we could lower their operating costs, which we're doing with these tools, it's a home run.

To the first part of your question, in terms of distribution cost declines, they do have significant potential. The AI interactions are all going through our brand websites or our MEP servers or our voice channels, which whether it's as I talked about a little while ago on the last question, Wyndham Connect AI agent answering a Muse AI agent, those are obviously less costly for us. And the ADR lift from Wyndham AI Concierge has huge potential for a [indiscernible] mentioned on the last question as we roll this out way beyond the 1,700 hotels, who are subscribed to it today. I mean that is driving occupancy index gains, rate index gains because the AI is delivering a 15% increase in rate. RPI gains and labor savings, obviously, back to the lens, we look at this through for our franchisees.

And on the LLM search equation, it's still really early days, as I said earlier, GEO may well prove to be for us and for our marketing fund, a whole lot less expensive than SEO. That to be determined. It is a great question. I mean, as AI transactions ramp. You've got Meta's Muse out there, again, skipheadline, building in right now, a small commission but it is the space to watch, and it will shape the economics of direct distribution for every brand and every OTA in the coming years.

Again, our focus on our strategy is to make our availability, our rates, our inventory the most readable, the most actionable data source for the LOMs. And if we could offer a direct booking path that an AI agent can execute on easily, then we capture that guest.

We'll move on now to Dan Politzer with JPMorgan.

Thanks for the question. It's great to hear from you. I have a follow-up on the domestic net unit growth and maybe ask from a different angle. I mean how much of the kind of pivot here or kind of evolving landscape do you attribute to kind of reducing or terminating some of those substandard hotels versus competition from new brands coming into the segment? Or maybe just kind of a change in the macro construction environment. Is there any kind of detail you could give on the conversation with developers and maybe any early thoughts on getting back to positive net unit growth there in the coming years?

Yes. Sure. We achieved, as we've said all along, by increasing our gross adds to where it's been before, around 6% and reducing those terms to 4%, which is where they've been before flattening out this year with the unexpected buy/sell transaction slowdown. I'd say that because of rising interest rates was 1 of the biggest impacts that we saw this year. Interest rates, as we all know, which were expected to fall in the second half of the year. We think have temporarily widened that bid-ask spread on buy-sell transactions, which are so important to our conversion engine.

With transactions in our segments falling over 30% in both the economy and the mid-scale segments, select service segments this quarter to historic all-time lows -- we -- and on top of that, the subdued industry new construction activity. So you take transaction volumes, you take industry new construction being muted. It's really building pent-up transaction demand for when those transaction-driven conversions pick back up in our segments in the quarters ahead. As we saw in late 2024 and into 2025, we're very confident that as economy by cell transactions resume. U.S. net rent growth will pick back up as it has before in the past.

Yes. And Dan, the only thing I'd add to that is, I mean, to your question around new competitors versus [indiscernible] just a slowdown in transaction volume like or the termination of what really had an impact. Listen, I think we've talked about this before on the competitor side. Brand launches, the new brand -- the first of the new brands kind of launched in 2023 and a couple have followed tubes since then. You look at that 3-year period, really less than 1% of our system has switched over to those brands and you look at it in terms of year-over-year, that's been a declining trend.

Really, what we are looking at, what Geoff talked about in the terms of the transaction volume, it's not just about the higher interest rates. It's kind of like the shift in expectations, right? You entered the year thinking you're going to have rate cuts. And then midway through the year, you ended up with rate hikes and expectations for remote rate hikes. So -- and so rate hikes in itself, we've seen this before, right? That in itself doesn't really cause -- of course, we want lowers better, but it's more the stability. I think the market is just looking for, they want to understand it's going to normalize and then transaction activity is going to pick back up. We've seen this multiple times throughout the cycle.

So we feel good about our setup. We feel good about our segment-leading brands or a loyalty program and all the technologies. So we're expecting kind of U.S. to be back in sequential growth really make up for -- and all we were just lapping some very outsized terms in the beginning of the year. That's kind of had an impact this year.

And you also asked Dan about developer sentiment, which I forgot to address just looking at my notes. I mean it remains really positive, given the strong long-term fundamentals. I mean, historically low supply less than 2% with -- when you think about the U.S. active pipeline supply down 8% year-over-year. Out at the lodging conference, many owners were up on stage talking about industry fundamentals being the best has seen in a decade. And that is showing up for us with our institutional developers with record openings, executions and pipeline growth. I mean the market is so undersupplied with new quality, affordable select service accommodations to serve the lodging demand from the public and private investment across the U.S. So as Amit said, we're confident.

We'll move on now to Ben Chaiken with Mizuho.

The Algo fee growth relationship was very impressive in 3Q as you touched on. But specifically, I'd love to think -- touch on how you're thinking about royalty rate expansion, I guess, both in 4Q, but also longer term. I think 2Q net of Revo that was theoretically around 100 basis points of contribution to the Yogo from realty rate expansion. I think 3Q was maybe more flattish ex REVO. Just curious how you think about royalty rate expansion and the moving parts both in 3Q, 4Q, but more importantly, longer term.

Ben, thanks for the question. our royalty rate, kind of our expectations within the Algo is 5 basis points of growth, both domestically and internationally, kind of on the long term. And that's not necessarily 5 basis points every single year, but you look at it on a multiyear period, we expect it to be 5 basis points on average. And we have seen U.S. royalty rate increased 10 basis points in 2024, 7 basis points in 2025. It's down approximately 2 basis points year-to-date in 2026.

But again, you look at it across the 3-year period, the average is approximately to 5 basis points, so in line with our objective. So individual years may vary, but the multiyear target is unchanged. And same thing internationally, as you mentioned, there are some revo-related noise, which we stripped out and disclosed kind of adjusting for that, you did see royalty rate growth there. And it's really a testament to both expansion into higher chain scale segments as well as the mid-scale and plus above strategies.

So both domestically and internationally, and that's obviously bearing fruit as we've seen look at kind of like a 3-year average on the royalty rate.

Thank you. We'll move on now to Alex Brignall with Rothschild & Company.

Great to hear from you, Geoff. Just 1 on U.S. net unit growth. Obviously, it continues to be relatively subdued, but the commentary you've made on signings is very encouraging. I wonder if you could just run us through the cadence of how that progresses in the next quarters and years. and how the RevPAR performance of kind of maybe perhaps most of relative rep performance of the low and high end segments might affect that.

Yes. I think since you asked about kind of what's the outlook, I'll take the question. I think that in terms of sequential growth, U.S. Obviously, we saw pipeline growth, both domestically and in the U.S., and pipeline is really the inflection of the execution sentiment and so we're pleased to see continued growth, 25 consecutive quarters of global pipeline growth. And then U.S., we saw again, year-over-year growth.

As far as the RevPAR sentiment, listen, obviously, we were coming back, we in an environment last year where we saw sequential declines in RevPAR growth every year. So obviously, having the opposite of that and kind of getting up to above the 20-year select service average of 2.5% to 3% is a positive, and that's kind of what Geoff was touching on earlier about the owner sentiment. So I think our expectation is to see sequential growth in the U.S. continue to kind of get to that 4% globally.

And too early to talk about 2027 in terms of RevPAR outlook, but our expectation is that this momentum continues and then translating that into net unit growth, transaction volume should pick back up, as I said, really the markets just looking for stability. And as we see that, we should see some continued improvement.

Thank you. We'll move on now to Ian Zaffino with Oppenheimer.

Geoff, glad to hear everything that's going on the health side. Question would be, just given kind of where the business is and how it's performing versus your expectations? How do you think about capital allocation here? You got the dividend, you have a buyback is -- are you more encouraged by kind of what you're seeing here? And would that then mean accelerate more buyback? Or how are we kindof about returning the cash to shareholders?

Thanks for the question. We have -- we repurchased approximately 91 million shares in Q3, about 30% more than last year and materially more than the prior quarter. The stock traded at a significant discount to the 52-week average. And we believe it's trading at an unwarranted discount, so we continue to support the stock and we have ample liquidity and balance sheet capacity to do so. I think our Board's authorization of an additional $400 million share repurchase, obviously reflects confidence in the strength of our business and ability to generate a significant amount of free cash flow.

So while we don't guide towards what our future share repurchases are, I think we will continue to support the stock when it trades at an unwarranted discount and barring any attractive deployments into M&A and investments within the business, we have ample free cash flow to deploy to build dividends as well as repurchases.

Thank you. We'll move on now to Lizzie Dove with Goldman Sachs.

Geoff, great to hear that you're doing well. So it's clearly so much investment going into data centers, manufacturing, broader infrastructure projects, as you kind of mentioned and gave some great data points earlier and on the slides. I'm wondering how are you thinking about the potential for this to create really a multiyear demand tailwind for Wyndham? Is there a way to kind of quantify that impact to U.S. RevPAR in aggregate? And is this something you think is accelerating as we look to 2027 and beyond?

Lizzie, thanks for the question. Absolutely accelerating and strengthening. It is performing right now. It was up about 6%, in line with the rest of North America, but it's no longer the drag from an acceleration standpoint to my point than it was during those quarters and the government slowdowns of last year. We're seeing -- our teams are out there contracting. They're seeing ongoing highway expansion. They're seeing ongoing an increasing manufacturer builds big utility grid upgrades and companies that are just continuing to deploy field crews and regional service teams across the country. And these teams operate on and these companies operate on strict per diems, really anchoring them to our select service brands across the U.S.

Where it's really showing up for us is in terms of what has been booked by our GSO. In Q3, our GSO booked 16% more revenue in Q3 than they did last year. And that was up from booking 12%. I talked about on the last call, more revenue in Q2 than they did in last year. So continued acceleration. And GSO contracted infrastructure on the books, which gives us looking into '27, a lot of confidence continues to pace well ahead of where we were same time last year. We continue to place infrastructure business into more hotels than we ever have. This quarter, we put it into 5,000 -- almost 6,000, I believe, of our hotels this year, which was up quarter-over-quarter.

We're seeing business from oil and gas room night production that was up 350 basis points. I think I talked about in our remarks versus the rest of the portfolio. And hotels near data centers continue to the first part of your question to see great strength. We have about 350 data centers that were circling that are around approaching 1,000 of our hotels in those markets, which have seen a couple of hundred basis points of RevPAR growth this year.

I mean you look at Arizona, TSMC semiconductor quarter remains 1 of our strongest markets. And we're seeing hotels servicing this project seeing big double-digit increases year-over-year in both their revenues, their bookings, their market share. So absolutely, it should become a tailwind, assuming it continues to pick up as it has over the last 2 quarters and not be the drag it was last year. So much of it, as we said in the script, has yet to be spent.

And this Bipartisan Build America Act, we think should really help as those funds become authorized from '27 into the 2030s.

Thank you. We'll move on now to Meredith Jensen with HSBC. And Ms. Jensen, please check your mute switch. Your line is now open.

I know we're running late maybe she might have exited the call.

We'll move next to Tray.

Sorry about that. Yes. Sorry about that. I was hoping you might speak a little bit about Mainland China and obviously facing some headwinds this day on the macro side. But if you could speak to the strong net unit growth that continues despite that? And what maybe is driving investment decisions for franchisees? And sort of any trends you're seeing in development activity there, the types of owners who are entering your system.

Sure. Yes. If I was to -- if I was to answer the least favorite part, which David obviously asks of the quarter, it was how China RevPAR of your question came in. And as we talked about in the script, we do have a much heavier weight in Tier 2 cities, which underperformed the industry by about 500 basis points, which was not unique to us. I mean the good news is that despite that slowdown, our hotels were able to hold rate flat to prior year, which is a big, big deal. And as our teams look ahead, I mean, they do believe, and there's a lot of analysts out there that believe that the deflationary cycle that China has been in is beginning to bottom.

I mean we've seen this year, PPI turned positive for the first time in several years. We've seen CPI recently also turned positive -- and so there's just so much tailwind potential there in terms of how far occupancy is below where it's been historically. And it was great again to see our hotels at a China is doing a lot to boost consumption. And we're really optimistic for the long term. As is the industry, I mean, Horwath, recently put out a sentiment survey, which has hotelier market confidence climbing to a 7-quarter high breaking out of a prolonged period of pessimism.

And if we look at the pipeline, LE's reported pipeline in China, Actually, we saw a tick up. 3,600 projects saw early planning up 4% with construction starts up 7% as hotel conversions hit a record high, rising over 20%, and that's certainly helping us to the back part of your question from a development standpoint. I mean once again, we've got a fantastic team over there, Joon Aun and Bill Wang are doing just a great job quarter after quarter, delivering double-digit net room growth for both our direct franchising and our overall China system. 2/3 of the contracts that we signed were new construction, which was great to see.

The other third conversion, but we're also seeing a lot of senior cell and same year opens -- to your question in terms of what we're hearing from people that are signing with us in the quarter or in the year to open that year is they're looking for that incremental distribution as demand has been so soft. And so we're super bullish as our growth has pivoted from master license agreements to direct franchise agreements at 3x the royalty rate that, that double-digit net room growth is going to really help us continue to grow our international royalty rate. And we see no signs of that business slowing down.

Our final question is from Trey Bowers with Wells Fargo.

Geoff, great to hear things are going well. Just 2 quick ones. One on -- you've talked to this, but I'll ask it quite directly. Is there a chance that domestic growth next year gets back to that 6% growth with a kind of 4% churn rate against it. So we could see 1 or 2 points of domestic log. And then two, just so I understand the Revo numbers. We started about 22,000 rooms. Now it says there's 13,000. Are those kind of delta of 8,000 or 9,000 rooms, ones that have run through the deletion counts already? Or are those rooms that have kind of graduated to returning to the system.

Trey, domestic net unit growth, I think we are expecting sequential growth in the year. We're obviously lapping outsized terms from the beginning of the year that we kind of expected to make up in our seasonally Q3 and Q4, which are strongest net unit growth quarters, obviously, transaction volumes kind of slowed down, which had an impact. So I think looking ahead, we obviously are expecting sequential growth in Q4.

And then beyond that, we want to kind of get back to see the transaction volumes to resume construction arts with, again, not necessarily predicated among interest rates coming down, but just more stability there, which should give owners confidence. We are seeing that -- and then -- so that's really kind of how we think about that on the domestic side.

And to your question around rebuild we started with about 22,000 rooms. We've kind of disclosed in the earnings release about 9,100 Revo rooms left the system. So the 13,000 that are remaining, our expectation is that off the 23,000, about 20% to 25% will be retained, so call it, 5,000, 6,000 addition rooms. And the revoinsolvency process, it's nearly finalized, but it's still kind of in the -- putting the finishing touches. So other than the 6,000-ish rooms that we expect 5,000 to 6,000 rooms that we expect to retain the rest will be leaving the system in Q4. And so whatever that 20% to 25% should be an upside for 2027.

Thank you. At this time, I will now turn the meeting back to Geoff Ballotti for closing comments.

Thanks, Leo, and thanks to anyone still on the line. I believe this is a record at in terms of 75 minutes. We appreciate your questions and your interest in Wyndham Hotels and Resorts. We know how busy your days are. Amit, Matt and I look forward to talking to many of you in the weeks ahead. But in the meantime, have a great weekend and happy Halloween next Saturday. And thanks, everybody, again for joining us today.

Thank you. This does conclude today's Wyndham Hotels & Resorts Third Quarter 2026 Earnings Conference Call. Please disconnect your line at this time, and have a wonderful day.

Welcome to the Wyndham Hotels & Resorts Second Quarter 2026 Earnings Conference Call.

[Operator Instructions] I would now like to turn the call over to Matt Capuzzi, Senior Vice President, Financial Planning and Analysis and Investor Relations.

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 our 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. I'd like to start off by thanking those of you on the call who have reached out to me to wish me well during my treatment for multiple myeloma. I'm getting great care. I'm staying busy with work, and I'm very optimistic about the treatment path ahead. And I can't tell you how much your words of encouragement have meant to me. So thank you for that.

We're very pleased to report another strong quarter where we opened a record of nearly 18,000 rooms, 7% more rooms than we opened last year. We drove sequential net room growth, both domestically and internationally, and we expanded our development pipeline to a record of approximately 261,000 rooms with a FeePAR premium approximately 30% higher than our existing domestic and international systems.

U.S. RevPAR grew 2%, 120 basis points ahead of our expectations. And on a comparable basis, we grew adjusted EBITDA and adjusted EPS each by 3%. Year-to-date, our resilient, highly cash-generative business has produced approximately $169 million of free cash flow, and we've returned over $170 million to our shareholders.

While global RevPAR remained flat sequentially at down 1% in constant currency, domestic RevPAR improved by over 200 basis points to up 2%, ahead of our 1% growth expectation. The 1% April month-to-date RevPAR growth that we reported on our last earnings call continued to pick up throughout the remainder of April with momentum accelerating from May into June. Domestic RevPAR saw increases in both demand, up 60 basis points and ADR up 160 basis points.

And our 3 largest states, Texas, California and Florida, which account for 1/4 of our U.S. room count, improved by 700 basis points sequentially, from down 3% in Q1 to up 4% in Q2. Weekend RevPAR improved sequentially, supported by stronger results in drive-to markets.

The strength we saw in the industrial Midwest in Q1 continued into Q2 with RevPAR outperformance in states such as Illinois and Indiana, both up 10%; Iowa up 9%; Wisconsin up 7% and Ohio up 6%. This momentum reflects the continued benefit of infrastructure-related demand, which is helping boost midweek occupancy and providing a meaningful source of long-term growth for our franchisees.

So many of our hotels located in project adjacent markets are serving some of America's largest transportation, AI, data center and industrial projects now ramping across the country. Strong leisure and everyday business travel trends continued into July. We're excluding the impacts from the World Cup and America250.

Month-to-date RevPAR growth has been relatively consistent with June's performance. International RevPAR declined 6% in constant currency during the second quarter. Canada increased 2%, while EMEA declined 6% as strong growth in Turkey and India was more than offset by softness in the Middle East, where RevPAR declined from down 5% in Q1 to down 45% in Q2. And in Germany, where the Revo portfolio continued to underperform as it progressed through insolvency.

Latin America RevPAR declined 7%, pressured by lower U.S. inbound travel to Mexico. Excluding Mexico, the region was flat. In Southeast Asia and the Pacific Rim, RevPAR grew 5%, led by Vietnam, Thailand and New Zealand. And while industry China RevPAR experienced a 400 basis point sequential decline, our RevPAR in China remained flat sequentially, though down 5% compared to the second quarter of 2025.

On the development front, Wyndham's owner-first value proposition continued to drive strong openings and net room growth. We opened nearly 18,000 rooms, up 7% year-over-year and a second quarter record for our company. Our development pipeline grew for the 24th consecutive quarter to a record of approximately 261,000 rooms across over 60 countries with a FeePAR premium of approximately 30%, both domestically and internationally, reflecting our strategy of adding hotels in higher chain scales and in geographies and markets with stronger long-term economics.

Here in the United States, we drove sequential growth in the second quarter with strong conversion additions in higher chain scales like the Wyndham Jacksonville Hotel and Conference Center with its multiple restaurants, bars and 35,000 square feet of meeting space, along with the Winfield Lofts, a Wyndham Hotel located in Los Angeles, near Dodger Stadium and the L.A. Coliseum.

New construction openings this quarter domestically were also strong with additions like the La Quinta, Hawthorn Suites, Mebane, North Carolina. The Hotel Troy, a Trademark by Wyndham located less than 3 miles from our New Jersey headquarters and the Monarch, an HQ hotel on historic St. Charles Avenue in New Orleans, the latest addition to our growing Registry Collection.

EMEA grew net rooms by 10%, excluding Revo, with several outstanding conversions, including the Wyndham Portocolom Resort in Mallorca, Spain. And the Wyndham Grand Carvoeiro nestled on the cliffs overlooking Portugal's breathtaking Algarve Coast, our third upper upscale addition to this important European vacation destination.

Latin America and the Caribbean grew net rooms by 12% with several fantastic conversions like the Wyndham Macae on the Sands of Pecado Beach in Rio de Janeiro and new construction openings like the Wyndham Garden Durango in Mexico.

In Southeast Asia and the Pacific Rim, we grew net rooms by 10%, driven by exceptional new construction openings like the Vienna House by Wyndham Charm Long Hai in Ho Chi Minh, marking our first Vienna House Hotel in Vietnam.

And in China, we once again delivered double-digit net room growth for our direct franchising system and 13% net room growth across all of Mainland China with a record-breaking performance for our Days Inn brand, which after adding 8 spectacular direct franchise hotels in the first quarter, opened another 19 Days hotels in the second, including so many upscale new construction direct franchise agreements like the Days Hotel by Wyndham, Bortala Jinhe, our 150th Days now open in China.

Ancillary revenues increased 4% in the quarter and 12% year-to-date, aided by our exciting new suite of Wyndham Rewards credit card products, our continued expansion of strategic partnership initiatives and our ongoing technology innovations.

Wyndham Connect, our AI-enabled guest engagement platform powered by our Wyndham-trained LLM is now being rolled out internationally. With more than 5,000 hotels today installed, the platform improves guest service while helping engage franchisees generate hundreds of thousands of dollars in incremental revenue by autonomously selling services, upgrades and amenities that guests want to take advantage of.

Wyndham Connect+, a premium add-on to the platform and recently renamed Wyndham AI Concierge, is also expanding now internationally. And it's driving more than 500 basis points of increased direct contribution for these hotels through agentic voice channels by managing franchisees' direct-to-hotel voice and messaging contacts and again, autonomously booking reservations while lowering their hotel operating costs.

Last month, in partnership with Barclays, we reimagined our Wyndham Rewards credit card portfolio, reshaping how members can earn, redeem and engage with our award-winning loyalty program. This refreshed credit card lineup is creating sustained long-term ancillary fee growth and includes 4 distinct products, each designed to target a specific type of member and demographic.

The portfolio now spans no-fee, premium, business and elite offerings, including our Earner Premier Card, our first ultra-premium co-branded credit card. Wyndham Rewards' new Earner Premier is receiving great reviews as a powerhouse card, offering some serious benefits for members, including up to 120,000 bonus points as a welcome offer, automatic Diamond status with its complimentary suite upgrades, late checkout and extra 20% bonus points on stays, a 25% discount on award redemptions and no points expiration ever.

Together, these enhancements made across all 4 of our refreshed cards expand our appeal to higher-value travelers while strengthening Wyndham Rewards' differentiated value proposition through richer benefits and greater everyday value. Earlier this week, we were extremely proud to be recognized for the tremendous value that we provide to our guests through Wyndham Rewards, where we once again were named the #1 hotel rewards program by U.S. News & World Report. Our Wyndham Rewards team remains focused on initiatives to drive increased loyalty and engagement with the program now contributing more than 1 out of every 2 check-ins domestically.

Global membership enrollments grew another 9% year-over-year to a membership base of over 126 million members. With so many new upscale, so many new luxury and new all-inclusive aspirational hotels being added to the system, along with our desire to maintain the simple fixed redemption structure that makes Wyndham Rewards so very unique.

We're expanding the program from 3 to 4 award tiers for free night stays in September. Free nights will now start as low as 5,000 points versus 7,500 points previously, while a select number of our most aspirational hotels will move from 30,000 points to a new tier of 45,000 points. Wyndham Rewards' simple fixed redemption structure with no dynamic pricing, which means no increased points requirements based on seasonality or peak periods of demand remains unchanged, and we remain steadfast in our commitment to delivering the industry's most rewarding and the simplest loyalty program for both members and for franchisees.

Looking ahead, we're encouraged by the continued recovery in both leisure travel and everyday business travel demand. As U.S. select-service RevPAR strengthens, we are well positioned to benefit from that momentum. Most importantly, we thank our team members around the world for their commitment and their relentless focus on serving our franchisees and our guests, which remain the foundation of our success.

And with that, Amit will now walk us through our financial highlights and full year outlook. Amit?

Thanks, Geoff, and good morning, everyone. I'll begin my remarks today with a detailed review of our second 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 second quarter of this year, marketing fund revenues exceeded expenses by $14 million, in line with our expectations, while revenues exceeded expenses by $3 million in the second 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 second quarter, we generated $375 million of net revenues and $212 million of adjusted EBITDA. Net revenues declined 6% year-over-year, primarily due to the absence of pass-through revenues from our May 2025 Global Franchisee Conference, lower other franchise fees and the deferral of fees from Revo, partially offset by higher ancillary revenues, EBITDA neutral revenue from the 2 Revo hotels we've taken possession of and a larger global system.

On a year-to-date basis, ancillary revenues grew 12%, driven by higher credit card and partnership fees. We continue to expect full year ancillary revenue growth of low to mid-teens, which implies slightly accelerated growth in the back half of the year. Adjusted EBITDA increased 3% on a comparable basis, primarily reflecting lower G&A expenses driven largely by insurance recoveries, the timing of variable costs and higher ancillary revenues, partially offset by a decline in other franchise fees and the deferral of fees from Revo.

Our full year expectations for G&A expense remain unchanged, as the Q2 favorability will be largely reversed in the back half of the year. Adjusted diluted EPS for the quarter was $1.48, a 3% increase on a comparable basis, reflecting growth in adjusted EBITDA and the benefit of share repurchase activity, partially offset by increased interest expense.

Free cash flow was $105 million in the second quarter and $169 million year-to-date. Development advance spend totaled $28 million in the second quarter. We continue to see strong and growing demand for our brands with global openings and pipeline up 4% year-over-year, excluding Revo. Historically, the hotels with development advances have entered our system at a FeePAR premium of approximately 40% relative to our system average.

We returned $86 million to our shareholders in the second quarter through $54 million of share repurchases and $32 million of common stock dividends. Year-to-date, we've now repurchased 1.3 million shares of our stock for $105 million. We ended the quarter with approximately $1 billion in total liquidity, and our net leverage ratio of 3.5x remained as expected at the midpoint of our target range. At this leverage ratio, our current outlook implies up to $170 million of capital available for share repurchases or M&A in the back half of this year after factoring in dividends and the remaining portion of the $110 million we've allocated for development advances.

Now turning to outlook. As Geoff mentioned, second quarter U.S. RevPAR growth exceeded our expectations by a full point at plus 2%. As such, we've updated our outlook to include our second quarter U.S. RevPAR outperformance and our revised assumptions for U.S. RevPAR growth in the back half of the year, increasing from flat to up 2%. Our revised outlook also reflects the most recent trends in China and the Middle East as well as Revo properties in Europe. Accordingly, we're raising our global RevPAR outlook to flat to plus 1%, an increase of 100 basis points at the low end of our range.

There are no changes to our net room growth outlook of 4% to 4.5%, excluding Revo. The Revo insolvency process is nearing conclusion, and we expect to retain a subset of the Revo related rooms. As you would expect, we've remained disciplined from a capital perspective as it relates to further investments in the Revo portfolio. And as a result, the majority of the portfolio is expected to terminate during the third and fourth quarter of this year.

As a reminder, our outlook excluded any financial impact from Revo as we deferred all revenues. We plan to enter into franchise agreements with the new operators for the subset of Revo rooms we expect to retain and we'll revisit the deferral of revenue for these hotels and any financial upside to our full year results at that time.

Net revenues are now expected to be $1.48 billion to $1.5 billion, increasing the bottom end of the range by $10 million. Adjusted EBITDA is now expected to be $735 million to $745 million, raising the bottom end of the range by $5 million. From a cadence perspective, we expect the majority of the remaining year-over-year comparable adjusted EBITDA growth to occur during the fourth quarter, primarily due to the lapping of one-time variable cost reductions made during the third quarter of 2025.

Our expectation for the marketing fund to breakeven on a full year basis remains unchanged. With respect to seasonality, the marketing funds underspent by $5 million in the first half of the year, and we expect the funds to overspend by approximately the same amount in the second half, with the amount roughly consistent between the third and fourth quarters.

Adjusted net income is projected to be $355 million to $365 million, and adjusted diluted EPS is projected at $4.71 to $4.83, which is based on a diluted share count of 75.4 million shares and as usual, does not assume future share repurchase activity or incremental interest expense from any potential new borrowings. There are no changes to our outlook for development advance spend or free cash flow conversion.

In closing, our second quarter results demonstrate the continued strength of our asset-light business model, further inflection in U.S. select-service RevPAR trends and the consistency of our cash flow generation. We delivered comparable growth in adjusted EBITDA and adjusted EPS, maintained strong liquidity and disciplined leverage and continue to return excess capital to shareholders while investing selectively in high-return development opportunities.

With our raised outlook reflecting stronger-than-expected U.S. RevPAR performance and continued confidence in our long-term growth drivers, we remain well positioned to deliver solid results in the second half of this year while creating sustainable value for our shareholders.

With that, Geoff and I would be happy to answer your questions. Operator?

[Operator Instructions] And our first question today comes from David Katz with Jefferies.

Geoff, glad to hear all is progressing well. I wanted to just start this morning and get your perspective on U.S. consumer health. Clearly, figuring out what the U.S. RevPAR growth trajectory is going to look like this year. It's been surprisingly good. Help us get some insight on how sustainable that is. And we certainly love your longer-term view to that end, too.

Well, thank you, David. And we do believe it is sustainable. When we look at our middle-income consumers who, despite the affordability issues and not being happy about gas prices, they're in relatively good shape. And I think we all feel good about and very optimistic about the second half and the year ahead for several reasons.

Obviously, everyone is talking about our comps, which will continue to ease throughout the year. 2Q economy comp, of course, was down 4%. 3Q, just to remind everybody, was down 5% in 4Q in economy was down 8%. And all of the leading indicators that we look at domestically are strong. Our cancellation rates, they continue to improve. Our booking lead times are holding steady at about 15 days.

The average distance driven for these consumers to our resorts this summer at 360 miles was actually up 30 miles from the first quarter and consistent with last year despite the gas prices. And the length of time they're spending at the hotels, the average length of stays that these families are saying to vacation this summer, and we think into the fall, is continuing to lengthen.

We're also optimistic about the second half tax refunds for these consumers. We think it will unlock further discretionary spending. About 10% of the $60 billion of tax refunds will be spent on travel. U.S. Travel is estimating and middle-income guests are going to be spending -- our consumers are going to be spending 70% of that, meaning an extra $4 billion that will be spent domestically this year on travel.

And when we look at how they're doing financially, their wage growth is robust enough certainly to support increased leisure spending, which we're seeing. And the banks are seeing, I mean, even the 1/3 of the lower income households this week on the banks that reported, we're seeing wage and deposit growth catching up to the higher income households. And on top of all of that leisure demand for the rest of the year and

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the infrastructure business for us continues to improve on really strong private sector growth with a 300 basis point Q2 increase in government spending. Oil and gas markets, they outperformed by 350 basis points in market tracks for us, representing about 11% of our rooms. And all of this has boosted weekday RevPAR and about 250 basis points from Q1. So there's a lot out there to be confident about, and our teams are feeling it.

And our next question comes from Brandt Montour with Barclays.

Great to hear [ your voice ], Geoff. Can you help us -- maybe for a minute, can you help us better understand the revenue to EBITDA bridge in the second half, maybe perhaps starting with royalty and franchise fee growth, that line didn't grow in the second quarter in line with U.S. RevPAR growth. So just what kind of visibility or confidence do you have that, that return to U.S. RevPAR growth in the back half will drive sort of accelerating growth in those other core revenue lines?

Brandt, thanks for the question. I'll start with the math first and then go into the drivers breakdown. I think if you take our full year EBITDA at the midpoint of $740 million and you take the comparable adjusted EBITDA in the first half of $363 million, it would imply a back half EBITDA of about $377 million or about $14 million higher than the first half. And this is assuming the marketing funds breakeven, which is our expectation for the full year. And that's just the math.

So as I -- and as I noted in the prepared remarks, majority of the growth is going to be in the fourth quarter. And now if you kind of go into the drivers, we're expecting second half U.S. RevPAR growth of 2%. We're also expecting international RevPAR to improve compared to the front half. And then we also expect growth in the franchise fees in the second half, as I mentioned on last quarter's call. That was really -- that and Revo were 2 of the big drivers for the second quarter royalty and franchise fees year-over-year variance that you had referenced. So we do expect -- so yes, we do expect core revenue lines to grow alongside RevPAR.

And then ancillary, we did about 12% in the first half. Our full year expectation is low to mid-teens, which would imply an acceleration in the back half. And then lastly, the G&A favorability that we saw in the second quarter is largely timing related, and we expect that to reverse in the third quarter. So those are kind of the puts and takes for the back half revenue and EBITDA growth to get to kind of the midpoint of the $740 million.

Our next question comes from Michael Bellisario with Baird.

Geoff, glad to hear everything is going well with your treatment that you're staying so positive. I want to ask on unit growth. Deletions did tick up a bit in the first half of the year, that's ex Revo, ex T&L. Just help us understand how much of that is you being more proactive? How much of that is competition? And then just sort of looking ahead, what are you seeing? What are you hearing that gives you confidence that unit growth will accelerate in the back half?

Yes. Thanks, Mike. First half, we always expect to have higher deletions and lower openings. While the second half, we generally experienced lower deletions and higher openings. And as you point out, we were certainly pressured domestically in the first quarter with the outsized loss of the legacy T&L from their resort optimization initiatives and the Vacasa rooms, the legacy Wyndham Worldwide relationship we had, which we previewed on the fourth quarter call and absolutely pressured as well in the first half with outsized terminations from Revo.

We look at retention on a rolling 12-month basis. We have made steady progress over the years, moving it from the 94s to where we are at 95% globally at the end of the second quarter. Domestically, while our economy brands lead the industry from a retention standpoint, our long-term goal remains, our teams are committed to moving that retention to 96%, both domestically and internationally, which is where we are internationally running at 95.9% over the last 12 months.

To your question in terms of how we're looking at it in terms of the levers to get there, we are, to your point, very focused on replacing those lower quality, lower FeePAR rooms with higher quality and higher FeePAR rooms in accretive markets that reflect the record franchisee owner satisfaction that we're seeing, the record guest satisfaction that we're seeing. I mean we've seen our strongest year-over-year gains since going public across all of our quality and all of our guest satisfaction metrics, whether it's our Net Promoter Scores or our overall satisfaction scores, they're all at record highs.

And our economy brands, which we're very focused on right now, are seeing some of the highest Net Promoter Score growth that they've ever seen, Microtel, which was J.D. Power's economy winner this year, up 500 basis points, super up, days up. So a Q2 OSAT with that focus of almost 500 basis points, a Net Promoter Score about the same and our index comparing how our economy overall satisfaction review scores comp against our peers is now running over a fair share, and we'll continue to focus on that.

To the last part of your question in terms of what we're seeing with new select-service brands coming into the -- we get this question a lot. It is -- we have seen less than 1% of our system who we either termed or who left us reflagging to one of these new brands that are being introduced. They're not materially impacting our signings or our openings or our pipeline or our approach on key money, which is tracking in line with the past few years on a year-to-date basis.

We had a record year domestically of openings last year. Q1 was a record of domestic openings. Q2 is another. And we've opened 8% more rooms domestically year-to-date. So we're not seeing that as a threat or an issue. And again, the reflagging of less than 1% of our former hotels of ours to new brand competitors, we don't view as material to our development growth moving forward.

Our next question comes from the line of Steve Pizzella with Deutsche Bank.

Geoff, glad to hear everything is progressing well. Just wanted to ask on how we should think about the longer-term EBITDA algorithm here given some of the onetime items this year. Can you help us think about the pieces to get back to the mid- to high single-digit EBITDA growth moving forward?

Steve, thanks for the question. Our long-term algo remains consistent with what we've communicated previously, high single-digits EBITDA growth predicated upon 2% to 3% RevPAR growth. And we have -- as you noted, we kind of had some onetime items with Revo and variable comp this year that obviously, when you adjust for that, we're kind of trending towards that. Again, as we get RevPAR growth, we feel very confident. We're -- the 2% to 3% that we're seeing in our algo. You're kind of seeing that in the back half of the year, we saw that in Q2. So we feel confident going into that RevPAR will catch up.

And then net rooms growth, 4% to 5% is our long-term algo, and we've been delivering at the 4% to get to the 5%. Some of that is retention related, as Geoff said, as we continue to deliver record openings. And then on the other items that we do control, ancillary revenues, we have low to mid-teens for this year. Long term, that's high single digits. And then royalty rate of 5 basis points domestically and internationally, we continue to do that. You look at the last 2 years, we're actually pacing ahead of that. So we continue to deliver on everything that's within our control and RevPAR is obviously being progressing well. So we're -- I think we're on track for our long-term EBITDA algorithm.

And our next question comes from Patrick Scholes with Truist Securities.

Geoff, very encouraging to hear you're getting great care and certainly like to hear your optimism here. Let's talk just quickly about what's happening with you folks in Europe. Specifically, how did Europe perform for you along the impact of Revo? And what are your expectations for at least the upcoming and following quarter, specifically in Europe?

Sure. I'll start and then Amit could jump in. As we talked about, Patrick, international RevPAR was weighed down by Europe by -- and by Latin America and the Caribbean. But I'll start with Europe. Our EMEA RevPAR, which declined 6% was certainly affected by a 45% drop in the Middle East. And as we, I think, pointed out in our script, a soft Revo performance throughout its insolvency, which, again, Revo, we've backed out of all of our revenues.

But excluding the Middle East and Revo, our performance in EMEA was up 5%. We saw strength this summer and continue to see it in Spain, which was up in the quarter, 26%. It's been a really strong market for us. Turkey was up 16%. India was up 11% and Africa was up 11% as well. And then when we look at Latin America, something else that obviously weighed on our international RevPAR driver. It slowed from down 4% in Q1 to down 7%, and that was driven by continued softness in Mexico. But excluding Mexico, Latin America was flat. And the good news and the optimism for us looking forward, we're seeing Mexico pick up. July is now running at plus 5% month-to-date, driven largely by rate, which is great and positive for franchisees and for our margins. But moving forward, I think we're obviously cautious. It's a fluid situation in the Middle East. But again, the Middle East is less than 1% of our system.

Our next question today comes from Dany Asad with Bank of America.

Geoff, we're glad to hear that you're getting great care, and we're all rooting for you.

Thank you, Dany.

The -- if I could just ask on -- a little bit on your outlook. So if we're taking domestic RevPAR from flat to up 2%. How does that 200 basis point raise split between rate and occupancy? And is that mix any different from what we've seen so far? And kind of can you just help frame that for us in terms of like how much more occupancy is there to grow from here on out?

Dany, thanks for the question. I'll start with the -- your first part, which is the domestic RevPAR. We're obviously pleased to see Q2 coming in 120 basis points ahead of expectation, and we're really kind of expecting that to carry into the back half of the year, taking our outlook from flat to plus 2%. As far as the breakdown between occ and ADR, we are assuming about 2/3 rate driven and about 1/3 occ, and that's really consistent with what we saw in the second quarter. Rate was about 160 basis points and then occ was about 60 basis points.

And then as we look ahead in terms of your overall -- your question as to occ and how much room there is, occ's been about 90% of 2019 levels. Most of the RevPAR growth has been driven by ADR, as you know, and that's consistent with the industry and consistent within the segments. So there's probably about 10% more tailwind that remains on occ. So we were encouraged to see both occ and ADR increase in the second quarter, and we're expecting that to continue into the third and fourth quarter.

Our next question comes from Ben Chaiken with Mizuho.

I want to double-click on the NUG topic again. So you opened up roughly 7,000 net rooms in 1H need to open roughly 30,000 net rooms in 2H. And I know you talked about the idea that you've always expected to have kind of higher deletions in 1H and lower deletions in 2H and openings kind of the opposite of that. Is the idea that you've been actively pruning -- just to double click here, is the idea that you've been actively pruning hotels and this activity will slow as it's under your control, and that's kind of been the entire plan for the whole year?

Yes. In terms of the levers that we talked about, absolutely. I mean, again, we're really focused on replacing those lower quality, lower FeePAR rooms with those higher quality, higher FeePAR rooms, which we're seeing in accretive markets. And again, it certainly reflected and continues to be with our OSAT and our NPS in our economy brands. We're feeling, Ben, really good about our domestic trajectory.

I mean, again, a record year of domestic openings last year, Q1, a record Q2. And we've opened and we continue to open and continue to grow that domestic pipeline of more upscale and more accretive rooms at that much higher feePAR, along with the pipeline, which is domestically at an all-time high of 110,000 rooms. And again, feeling good about the second half.

Our next question comes from Alex Brignall with Rothschild.

Geoff, as everyone, wishing you the best. So on the loyalty program, again, clearly, you have a spectacularly popular program with both owners and guests. Some news flow from one of your peers during the quarter suggested that in terms of the balance of economics between franchise owners and property owners have maybe gone a little too far. Could you just talk a little bit about the economics of your program and how you are balancing some of the benefits that you're providing with some of the AI programs you're doing, increased direct distribution with where that ends up in terms of economics flowing through to you, the franchisor and to the franchisees?

Sure. Thanks. Our owners, when it comes to the Wyndham Rewards program, are very engaged and have never been more so. We run our loyalty program from an economic standpoint on a breakeven basis through our marketing funds, which our franchisees, our owners and our franchise advisory committees understand. I mean it's something when we meet with our FACs and I've been meeting with them this month on Zoom, they understand that. And they're very engaged with both Wyndham Rewards and with the credit card program that's helping drive more direct business to their hotels.

Our program from an ownership standpoint and an economic standpoint is not only viewed by them as the simplest and the most rewarding for members and guests, which I mean, we could not be more pleased. And a shout out to our Wyndham Rewards team for yesterday's, today's show. Big reveal that Wyndham Rewards took the #1 spot again on U.S. News & World Report as the best hotel rewards program based on really 6 criteria that we think really makes our program stand out as the most rewarding and the simplest.

But back to the owners, it's viewed as the most equitable program in the industry. When it comes to redemption rates, and that's what owners are focused on. Wyndham Rewards pays back to our owners for free night stays on an occupancy basis redemption versus a fixed dollar amount. So they'll take that inbound. I mean, during high demand periods, our franchisees are very happy to take a free night stay direct booking as they're not having to absorb any program cost, given the high demand and occupancy and they're getting their full average daily rate.

So we're very engaged with our owners on the program. And obviously, members are more engaged and our owners understand today as it continues to grow, and we grew it, as we said in our script, with by another 2.5 million members in the second quarter, it's domestically providing in the economy space, which has been, I think, until our program unheard of, 1 out of every 2 check-ins domestically, and it's a really powerful tool for them that they're very engaged on.

Our next question comes from Dan Politzer with JPMorgan.

Geoff, glad to hear that you're feeling well and in good spirits. I wanted to talk about the outlook a little bit. You raised RevPAR, I think, 50 basis points at the midpoint. You raised EBITDA a few million. As you sit here today and think about your net rooms growth, outlook and RevPAR across both domestic and international segments, I guess where do you feel the greatest confidence in underwriting to get to that high end of the range? Yes, that's it.

Look, our guidance is a range, so obviously, it incorporates a lot of possibilities, and we have multiple combinations of driver growth to hit our outlook range. But specifically to your question about where do we feel the greatest confidence, we obviously saw U.S. RevPAR growth accelerate throughout the year, and we've seen it outpace our expectations. So -- and international came in a little bit weaker in the second quarter, which we do expect to recover in the back half of the year. So you will see some better performance on a relative basis.

So U.S. RevPAR growth, I think, as you look at the back half, what we've forecasted at plus 2%, obviously, that's kind of what we're seeing based on, as Geoff alluded to at the beginning, based on what we're seeing in a normalized basis in July as well as June. And so is there potential further acceleration? We're all optimistic that remains to be the case.

So you can see if that happens, obviously, the high end will really go through U.S. RevPAR, but also we do need some recovery in the international, as I mentioned. And that's really kind of flows into our EBITDA drivers. We took the 1.5 points of RevPAR growth we saw in the low end into our EBITDA and raised it by $5 million. The high end, as I said, kind of remains unchanged. So the midpoint movement is really just math.

Our next question comes from Stephen Grambling with Morgan Stanley.

Geoff, great to hear your voice. I'll echo my well wishes and hope you're back on the VersaClimber soon, if not already. Your slide deck notes key money is only 3 out of every 10 deals. And I think you used to say that Michele had an eyedropper, now Amit is in the seat and had a development lens. And I think we've talked about this previously, but can you remind us of the guardrails you think about in terms of deploying key money? And are you seeing any change in the opportunity set or even the return potential from key money-related deals?

We are -- in terms of whether it's Michele or me, we -- one thing that hasn't changed is we are both extremely disciplined when it comes to our shareholders' capital, and we'll continue to do so. So that hasn't really -- I mean, you look at 2024, 2025 and our outlook for 2026, we've really been in the $100 million to $110 million range. So it hasn't really changed. And as we kind of talked about in the prepared remarks, when we do give development advances, they come in at a significant FeePAR premium over the existing system, roughly 40%.

So when we use it, it's really -- we're targeting assets and markets, attractive markets where we want to increase our presence, higher RevPAR assets to kind of bolster overall FeePAR. And then in terms of our underwriting and how we are -- we obviously, goes without saying, we're disciplined, and the discipline really comes in, in the form of making sure that the expected returns are well above our cost of capital. We also factor in regional differences to make sure that we are getting the appropriate risk-adjusted return.

And then the opportunity set, listen, I think we have seen -- as the earlier question about competition, we've certainly seen more competition over the last 3 years, but I think it's a testament to the strength of our brands and our value proposition that our key money has remained in that same range of $100 million to $110 million.

And our next question comes from Ian Zaffino with Oppenheimer.

Geoff, glad we got some good news here. Keep it up. As far as the World Cup, would you be able to maybe quantify the impact there maybe on U.S. RevPAR, whether second quarter, third quarter, what's kind of baked in? And how do we think about it?

We obviously -- we were -- I think the World Cup was a great success for the U.S., and we were pleased. And as our President said, hopefully, it returns very soon. As far as the impact is, we had about 25 basis points in for the quarter in the U.S. So overall quarter, the impact, which was again just June in the second quarter. And that's kind of similar expectations for July.

The other thing I think I want to make sure is we capture is America250, which we had definitely helped in both June as well as July. So those 2 had -- roughly you kind of adjust for those 2 and you look at what June and July RevPAR are, those are kind of consistent with our -- the 2% that we're guiding for the back half of the year and really just shows the underlying strength of the leisure demand and the weekday, everyday business demand above and beyond the onetime items that we saw in June and July related to World Cup and America250.

Our next question comes from Meredith Jensen with HSBC.

I was hoping you could speak a little bit more given how Wyndham is continuing to be a real leader in driving technology and AI initiatives. And clearly showing an ability to move pilot to scale really quickly. If you might talk about which areas you're seeing bigger opportunities than you might have spoken about previously? And maybe on the other side, which parts of the initiatives you might need to reset, sort of evaluating the TAM on some of those?

Sure. Thanks, Meredith. I would -- I'll point to 3. And while I don't think they need a reset, the first, certainly, our ongoing work with our LLM relationships, which is so benefiting our guest search, continues to evolve. And it changes frequently. But I mean, we all know that roughly 60% of travel searches by our guests are occurring within an LLM for whether it's inspiration or research or itinerary building.

Our focus remains to serve those guests end-to-end for the best booking experience and drive increased direct bookings.

And our use of an AI-powered on property LLM, along with Wyndham agents in each of those LLMs, we're really excited about how we're providing real-time rates and inventory and guaranteed room types and things that are cached or scraped third party just simply can't.

We're seeing -- we're driving increased visibility for our hotels in those listed results. And what we're seeing and what we want to continue to see is a higher conversion. We're seeing a 20% higher conversion on our brand.com sites when the guest connects to us from an LLM. And it's something that we're continually working on. I wouldn't say reset, but we'll continue to evolve.

What we're most excited about and what we've moved to your point from pilots to really meaningful benefit for our franchisees are the products that our franchisees are embracing right now. Our Wyndham Connect, it's allowing, as we said in the script now, 5,000 of our hotels to directly talk to all of our guests via AI and just taking labor-intensive tasks away from those franchisees, allowing them to make extra money. It's something we talk to them about every day. There'll be a note this Thursday -- today going out this afternoon to all of our franchisees once again, extolling and promoting the benefits of selling early check-ins and late checkouts and upgrades all autonomously.

And again, we've talked about this publicly. It's driving upwards for engaged franchisees $100,000 or more in increased revenues. That's a big, big deal right now. And it's -- we have exceeded 40 million guest messages today. We're averaging about 260,000 guest interactions via this AI tool per day. And again, our franchisees, our FACs have been part of the process from the get-go and are increasingly engaged with it.

And then we also talked briefly about our new Wyndham AI Concierge product, which is a premium add-on, unlocking all the AI voice capabilities, handling everything that's direct to the hotels over voice, whether it's coming in, if you're calling our hotel, messaging our hotel or SMSing our hotel, we are booking those reservations for our hotels completely autonomously, leveraging Salesforce and Data 360. I mean it's live now in 1,500 hotels using those AI agents who have just an encyclopedic knowledge and understanding of what Meredith has booked with us before, her loyalty status and the ability to answer any question imaginable.

And for franchisees, again, it's saving them labor, and that's why they're engaged by not needing as much staffing in their front office. But it's driving up to -- and we've talked about this publicly, an increase of 500 basis points of direct contribution by handling all of the franchisees on property voice, yielding 0 drop calls and increasing that booking conversion and driving -- we're able to drive a 15% increase in ADR if you're booking it autonomously versus on the phone. And that's a big deal for franchisees. So we're super excited, and we'll continue to push on that.

Our next question comes from Trey Bowers with Wells Fargo.

This is Nick Weichel on for Trey. We're glad to hear you're doing well, Geoff. Just wanted to dig in a bit more on units growth and the pruning of the portfolio with the lower FeePAR to bring in more higher FeePAR. Are there any specific brands and regions where you're seeing the most, like where you're doing the most pruning? And I guess, vice versa, are there any like brands and regions where you want to potentially add more rooms to?

Well, yes. I mean the international opportunity that we have to continue to add brands is massive. I mean we continue to add new brands, and we've done that over 175 times since spin across 100 new countries. So I mean, the opportunity for our direct franchise sales teams internationally is just enormous, and we'll continue to do that. I mean there's no brands in specific that are right now in tough shape from a pruning standpoint. We're just very focused on our conversion room openings, again, looking at bringing in higher FeePAR deals and higher quality deals. And we're seeing great success.

I mean we continue to gain meaningful share domestically in the upper mid-scale conversion market domestically. We've doubled it from where we were pre-spin to about 25% today. And we've done that in our upscale. We continue to add upscale brands to our domestic portfolio, and we've taken that share from 4% to 8%. And the brands that are doing very well from a conversion standpoint are brands like AmericInn, like Baymont, like Hawthorn Suites. Their quality scores are all improving. They all saw double-digit growth in domestic openings.

And La Quinta, la Quinta conversions in Q2 tripled domestically. We've opened a dozen La Quintas year-to-date, and we're really proud of that. And then from where we have lost rooms and have been focused on quality, we're also gaining more than our fair share of economy conversions. Back in 2019, our conversion share was about 44%. It's 63% today. We're still -- I mean, we like that business. Over 90% of all of our conversion executions in the economy space that open are opening less than a year from signing. And our franchise sales teams are increasingly engaged with the brands that we have in terms of how their quality scores are improving. And the new brands that like Dazzler, Dazzler Select, which we haven't talked about publicly that is doing very well for us.

And our final question today comes from Lizzie Dove with Goldman Sachs.

Geoff, really wishing you the best and glad that you're doing well. I think most of my questions have been asked. So just a clarification for me on the modeling side of things. I think you said the majority of EBITDA growth would be in Q4. I know there's been a lot of marketing fund variability. I think it was an $18 million underspend last year in Q3, so about $20 million or so variability in Q3 based on what you've guided in the second half. And so just curious on that majority of EBITDA growth in Q4, is that on an underlying basis, kind of ex the marketing fund variability or on a reported basis?

Yes. It's -- Lizzie, thanks for the question. It's ex the fund. So I was -- when earlier in the questions that someone asked about kind of the bridge for the second half. So the numbers I was giving, which is the back half is going to be about $14 million higher than the first half. That's on a comparable basis, which assumes that the marketing fund is neutral in -- on a full year basis. So we've got -- I kind of went through the puts and takes. So the fund delta is largely going to be the $5 million that we're carrying over.

I think we said in our prepared remarks, it's going to be overcome roughly the same between Q3 and Q4. You also have a little bit of the variable cost reductions from Q3 of last year that we're going to be lapping, which obviously increases the -- which is why the growth you're going to see it on a reported -- on a comparable basis is going to be in the -- primarily in the fourth quarter.

This does conclude today's question-and-answer session. I'll now turn the call back to Geoff Ballotti for closing remarks.

Well, thanks, Angela, and great job. And thanks, everyone, for your questions and your interest in Wyndham Hotels & Resorts and for your well wishes. I'll say this, I've never had a greater sense of gratitude each morning when I wake up and start my day. I'm surrounded by an amazing group of leaders and team members who have all delivered another great quarter and set us up for just a great year ahead. And Amit and Matt and I, we look forward to talking to many of you today and in the weeks and months ahead.

And in the meantime, we'd like to remind all of you golf fans that we're less than 2 weeks away from the 20th Wyndham Championship. The final tournament, the very final tournament of the PGA Tour's regular season before the FedEx Cup playoffs begin and coverage begins on August 5 on the Golf Channel and then continues over the weekend with Jim Nantz and the CBS crew. They do a great job. Have a great rest of your summer, everyone, and thanks again for joining us today.

Thank you. This does conclude today's Wyndham Hotels & Resorts Second Quarter 2026 Earnings Conference Call. Please disconnect your line at this time, and have a wonderful day.

Thanks, Angela.

Good morning, everyone. Welcome to the Wyndham Hotels & Resorts First Quarter 2026 Earnings Conference Call. [Operator Instructions]

I would now like to turn the call over to Mr. Matt Capuzzi, Senior Vice President, Financial Planning and Analysis and Investor Relations. Mr. Capuzzi, please go ahead.

Thank you, operator. Good morning, and thank you for joining us. With me today are Geoff Ballotti, our CEO; and Amit Sripathi, our CFO.

Before we get started, I want to remind you that our remarks today will contain forward-looking statements. These statements are subject to risk factors that may cause our actual results to differ materially from those expressed or implied. These risk factors are discussed in detail in our most recent annual report on Form 10-K filed with the Securities and Exchange Commission and any subsequent reports filed with the SEC.

We will also be referring to a number of non-GAAP measures. Corresponding GAAP measures and a reconciliation of non-GAAP measures to GAAP metrics are provided in our earnings release and investor presentation, which are available on our Investor Relations website at investor.wyndhamhotels.com.

We are providing certain measures discussing future impact on a non-GAAP basis only because without unreasonable efforts, we are unable to provide the comparable GAAP metric. In addition, last evening, we posted an investor presentation containing supplemental information on our Investor Relations website. We may continue to provide supplemental information on our website and on our social media channels in the future. Accordingly, we encourage investors to monitor our website and our social media channels in addition to our press releases, file submitted with the SEC and any public conference calls or webcast.

With that, I will turn the call over to Geoff. Geoff?

Thanks, Matt. Good morning, everyone, and thanks for joining us today. We're very pleased to report a strong start to the year with first quarter results highlighting the strength of the value proposition we deliver to our owners in a faster-than-expected RevPAR recovery for our U.S. select service brands.

Our development momentum continued with net room growth of 4% and a pipeline which increased for the 23rd consecutive quarter to a record of over 259,000 rooms. We delivered 21% growth in ancillary revenues. We generated $64 million of free cash flow, and we returned $85 million to our shareholders. Global RevPAR improved 450 basis points sequentially from the fourth quarter. Domestic RevPAR, excluding last year's hurricane impact, improved over 600 basis points to essentially flat and ahead of our down 2% to down 3% expectation as demand continued to pick up throughout the quarter.

January's 4% RevPAR decline improved to plus 1% growth for February and also for March. Our 3 largest states of Texas, California and Florida which account for 1/4 of our U.S. room count improved by 800 basis points sequentially from down 11% in Q4 to down only 3% in Q1. The Q4 strength we saw in our Midwest and industrial states continued into Q1 without performance in Iowa, Illinois, Michigan, Oklahoma and Wisconsin.

Immigration and trade policies that created an environment of uncertainty appear to have stabilized and strong leisure demand over the spring break travel season has provided improved confidence among many franchisees as they approach the peak leisure summer travel season. April month-to-date RevPAR growth has been consistent with February and March. International RevPAR growth was consistent with the fourth quarter at down 1% in constant currency.

In Canada, RevPAR increased 8% on increased pricing power and improved demand. In EMEA, RevPAR grew 1% with strong performance in Turkey, Greece and Spain, offset by softness in the Middle East, which declined from plus 18% in Q4 to down 5% in Q1. RevPAR in Mexico fell with lower U.S. inbound travel driving pricing pressure and dropping our Latin America RevPAR by 4% versus prior year. Excluding Mexico, our Latin America region saw an 11% RevPAR increase, driven by strong pricing and demand growth in Argentina, Brazil and the Caribbean.

Asia Pacific RevPAR improved nearly 700 basis points from down 7% in Q4 to down 1% in Q1. Strength in Thailand and Vietnam was offset by China where RevPAR improved 540 basis points sequentially from down 10% in Q4 to down 5% in Q1, driven by continued occupancy improvement, which remains a significant tailwind at only 88% of pre-COVID levels.

Earlier this month, the large contingent of our franchise sales, operations and technology team members attended a AAHOACON26, the Asian American Hotel Owners Association Conference, in Philadelphia which aside from Wyndham's Global Hotel Conference is the largest gathering of select service hotel owners in the U.S. Our booth at AAHOACON's trade show was the busiest it's ever been, and developer enthusiasm for our brands and our AI-driven technology offerings designed to capture revenue at every touch point of the guest journey was strong.

Developers are increasingly noting that our best-in-class technology, powered by providers like Sabre, Oracle, Salesforce, Canary Technologies is making our brands ever more efficient and less expensive to operate and that our rapidly expanding AI-enabled shared service approach is lowering their breakeven point and making their hotels more profitable to run. This increased interest in our brands is certainly reflected in our first quarter results where new hotel contracts awarded in the United States increased by 8% and where our global development pipeline grew to a record of over 2,200 hotels. As the most asset-light player in the industry, with the development pipeline whose domestic and international rooms carry a 30% FeePAR 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 V Capri Palm Springs, which joined our Dolce by Wyndham brand. and Kauai's boutique Island Sky Ocean Hotel, which joined our Trademark Collection by Wyndham, a brand that has grown to over 100 hotels in the U.S. with 99 hotels in its global development pipeline.

Domestic new construction activity was again fueled as it will be for the decade ahead with new ECHO Suites by Wyndham hotels opening in markets like Colorado Springs, our seventh in the past 6 months, with our 20th opening 2 weeks ago in Bozeman, Montana. We also saw more new construction upper mid-scale dual-branded La Quinta Hawthorne Suites prototypes opening in popular tourist destinations like Leavenworth, Washington, and more new construction upper upscale hotels like the Dolce by Wyndham opening in the heart of South Beach, Florida.

Internationally, we increased the number of net rooms by 9%. 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 Ramada Plaza Tashkent located in the heart of Uzbekistan's capital. Latin America and the Caribbean grew net rooms by 12% with several notable trademark conversions, including the new Aparta Boutique Hotel in the heart of Cartagena’s Old City, along with the Decameron Baru, a Tripadvisor Hall of Fame award-winning resort near Playa Blanca.

In Southeast Asia, in the Pacific Rim, 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 Tengchong Hot Spring, our first Wyndham Grand in the Tengchong Yunnan province. And the Wyndham Fuzhou Gulou, 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 her Miami culinary loft with stays at our new registry collection Balfour 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 Pro-Am 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 agentic 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-ins, late checkouts, room upgrades and pet fees, incremental amenities and services and so many other creative upsell opportunities they develop themselves. Together, these initiatives are creating a durable competitive advantage that we expect to compound as adoption continues to ramp. Building on this momentum, AI is transforming our marketing economics and booking process performance, amplifying our reach, transforming our digital acquisition model and optimizing our unit economics by allowing us to drive significant reservation volume growth while consistently compressing our cost per click and cost per acquisition.

By embedding AI across the full guest engagement journey and leveraging our partnership with Adobe, we are dramatically increasing personalization while keeping guests engaged longer, driving higher conversion rates, shifting demand into direct booking channels and improving the foundational profitability of our business. Our strategy to meet guests wherever their travel intent is formed is working. And increasingly, that's beginning inside of OpenAI's ChatGPT, inside of Anthropic’s Claude, and inside of Google's 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 Claude, enabling subscribers to conduct intent-driven searches. This quarter, we're excited to share that we've launched Wyndham apps on both Claude 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 agentic 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 has been in the lodging industry for most of his distinguished career and with Wyndham for the past 5 years in a variety of roles, leading our M&A, our strategic development and our franchise sales efforts, most recently as our Chief Development Officer. Amit's combination of deep finance and capital markets expertise, his firsthand operational leadership at Wyndham and his strong relationships with our franchisees have positioned him very well to take over as our CFO. And with that, Amit will now walk us through our financial highlights and full-year outlook. Amit?

Thanks, 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 Revo Hospitality Group. Ancillary revenue growth was driven by the full quarter impact of our renewed long-term co-branded credit card agreement, which occurred at the end of first quarter last year. Adjusted EBITDA declined 1% on a comparable basis, primarily reflecting the absence of onetime cost reductions, partially offset by our revenue growth. Adjusted diluted EPS for the quarter was $0.96, down 3% on a comparable basis as a 1% comparable adjusted EBITDA decline, a marginally higher effective tax rate and increased interest expense was partially offset by the benefit of share repurchase activity.

Development advance 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 FeePAR accretive markets Geoff mentioned earlier. We continue to be disciplined with the use of development advances and underwriting above our cost of capital with these hotels historically entering our system at a FeePAR premium of roughly 40% above our system's FeePAR.

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 A balance. Pro forma for the transaction, our nearest maturities in the second half of 2028, 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 3 months. As such, we've updated our expectations to include our first quarter U.S. outperformance as well as assumptions that the U.S. maintains this level of growth through the second quarter. Our expectations for the back half of the year in the U.S. remain unchanged at approximately flat until we gain further visibility in the peak leisure summer months.

Accordingly, we're raising our global RevPAR outlook to a range of up 1% to down 1%. As part of our efforts to pursue all available remedies related to Revo's ongoing insolvency proceedings and optimize the recoverability for our shareholders, we exercised our rights during the first quarter to foreclose on and take ownership of 2 properties in Europe that were previously owned by Revo. We expect these properties to generate approximately $10 million of net revenues in full year 2026 with a limited impact to earnings as we work to stabilize operations and implement an asset management plan to maximize value.

As such, net revenues are now expected to be $1.47 billion to $1.5 billion. The impact from our increased RevPAR outlook falls within our adjusted EBITDA outlook range of $730 million to $745 million, which therefore, remains unchanged. We've updated our adjusted net income range to $351 million to $365 million to reflect the impact of increased interest expense resulting from our issuance of senior unsecured notes, which is offset in adjusted diluted EPS by the impact of share repurchases. As such, our adjusted diluted EPS outlook range of $4.62 to $4.80 remains unchanged.

Our expectation for the marketing fund to breakeven 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. Operator?

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

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

We began to see it, Mike, really as we talked about on our last call in January, we're midway through February. The Q4 RevPAR, as we talked about in the script of down 8%, was down 4% in January, and then it just jumped to plus 1% for February and March. And April month-to-date is continuing with that same strong demand, that same February and March improved performance. We saw it specifically in states like Texas, which we talked about the combination of Texas, Florida and California improving 800 basis points. But Texas alone was a 700 basis point improvement, and it was up 2% year-over-year, which was great to see. And we have 700 hotels in Texas, 2% up for the quarter. That was a big deal. Improvement, of course, in California and Florida.

We saw it, as we talked about across the Midwest, infrastructure states collectively, a big group of them, up 8%. We're seeing corporate contracted in that everyday business pick up. And sequentially, it was both occupancy and rate. We saw nongovernment infrastructure pick up, oil and gas pick up our oil and gas market tracks, which are 12% of our room count, picked up by 400 basis points. And in terms of what we're seeing now in April, if we just look at STR for the last 8 weeks, U.S. economy occupancy, is running up 140 basis points to prior year. So that's demand driven, with Wyndham's economy brands outperforming over those last 8 weeks, the STR economy industry occupancy by 120 basis points.

And our economy brands are continuing to drive rate index gains. And we talked about on the last call, and we continue to see it, ADR being the biggest opportunity for our small business owners moving forward, especially in select service. Our economy and mid-scale brands continue to gain rate index. There's a lot of runway ahead. We know that economy ADR has a long way to recover. It's only up 11% to 2019 versus a higher-end segment like luxury being up 30%. So as wage growth continues to outpace inflation and consumer confidence continues to stabilize, the pricing opportunity for our franchisees to catch up on both the demand side, which we're seeing and now looking forward on the rate side is significant.

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

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

Sure. Thanks, Brandt. There is so much optimism out there in the United States, both obviously on the U.S. development side. But on the consumer demand side, specifically, cancellation rates are improving. They're getting better. Booking lead times are really solid. And the lengths of stay interestingly are getting longer. They're up to prior year, and they're up significantly, 540 basis points to where they were pre-COVID. And we're seeing guests drive a bit further than last year and drive a lot further than they were post-COVID with that revenge travel coming back.

And whether it's a C-shape or an E-shaped economy with that middle tier of middle-income consumers, our sweet spot, feeling better, they are regaining confidence in purchasing power, and our franchisees across the country are feeling it. You referenced tax refunds. Those second half tax refunds absolutely have the potential to unlock further discretionary spending. U.S. Travel published a research report earlier this month, which estimates that 1 out of every $9, 9% of the estimated $57 billion of tax refunds will be spent on travel. And that middle-income guests, U.S. travel believes, and their research shows will drive 70% of that, meaning an extra 1 out of 9 on $57 billion, 70% of that, $3.5 billion, $4 billion, that their research estimates will be spent on domestic travel this year.

And our internal consumer research shows that our middle-income guests continue to express a higher intent to travel this year, certainly than they were at this point last year. Wage growth, as we saw yesterday, it is robust enough to support increased discretionary spending, which, again, our small business owners are seeing. And while Amit mentioned in his outlook comments that while we have limited back half visibility, we know our comps ahead get easier. And we're expecting a stronger June. We're expecting a stronger July with FIFA, where we're already seeing our hotels within 20 miles are pacing considerably ahead of prior year, which should contribute. We're estimating about 20 bps of uplift right there.

And then we have events planned for the Route 66 and the America 250 celebrations this summer and fall that have our -- here in this building, our PR, our sales teams, our marketing teams targeting drive-to guests with mobile offers to boost room night demand across the hundreds and hundreds of our hotels along U.S. highways and byways like Route 66. So it was more leisure to your question, but we -- it was similarly, and we could save it for another question, blue collar and infrastructure business, which is strengthening. Government showing signs of improvement, a lot of optimism out there with oil and gas in those markets that we're in, but there is a lot to be confident about.

We go next now to Steve Pizzella with Deutsche Bank.

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

A lot in there, Steve, and it's something I was sitting with owners in Southeast Asia and the Pacific last month, and it's -- whether I was in New Zealand talking to a developer building La Quintas or in Singapore, in a full-service hotel, there is nothing that they're more excited about in terms of everything you asked in that question, incremental revenue and more direct bookings.

I mean, AI is moving so quickly. And our whole AI forward 6 year, we've talked a lot about it on these calls, a $450 million investment that Scott Strickland and the team has led has really accelerated our AI readiness. We are now 100% cloud-based. We're fully optimized across all of our platforms with best-in-class partners like AWS and Salesforce, Oracle, Adobe. And the foundation is enabling us to launch products like we've talked a lot about. I won't go into it, the Wyndham Connect AI with Canary. It's in our investor deck powered by Open AI. That was launched 2 years ago. And that gave us a very early lead in removing friction across the guest journey for franchisees. And it delivered to your question, commercial value to our owners, allowing them to focus more on hospitality.

Because we're deploying it at scale across all of our guest touch points, we're no longer piloting. We're driving up to in an engaged full-service hotel up to $0.25 million of additional NOI ancillary revenue, that is real money for those hotels. We've got engaged economy hotels driving $120,000 of incremental spend. Incremental spend from guests, which is flowing straight through to their bottom line and incremental mid-scale hotels driving $150,000 through that one product.

And so it's really exciting in terms of what it's driving for them, and it's certainly helping us. It was a big topic of conversation when we were at the AAHOA conference I referenced in my remarks today in terms of what's differentiating Wyndham from -- in the select-service space, their competitive sets to do business with us. And we're really excited about it. To your direct contribution question, I think that's for us, the biggest benefit that as we roll this out. We talked about 1,100 hotels right now and rolling it out across the world with our Wyndham Connect+ product that's also in the investor deck. We are taking millions and millions of dollars of costs out of those hotels front office.

We're taking millions of guest calls, millions of questions away from people that would have to answer them, and we're autonomously handling those labor-intensive tasks that they no longer have to staff to. That's what's saving the money. But it's also resulting in better interactions with our guests. We have no drop calls, faster handle times. Handle times have improved by 25%. And it's that AI product that we've deployed that's driving that. We talked about in the script, 300 basis points of increased direct contribution to those franchisees, which they're very excited about.

We go next now to David Katz with Jefferies.

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

Yes. The incremental revenue upside that I'm talking about, David is with Steve's question, is the most immediate important measurement for our franchisees. I mean we're looking at everything that we could do to drive incremental revenue to their hotels. We're looking at how much margin we could drive by taking a guest service agent perhaps or a PABX operator off of their payroll and allow them to free up staff for others.

We're looking at the percentage that we're able to drive to the hotel from a direct booking basis because the call wasn't dropped or it wasn't lost. And that's that 300 basis point KPI that we're tracking right now for the 1,100 hotels, only 1,100 so far of our 8,000 as we roll it across the world in 100 different languages, that we're looking at. So our job is to make sure that these small business owners are engaged with these tools that can drive hundreds of thousands of dollars up to $100,000 maybe in a -- or over $100,000 in an engaged franchise economy hotel to $0.25 million in a very engaged Lake Buena Vista Palace in Orlando. That complex is just all over this and is really, really creative. And we can't underestimate the KPI for guest satisfaction.

We're continuing to see, we've seen an uptick of 400 basis points in guest satisfaction because those calls are answered right away. I mean we have that single source of truth where David Katz is booking a reservation. And we now know that autonomous agent now knows all about David. Before we did not, that front desk agent might not. We have that basic information that was not easily at their fingertips about what David and his daughters like and not having to ask David to give us anything about him in terms of his loyalty, his booking behaviors.

These agents are able to answer any question imaginable that a guest might ask about his stay in moments, not minutes and book the Katz' family into their preferred room based on their past day history and then work to sell them a suite upgrade, an early check-in, late checkout or an F&B amenity package. All of this being done autonomously is just so exciting. We would not have had the time to do that before. And it's the revenue generator that we're looking at. It's the direct bookings because that call wasn't dropped and you didn't hop off on to a third party to book, and it's the increased satisfaction that we're delivering for our guests at time of booking.

And then you just multiply that on in terms of everything that we're doing with the LLMs, in terms of where we're live today with Claude and OpenAI and Google. And it's really, really, really exciting. I mean we're scratching the surface with so many new initiatives. underway that we're not going to talk about or disclose on this call, but we're very well positioned as these platforms continue to evolve.

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

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

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

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

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

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

Sure. looking at the industry, looking at STR, and we've talked about this before, Patrick, our brands in China were much like here in the U.S., the first to recover coming out of the lockdown. And looking at our overall RevPAR today versus where it was pre-COVID, we're in line with STR. Certainly, we want to see that minus 5% become positive 5%. Overall, China RevPAR did improve. It was 540 basis points of improvement from last quarter to this quarter. And what was great to see was occupancy improving a full 12 points to being up 8% to prior year.

ADR is still the issue over in China, continued deflation. The deflationary environment in China is the longest it's been since a long, long time back in the '60s, but it is estimated to likely soon turn, and we're looking forward to that RevPAR continuing to improve and get back to positive, which I think is our expectation for the full year. Occupancy is the big tailwind. It's still trailing by a long, long margin where it was pre-COVID. But with PPI turning positive for the first time in 41 months at up 1% and with the government boosting service consumption and travel demand, visa-free entry in international inbound is -- a lot of our peers have been talking about as that picks up with increased flight capacity, we're optimistic. But where we're most optimistic in China is the continued growth on the development front.

Our Q1 NRG double digits for both our direct franchising system and our overall system with direct franchise signings up a solid 5%. We've increased our direct franchising business. We continue to grow it. It's up 100% since spin. It's sitting at about 100,000 rooms with over 400 hotels -- direct hotels now in our pipeline. And this accelerating double-digit net room growth is helping grow our international royalty rates. And as we pivot from MLAs to direct franchising agreements, it's at a significantly higher, 3x higher royalty rate is what it was for Q1.

So we're really pleased with how things are going in China. We've got strong direct development owner relationships. 12 of our 25 brands are now registered for sale in China. And we've taken back these legacy MLAs like Days Inn, which has grown significantly since we did that, and we're growing across the capitals of Beijing in Shanghai, our brand really resonates. Tech centers we talk about on every call as we did this. The Elite Eight cities, great growth. We've just -- we're very proud of what our Chief Development Officer over there, Bill Wang and his team, significant growth has been delivering and continues to deliver and achieve for us.

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

We go next now to Ben Chaiken with Mizuho.

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

Leisure was up about 100 basis points versus business in terms of improvement, but we're seeing -- we're still seeing it improve. I mean our overall infrastructure business that I touched on, Ben, while it was still down to prior year, improved 10 points sequentially from Q4. And the nongovernment infrastructure revenue increased double digits in the first quarter, which helped our total business segment, if you think about 70% of our business being leisure, 30% being business, we were down 7% year-over-year for Q4, and we were flat for Q1. So significant improvement.

And it helped boost our weekday occupancy, our weekday demand to flat for both February, March, and we're seeing that again in April. Piece of that is oil and gas and energy infrastructure spending. That, as we talked about, increased really, really impressively for Q1. And in terms of forward-looking, our GSO consumed infrastructure revenue for the quarter grew 12%, while the contracted infrastructure revenue, what's on the books forward-looking continues to pace well ahead of same time last year. And the second part of the question, Amit, did you pick that up?

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

Yes. Amit's former franchise sales team now led by David Wilner, Jared Meabon, Brian Parker, and Brad Gant. They did not miss a beat as Amit was promoted, and they saw very strong momentum domestically. The 8% they signed more U.S. development contracts than last year. I think what impresses us all is how they are coming in for more upscale and more accretive rooms, significant FeePAR premium growth of 30% above our U.S. system average. And yes, we're just thrilled right now with a pipeline that grew by domestically 300 basis points. It's sitting at a record 110,000 rooms.

And openings as well, opening 6,300 domestic rooms being in line with last year's record Q1 openings all fueled by extended stay, which we know there's going to be a lot of demand in a stabilizing economy base and increasing upscale executions is something that we're feeling good about.

We go next now to Stephen Grambling with Morgan Stanley.

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

It really gets back to the engagement of the property in terms of what they could think of, Stephen, to market to the Gramblings. If you're flying across the country and you're arriving on the West Coast and it's still early in the morning, it's pretty easy to sell you that early check-in and amenity package to get you and the Grambling kids to their room. Obviously, the higher up the chain scales you move, there are increasing opportunities from what you could do with food and beverage in the hotels. I mean that's where we're seeing a lot of our success in full-service hotels like the one I mentioned in Orlando, where you do have food and beverage outlets and experiences.

But it's just a really great opportunity from an incremental revenue standpoint for really all chain scales to drive. And it's most impactful, I think, to the small business owner that is able to drive something that's in their minds, really offsetting the rising labor costs and the rising brand fee costs and the rising distribution costs that obviously the whole industry always talks about. I mean, it's a massive, massive offset for them.

We go next now to Dan Politzer with JPMorgan.

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

Yes. I mean, we had, as we previewed to all of you in February, affiliate rooms come out. The U.S. system was certainly pressured in Q1 with the outsized removal of what were legacy travel and leisure rooms that they've talked a lot about publicly and a legacy all the way back to our Wyndham worldwide days of our Vacasa vacation rental affiliate room product as that company was sold, which could always happen from time to time. But when we look ahead with net room growth domestically to the first part of your question, I mean, we had a record 72,000 room openings last year. We had a big piece of that being domestic.

And as rooms open, they come out of the pipeline, but we also had the ability to really add to that pipeline, as I was just talking about in terms of the team that Amit built by signing 8% more U.S. contracts than they did last year for those more upscale and accretive rooms. Our economy segment, which saw stabilization last year to a large degree, it still has room to go, but our economy rooms were up 4% on a gross additions basis. We're running a best-in-class economy retention rate still. That's been stabilizing. And as we put more sellers on the street to sell new brands like our premium economy Dazzler Select brand that has so many competitive advantages going for it, like it's lowest cost AI-enabled PMS CRS technology stack able to drive the type of incremental revenues that we're just talking about.

We're looking forward to that domestically. But where we're really seeing growth is in extended stay and mid-scale and above. Our extended-stay pipeline is up over 4% year-over-year to a record 45,000 rooms in a segment where we know demand outstrips supply by 3x and is going to for years to come. We're seeing really strong interest in our ECHO Suites extended stay product, our Hawthorne Suites extended-stay product and our upscale WaterWalk brand that its pipeline is up 2x from last year on small numbers, but a lot of interest and a lot of demand. And our upper mid-scale and upscale brands are resonating in markets so often oversaturate with larger pure supply.

We're seeing good increases for our Wyndham Grand brand, our Dolces. We recently opened 3. It's on the cover of our investor presentation we put out yesterday and a good double-digit growth for our registry collections domestic pipeline. So with 85% of our pipeline in the U.S., either extended stay, mid-scale, upper mid-scale, upper up or luxury as we continue to push our system into higher FeePAR segments, we're, again, feeling good. Our domestic pipeline at spin was 1/3 of our total pipeline, and it's now over 43% of our pipeline and growing.

We go next now to Ian Zaffino with Oppenheimer.

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

Good morning, Ian. Thanks for the question. I'll start with your RevPAR puts and takes. I think you kind of look at the Q1 outperformance relative to our expectations of down 2% to down 3%, we're 250 basis points ahead of that. That's about 30 basis points on a full year global basis. And then Goeff kind of touched on April momentum and kind of what were continuation of the trends we're seeing. So that kind of -- we're assuming those continue into the second quarter. We don't really -- and so we're assuming about another 20 basis points from that plus 1% in Q2 on our full-year outlook.

So that's kind of how we got to the 50 basis points shift in the low end and the high end to kind of get to flat on the midpoint. As far as like the puts and takes, look, we don't have -- you know the booking windows. They're just over 2.5 weeks. They remain short. We certainly have a lot of catalysts, FIFA and other things. But until we kind of get a good look at the peak summer season, we don't want to be -- we don't want to predict what that's going to look like. So we're being measured in what that is. As far as your low end and high end, you look at Q1 was down minus 1%. And if you for full year to kind of be there, you just assume the rest of the year is at minus 1%. To get to the high end of plus 1%, you basically need to make up the minus 1% you had in Q1. So assume like plus 1.5% for the rest of the year to kind of get to that.

And then your second question around credit card business, look, we are -- credit card and loyalty really tie in well together. We had a very strong quarter on ancillary overall, and that was largely driven by the credit card. Some of it was the lapping that I mentioned from Q1 of last year. You look at the sustainability of the credit card and the ancillary business as a whole, we have -- this year, we're projecting low to mid-teens for that. Long-term outlook for ancillary growth is kind of, call it, the high single digits. And then there's multiple catalysts within the credit card. We are -- there is markets like Canada where we have strong presence, which we, as we previewed, we're expanding into later this year.

We've also got other markets in Latin America and Asia with strong Wyndham Rewards members and hotel presence that are also opportunities for that. And then there's other -- within ancillary, there's others with some of the AI technology and other initiatives that can also kind of help fuel that growth. So credit cards. We think there's a long runway as well as these other things to kind of get us to a high single-digit ancillary growth going forward. And we also -- we launched the Wyndham debit card, which is we were the first in the industry to do that. And so yes, we feel very good about the prospects for ancillary growth going forward.

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

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

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

Yes. And if I could just kind of close out the Middle East in Turkey, I think, Meredith, Middle East represents only about -- we've got 50 properties there, really just 1% of our portfolio in terms of EBITDA. And Turkey has limited impact from the war that's outside of the Middle East. So overall, Middle East, we don't really see it having a huge impact. It obviously impacts EMEA, but on a global basis, really not much of an impact. And then turning to Revo, the owned hotels that -- the 2 owned hotels in Europe that I mentioned in my prepared remarks, it was really kind of part of exercising all available remedies to recoup our investments.

So we took -- we foreclosed and took ownership of 2 properties on our consolidated on our books, about $36 million of gross value, about $23 million of net asset value. These properties are expected to contribute about $10 million in revenue, which is why we have revised our outlook range to account for that. Really no earnings impact there. Our plan is to stabilize and improve profitability of these 2 assets as we kind of explore strategic options for them.

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

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

Yes. Lizzie, good morning. As you mentioned, the U.S., and our net rooms growth this quarter, that was primarily impacted by the affiliate rooms from T&NL and Vacasa. The openings were generally in line with last year. It was really on that side. As we look ahead, as Geoff mentioned, you know, we feel very good about our development momentum across the U.S. portfolio. You know, new signings are up. U.S. pipeline is up 3%. And the other thing is that the rooms we’re bringing in are at a significant FeePAR premium to the rooms that are leaving the system in the U.S., almost a full year, that delta was over 30%. We are seeing, continued demands for our brands across really all segments.

So we, we manage net rooms growth on a full-year basis. Q1, as we previewed with you, was expected to be this way. And we look forward to kind of our development team executing the momentum that we have going on from 2025.

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

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

Good morning, Trey. Thanks for the question. Yes, the royalties and franchise fees line item that you're mentioning, it has a couple of components. I'll go through in sequence about the first 1 on the royalty side, about $3 million of that was related to the Revo fee deferral which we had previously communicated. And we also had a little bit of higher D&A amortization just year-over-year, which kind of offsets some of the RevPAR increase we saw in the first quarter.

The other item that's in there is franchise fees, and we've always said they're not linear compared with our drivers. So we have some outsized franchise fees in Q1 of last year that we noted at that time and really was lapping those in Q1 of this year. And then you -- on a full year basis, if you look at franchise fees, in particular, like the cadence last year, it was front-weighted and kind of reversed in the back half. We are kind of expecting the inverse this year franchise fee.

So aggregate, we expect franchise fees to be down a few million for the full year and Revo will have a $12 million impact on that line item on the full year as well, both of which are already factored into our full year guidance and what we had kind of guided you guys to previously.

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

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

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

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

Thank you, operator. Good morning, and thank you for joining us. With me today are Jeff Bilotti, our CEO; and Curt Albert, our Interim 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'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 Jeff. Jeff?

Thanks, Matt. Good morning, everyone, and thanks for joining us today. We closed out a challenging year on a very strong note, delivering net room growth of 4% and full year comparable adjusted EBITDA and adjusted EPS growth of 4% and 6%, respectively, all in line with the outlook that we shared back in October. Against this backdrop, we opened a record 72,000 rooms, the largest number of organic room additions in Wyndham's history and 13% more than last year.

We also signed 870 deals, which was 18% more than 2024's all-time high, further increasing our global development pipeline by 3% to nearly 260,000 rooms and more than 2,200 hotels. We drove a 15% increase in ancillary fee streams and our highly cash-generative business model produced $433 million in adjusted free cash flow, enabling us to return $393 million to our shareholders across the board where we could control the outcome our teams delivered in 2025.

Our record number of new signings and openings are increasing Wyndham's long-term economics by securing franchise agreements that drive higher average royalty revenue. Our record development pipeline is now carrying an average fee par premium of 30% domestically and nearly 20% internationally compared to our existing system, which will enhance our future growth.

Domestically, system growth was driven by strong conversion activity, including the Balfour Miami Beach, a luxurious Registry Collection Art Deco Hotel on Ocean Drive and the Barley House, an upscale trademark collection boutique hotel on the Marina in the heart of Fort Lauderdale, along with so many high-quality new construction prototype additions like the new Wyndham Garden in Anna, Texas, the La Quinta by Wyndham in Jackson, Tennessee and the new Microtel by Wyndham Twilla in the Great State of Utah. Separately, developer excitement for our Echo Suites brand continues to build with half a dozen Q4 openings in Round Rock in Pasadena, Texas; Peoria, Arizona, Springfield, Missouri; Conyers, Georgia and Naples, Florida.

We closed 2025 with 18 Echo Suites now operating and with RevPAR and operating margins ramping in line with expectations. New hotels continue to break ground and development time lines are faster than ever as construction costs moderate. Following our introduction of DaZLR Select by Wyndham in the economy conversion lifestyle space back in October, we added another 3 highly rated DaZLER Select conversions, allowing hotel owners to preserve their properties' individuality while leveraging the power of our global distribution, loyalty, technology and marketing platforms.

And after a highly competitive RFP amongst our lodging peers, we were thrilled to be selected by the Choa Nation in the fourth quarter to add the spectacular AAA 4-diamond Choa Casino & Resort in Durant, Oklahoma to our Wyndham Grand brand, along with the upscale resort additions of the Choa Landing Hocha Town, the Choa Pacola and the Chota Grant to our Trademark Collection brand. This affiliate relationship adds 2,000 upscale rooms, over 40 restaurants, bars and lounges, full-service pools and spas and over 100,000 square feet of state-of-the-art conference and event space for our global sales teams to sell, all with an easy reach of DFW International, a getaway that our over 120 million Wyndham Reward members will want to book, earn and redeem at, reinforcing why Wyndham Rewards continues to be the #1 loyalty program in the industry.

The affiliated rooms from these Choa Resorts join us at an opportune time for our Wyndham Reward members as we'll be saying goodbye in the first quarter to approximately 3,000 legacy affiliated rooms, the bulk of which were sourced from travel and leisure and related to the closure of a handful of Wyndham Vacation Resorts that they have previously reported, along with rooms previously managed by Vacasa, which are being sold by Casa Go to its franchisees. While these terminations will not impact our ability to drive net room growth on a full year basis, they will create headwinds in the first quarter from a timing perspective.

We continue to work on adding more aspirational upscale hotels and resorts, which expand opportunities for Wyndham Rewards members to earn and redeem to status match and to transfer benefits, increasing Wyndham Rewards membership enrollments, which grew 13% in Q4, growing the share of direct Wyndham Rewards occupancy that our franchisees enjoy, which grew to a record 54% domestically this quarter and identifying new customer markets to drive credit card sales, Blue Thread marketing and other ancillary revenue opportunities.

Internationally, we increased net rooms by 9%. EMEA grew rooms by 8% with spectacular new conversions like the Wyndham Corfu, an elegant beachfront retreat on the Ionian Sea in Greece, along with several new construction additions like the Ramada Arna Buta in Turkey, a country in which we now have 130 direct franchise hotels open with over 40 more in our development pipeline.

Latin America and the Caribbean increased net rooms by 5% with new conversions like the Oceanfront all-inclusive Casamarina Soua, a new trademark collection hotel in the Dominican Republic, along with new construction openings like the Wyndham Natal Pitonggi Beach on the sands of Petonggi Beach in Brazil's dyillic Northeastern tourist destination.

In Southeast Asia and the Pacific Rim, we grew net rooms by 11% with upscale conversions like the EvoloWualumalu, an upscale Wyndham hotel located on the heritage-listed Finger Wharf in downtown Sydney Harbor, along with several exceptional new construction additions like the Oceanfront Wyndham Go Sun, South Korea.

And finally, in Mainland China, we again grew our direct franchising system double digits by an impressive 14%, expanding our footprint across the country with conversions like our 136th Days Inn Hotel in Changsha and so many new construction additions like our 20th Hawthorne Suites in Xi'an and our 31st Microtel by Wyndham in NnXijianshi, along with dozens of other luxurious new openings like the Wyndham Lean in Sichuan province.

Fourth quarter global RevPAR declined 6% in constant currency, with domestic RevPAR down about 6 points, excluding hurricane impacts in 2024 and international RevPAR declined 1 point. While we continue to see strength in several important Midwest and industrial states for us like Missouri, Minnesota, Michigan, Wisconsin and Oklahoma, where we're seeing increasing infrastructure demand being contracted, it was more than offset by continued softness in our 3 largest states, Texas, California and Florida, which account for 1/4 of our U.S. room count and which excluding hurricane impacts, declined 11%.

Importantly, booking windows and cancellation rates both improved versus fourth quarter 2024. And on a full year basis, U.S. RevPAR declined 4%, which was in line with our expectations. In a moment, Kurt will walk you through our expectations for the full year. Excluding hurricane impacts, the decline of 6% we saw in Q4 improved to down 4% in January and has further improved thus far in February. Leisure and corporate bookings are beginning to pick up as reflected in our booking backlog.

And as we approach the month of March, we'll lap the beginning of when our RevPAR significantly decelerated in 2025 and when our domestic comps become meaningfully easier. Internationally, in the fourth quarter, we continued to see solid growth across our EMEA region with RevPAR up 7%, driven by considerable strength in Southern Europe and across the Middle East. Our Latin America region also delivered impressive RevPAR growth of 6%, an 11-point sequential improvement from the third quarter, reflecting strong leisure demand and pricing power from our more upscale brands across the Caribbean.

Performance in Asia continues to lag the rest of our international regions. Southeast Asia and the Pacific Rim was down 2%, primarily due to weakness in Korea, and China was down 10% with continued ADR declines in their deflationary economy. We once again delivered outstanding growth in our ancillary revenues. New strategic partnerships and affiliations, new technology initiatives and continued momentum in our co-branded credit card program fueled a 19% growth in fourth quarter ancillary fees, bringing full year growth to 15% slightly ahead of our expectations from the beginning of the year.

After its launch in October, Wyndham Rewards Insider, our Travel Rewards annual subscription program, saw its month-over-month paid membership double in November and then again double in December as our teams work to fully integrate Wyndham Rewards Insider into our booking paths and digital platforms.

We also recently signed an agreement with Mastercard to create our first international co-branded credit card in Canada, which is expected to launch later this year. Like all of our U.S. offerings, we will be including both no-fee and premium card options. This is an exciting growth opportunity for us, not only designed to bring more members into the Wyndham Rewards ecosystem and drive incremental ancillary revenues in Canada, but also serving as a blueprint as we plan for expansion of our credit card platform into additional new international markets.

On our third quarter call, we highlighted the success of our AI initiatives with nearly 350 Agentic AI agents handling millions of guest calls and reservation requests, driving hundreds of basis points of additional direct bookings and generating incremental revenue while reducing on property labor costs for our franchisees. With a track record of proven results, we're accelerating our aggentic AI capabilities on the data foundation that set our transformation in motion.

Through our partnership with Salesforce, we created a first-of-its-kind Guest 360 data product, establishing a scalable AI factory that enables us to rapidly design and deliver advanced solutions that deepen engagement with both our guests and franchisees in ways we never imagined possible. We continue to work with public LLMs, including Google AI Mode and ChatGPT to establish direct connections of our hotel data to eliminate the need for these models to scrape our sites. For example, in November, Google selected Wyndham as one of a handful of partners to take part in an agentic booking experience on AI mode in search.

Soon, guests will be able to discover Wyndham properties through natural conversational interactions while our connected systems enable seamless direct bookings within AI mode. And we're very excited to share that we successfully connected to Anthropic Clad, the family of LLMs known for its emphasis on safety and human-like reasoning with over 30 million monthly active users. It's an early glimpse of how AI native distribution will reshape the way guests find and book our hotels, which helps us rapidly improve the guest experience and increase direct booking capture.

Before I wrap up, as you saw in our release last night, we recorded noncash charges in our fourth quarter results related to the recent insolvency filings of a large European franchisee, Revo Hospitality Group. While our balance sheet exposure to Rivo was secured by certain collateral and guarantees, the scope of these filings has unfavorably impacted the value of our security and our expected recovery. We've engaged an experienced team of advisers to assist us during this complex process, and Kurt will walk through the impacts to our financial statements and reporting metrics in a moment.

We want to extend our heartfelt appreciation to our team members around the world. Our resilience in 2025 would not have been possible without their dedication and their support. Their commitment to our economy culture and to delivering the very best value to owners and guests in the face of what was considerable global RevPAR challenges remains the key to our continued success as the world's largest hotel franchisor. On behalf of our entire team, we would also like to recognize Alexandra Young, who joined our Board of Directors in November.

Alex is an accomplished leader who is recognized as an expert in global portfolio management and international investment, and our expertise spans multiple sectors, including hospitality and real estate. She serves on our corporate governance and audit committees, bringing valuable expertise to our Board. And finally, I'd like to welcome Kurt Albert, our Interim CFO, who continues to lead our global finance organization while we complete our comprehensive search for a permanent CFO, which we expect to conclude in the coming weeks. And with that, I'll now turn the call over to Kurt. Kurt?

Thanks, Jeff, and good morning, everyone. Having spent more than 15 years with Wyndham, I have a deep affinity for this organization and have truly appreciated the opportunity to increase my engagement and conversations with the investment community since stepping into the CFO position a few months ago. That said, I'll begin my remarks today with a detailed review of our fourth quarter and full year results, followed by an update on our cash flows and balance sheet. I'll then cover our 2026 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 fourth quarter of this year, marketing fund expenses exceeded revenues by $2 million compared to revenues exceeding expenses by $5 million in the fourth quarter of last year.

During full year 2025, marketing fund expenses exceeded revenues by $3 million, while in 2024, marketing fund expenses exceeded revenues by $1 million. To enhance transparency and provide a better understanding of the results of our ongoing operations, I will be highlighting our results on a comparable basis, which neutralizes the marketing fund impact. As Jeff just mentioned, one of our large European franchisees, Revo, filed for insolvency proceedings for most of its operating entities under self-administration last month. Given collectibility concerns, we began deferring all Revo-related revenues starting in the fourth quarter. While these hotels continue to operate under our flags, they will remain in our system size, RevPAR and royalty rate metrics and fees owed to us will continue to accrue.

For the purposes of our 2026 outlook, we have taken the conservative step of removing all Revo-related revenue recognition from our expected results until such time that we have greater certainty on expected outcomes and collectibility. We also recorded noncash charges of $160 million within the operating expenses and impairment lines on our P&L, which reflects a write-down to the net realizable value of the loans outstanding, accounts receivable and development advances with Revo as well as the carrying value of our Vienna House intangible assets. As Jeff said, we are continuing to work closely with a strong team of local advisers to pursue all available remedies to maximize the recoverability for our shareholders.

And importantly, this relationship represents a unique circumstance given Revo's concentration within our portfolio. In the fourth quarter, we generated $334 million of fee-related and other revenues and $165 million of adjusted EBITDA. Fee-related and other revenues declined 2% year-over-year, primarily reflecting a 5% decrease in global RevPAR, lower other franchise fees and the deferral of fees from Revo. These headwinds were partially offset by a 19% increase in ancillary revenues and system growth of 4% -- despite a 5% decline in RevPAR, a $7 million reduction in fee-related and other revenues and increased costs associated with insurance, litigation defense and employee benefits, fourth quarter adjusted EBITDA increased by 2% on a comparable basis.

We'd like to thank and recognize our teams around the world who did a fantastic job this quarter, helping to drive cost containment measures, combined with operational savings aided by the realization of AI investments that drove efficiencies.

Adjusted diluted EPS for the quarter was $0.93, down 4% on a comparable basis as a previously anticipated higher effective tax rate and higher interest expense was partially offset by comparable adjusted EBITDA growth and the benefits of share repurchase activity. For the full year, we generated approximately $1.43 billion of fee-related and other revenues and $718 million of adjusted EBITDA. Fee-related and other revenues increased $25 million year-over-year, primarily reflecting a 15% increase in ancillary revenues and higher pass-through revenues associated with our global franchisee conference in 2025, partially offset by lower royalties and franchise fees and lower nonconference-related marketing, reservation and loyalty revenue.

The decline in royalties and franchise fees and nonconference-related marketing, reservation and loyalty revenue primarily reflects a 3% decline in global RevPAR and the deferral of fees from Revo, partially offset by system growth of 4% and a 7 basis point increase in our U.S. royalty rate. The strength and efficiency of our business model in the face of declining U.S. and global RevPAR resulted in full year adjusted EBITDA increasing by 4% on a comparable basis.

This increase primarily reflected our growth in ancillary revenues as well as cost containment measures, including onetime variable cost reductions, partially offset by lower royalties and franchise fees and increased costs associated with insurance litigation expense and employee benefits. Adjusted diluted EPS increased 6% on a comparable basis to $4.58, reflecting adjusted EBITDA growth and share repurchase activity, partially offset by higher interest expense.

Adjusted free cash flow was $168 million in the fourth quarter and $433 million for the full year with a conversion rate from adjusted EBITDA of 60%, slightly ahead of our expectations due to favorable working capital timing, which will reverse out in Q1. Our adjusted free cash flow yield of 7.5% continues to be best-in-class within the lodging sector. Development advance spend totaled $32 million in the fourth quarter, bringing our full year investment to $105 million, in line with our expectations and largely consistent with our spend in full year 2024.

Less than 1/3 of our openings in 2025 included development advances, room openings that are entering our system at a feePAR premium nearly 40% above our current system. Over the course of 2025, we added hotels in feePAR accretive markets such as Miami Beach, Houston, Atlanta, Mexico City and Singapore, and we expect to continue improving per room EBITDA economics, creating a compounding benefit over time. We returned $393 million to our shareholders in 2025, representing 5% of our market cap through $127 million of common stock dividends and $266 million in share repurchases.

Over the past 5 years, we have returned 37% of our market cap to our shareholders, leading all lodging C-Corps in capital return. Earlier this month, as part of our continued commitment to shareholder returns, our Board of Directors authorized a 5% increase to the quarterly cash dividend, raising it to $0.43 per share, beginning with the dividend expected to be declared in the first quarter of 2026 and reflecting the Board's ongoing confidence in the strength of our business model and our ability to consistently generate strong cash flows.

And as a result of the completed refinance of our revolving credit facility in the fourth quarter, we closed the year with approximately $840 million 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 for 2026. We expect full year global net room growth of between 4% and 4.5%. From a timing standpoint, in the first quarter, given the known termination of approximately 3,000 rooms that Jeff mentioned earlier, we expect our global system to be largely flat sequentially before returning to growth in Q2.

Additionally, our full year net room growth outlook excludes any potential termination impact associated with Revo's ongoing insolvency. We are projecting global RevPAR to finish between up 0.5 point to down 1.5 points. Our expectations reflect several key dynamics. While U.S. RevPAR performance trends have improved thus far in 2026, given the first quarter features our most challenging comps of the year, we expect first quarter U.S. RevPAR to range from between down 3% to down 2%.

As we move into the second quarter, we expect U.S. leisure demand to begin to improve, aided by events such as the FIFA World Cup and the 250th anniversary of America as well as the potential for U.S. government stimulus as we get closer to the midterm elections. However, and importantly, in order to achieve our full year outlook, we would only need U.S. RevPAR from Q2 to Q4 to be approximately flat.

Full year international RevPAR growth is expected to remain roughly in line with 2025 performance. While the strong performance we saw in EMEA, Canada and Latin America in 2025 may grow at a bit of a slower rate in 2026, we are anticipating the potential for offsetting benefits from an improvement across Asia Pacific as China's recovery continues.

Moving on to the financials. Fee related and other revenues are expected to be $1.46 billion to $1.49 billion, which includes low to mid-teens year-over-year growth in our ancillary revenues. Adjusted EBITDA is expected to be between $730 million and $745 million, growing year-over-year by 2% to 4%. Excluding the previously noted return of approximately $15 million of onetime variable cost savings, and the impact of the deferral of approximately $12 million of royalties related to Revo, our adjusted EBITDA would otherwise be expected to grow between 5% to 7%.

While we expect our marketing funds to break even on a full year basis, -- we will continue to see timing differences in our quarterly results. We expect to spend the funds by approximately $15 million to $20 million in the first quarter and then underspent in each of the remaining quarters of the year. Additionally, including the impact of our marketing fund spend, we would expect to generate approximately 20% of our full year adjusted EBITDA in the first quarter, consistent with the Q1 percentage of our full year 2025 adjusted EBITDA.

Adjusted net income is projected to be $354 million to $368 million, and adjusted diluted EPS is projected at $4.62 to $4.80 based on a diluted share count of $76.7 million, which, as usual, assumes no share repurchase activity or incremental interest expense associated with any potential borrowing activity. Free cash flow conversion before development advances is expected to range from 55% to 60%. In addition to the cash we generate from operations, we will also continue to benefit from a strong balance sheet.

Combining our excess free cash flow and incremental capacity while maintaining leverage at 3.5x based on our projected EBITDA growth, we would anticipate having up to $400 million of available capital in 2026 to either invest in the business or return to shareholders. We expect approximately $110 million of this available capital will be deployed as development advance spend roughly consistent with 2025.

In closing, despite the challenges we faced in 2025, our results continue to reflect the highly cash-generative nature of our business, and a business model that has a proven ability to generate organic adjusted EBITDA and EPS growth amid macro uncertainty. We are entering 2026 with a strong balance sheet and efficient operating cost structure, prolific ancillary revenue growth and the potential for significant demand tailwinds.

We will continue to invest in high-return growth opportunities and digital technology in order to provide incremental profitability for our owners while returning excess capital to shareholders in a consistent and sustainable manner. We are enthusiastic about building on our successes and capturing the opportunities that lie ahead in 2026. With that, Jeff and I will be happy to take your questions. Operator?

Thank you very much, Mr. Albert. Ladies and gentlemen, the floor is now open for questions. [Operator Instructions] We'll go first this morning to Brant Montour of Barclays.

So I was hoping you could put a finer point on what you're seeing year-to-date in terms of RevPAR, if you're actually seeing occupancy build sequentially? And where -- which segments and what type of demand segments that you're actually seeing that building? And then sort of last follow-up to that same question, would be how much of -- are you putting any of these green shoots that you're seeing on my words green shoots into your flat Q2 through Q4 average implied RevPAR growth in your guidance? .

I'll let Kurt talk about the guidance, but I'll talk first about just how encouraged we are year-to-date. With a significant improvement in January. I mean, to your question, it is the first real sign of green shoots that we've seen in a while. Overall, January U.S. RevPAR was down 4% normalized, and all of that RevPAR improvement was demand driven, which is just for us, so great to see. We saw very positive January trends as well in the 3 states that have dragged us down. We've been talking about over the last couple of calls. .

Texas improved by 600 basis points year-over-year in the quarter from down 5% to plus 1 in January, which is great to see. Florida improved 400 basis points from Q4 to what we saw in January. In California, we're seeing really no signs of any deterioration in the RevPAR as we had been all along last year. So we're seeing continued strength, as we talked about in the Midwest, Wisconsin up 7%; Minnesota, up, Oklahoma, Michigan, all up, mid to low single digits. In February continues to improve in line with what we saw in January, just great news.

And I think as you've all seen in the STR and the economy set which began improving, as we all know, in the late summer, it's continuing to improve. If you look at the last 4 weeks versus the last 8 weeks, last 4 weeks are 200 basis points better than the last 8 weeks. And again, our normalized U.S. occupancy here in the U.S. has only continued to improve. October was down 4%; November was down 3%, December down 2%, January only down 1%.

And going back to 2019, one of the things I think a lot of folks miss is occupancy has recovered more so in economy and mid-scale, than it has in any other segment. If we look at upper upscale and luxury occupancy, which were both down 8%, 800 basis points to 2019 for the fourth quarter, economy and mid-scale perform 200 and almost 500 basis points better, respectively. And it's starting to feel like demand is beginning to really improve that -- those green shoots are beginning to come with the longer-term opportunity for our franchisees and small business owners being rate.

I mean, as we know upscale hotels have been able to price much more aggressively than our chain scales where the guest is obviously more price sensitive. ADR for economy was up 11% to 2019, but it was up 30% in the luxury segment. And that was the only segment that was able to outpace that 25%, 26% growth in inflation. So that's very good news from an green shoots standpoint to our economy and mid-scale owners from a pricing standpoint with ADR still a good 1,500 basis points below inflation.

And so as unemployment remains at historic lows and wage growth continues to outpace inflation. We think that's going to provide upside when consumer confidence does stabilize. And RevPAR returns which we know it will to its 3% 30-year CAGR. But Kurt, maybe you could tie that into the guidance.

Yes. Bren, I think when we think about some of the green shoots that we touched on in the prepared remarks. We have not necessarily tried to build an individual level of opportunity directly into our guidance, really 2 reasons. One, in isolation, some of these might end up being smaller and/or harder to quantify. And two, really the ultimate impact to the year will really be determined by when we do start to see some of these benefits come to fruition. So the way we're thinking about it is as the year progresses and we see how these tailwinds materialize and start to maybe stack together, that could end up being how we get towards the higher end or maybe even above where our guidance is right now.

We'll go next now to David Katz with Jefferies.

Good morning, everybody. So Jeff, I could probably venture an educated guess what your kind of least favorite part of the whole report. But you talked in your opening comments about a lot of different things that are positive. Do you have sort of 1 aspect of this sort of whole earnings report that you would pull out as sort of the most positive or your favorite?

David, that one thing would be development. If we look at net room growth acceleration, along with the acceleration in our executions and the growth of our pipeline, that would be the one thing that we're most excited about. I mean, to see the accelerated net room growth in these higher-fee par segments continue as we did a record 72,000 organic rooms, almost 600 hotels. It was up 13% to what was last year a record.

And it just continued to build throughout the 4,000 net rooms added in Q1, 7,000 in Q2, 9,000 in Q3 and nearly 14,000 in Q4. That was the one thing that I think really stands out for all of our teams. And we are encouraged by both new construction and conversion. I know there's been a lot of talk across the industry that new construction pipelines are pressured. We're not seeing it. We're seeing growth in our new construction executions, which were up 15% the prior year, and new construction openings.

Domestically, our new construction openings increased 50% year-over-year. And globally, they increased 7% and over 30% of our openings this year were construction. Conversion is still solid. It was up 16% with good growth across the board. Our prototype brands like Hawthorne Sweets and Garden and La Quinta, all saw solid growth, both on the conversion and the new construction side.

And our economy brands, Days Inn, Super Travelodge all saw double-digit growth in economy opening. So I think the 1 thing we're really excited about, our franchise sales team have delivered a pipeline for us looking forward. that is larger and stronger than ever, 870 deals signed. That was a record for the full year, up 18% in really high fee part regions like across Latin America and Europe, Middle East Asia, it was really encouraging for us to see, and that would be my highlight.

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

Jeff and Kurt. Just a demand question for you. So if we look at the 20% of bookings that are infrastructure related, how does the RevPAR from that demand segment compared to that of the leisure traveler and should we expect the mix of the 20% infrastructure versus the 70% leisure? Should we expect that mix to change over time as you move into higher fee part rooms?

Thanks, Danny. We will expect it to increase. Excluding the impact of the federal government, which was a considerable drag for us. Infrastructure performed a bit below leisure I think leisure was down something like 6. Infrastructure is probably down about 8%. But infrastructure, we believe your question will continue to perform better than it did in 2025.

And we expect it to continue to pick up. We still view that $1.2 trillion infrastructure spend as a real multiyear tailwind for us. And additionally, it will get back to driving that 150 basis points of additional RevPAR growth that it did for us in the Q4 of 24 pre-dose and pre-government shutdown, which slowed us down, this year. And we're also very encouraged about hotels, and there are so many private investment projects, infrastructure projects, especially data centers and semiconductor fabs, which, as we talked about, continue to outperform from a RevPAR and our RPI standpoint, excluding the government and the Fed rooms, which obviously down, as I mentioned, infrastructure demand, it kept pace. It helped drive, we believe, our weekday economy occupancy improvement that we saw each month of Q4.

Economy occupancy, which was down 7% in October, 5% in November, 2.5% in December, that improvement just demonstrated the continued resilience and gradual pickup of our infrastructure demand. Our GSO teams did a fantastic job. Consumer revenue for full year grew 220 basis points with so much of that growth being infrastructure-related. And our contracted room nights right now are up about 2x what our consumed infrastructure room nights are. And our GSO year-to-date infrastructure booked and consumed is pacing well ahead more so than it fell off about 240 basis points ahead of same time last year. So we think it will continue to pick up.

We go next now to Patrick Scholes of Truist Securities.

A question then a follow-up question. And the first one, sorry if I missed it. Did you quantify what the RevPAR impact was in the fourth quarter from the government shutdown or another way of saying it, how much of an easy comp do you have from that in the upcoming 4Q? Yes. .

Patrick, in the fourth quarter of this year, the government shutdown was not a significant headwind, but it was about 50 basis points, maybe a little bit less than that, that we'll have coming up to a next fourth quarter.

Okay. So a little bit of a tailwind there from that coming up. Then not to dwell on the negative. Can you talk a little bit more about this bankruptcy? And was this with the Revo exactly what happened there? And was this the same -- was this the $44 million investment that you had made in this -- in 2022, just to make sure I'm understanding what your original participation in that was.

Yes. Patrick, to your last question first, it was tied to the -- some of the loan investments we made earlier this year. As we noted in our prepared remarks, we learned about the solvency during the preparation of our year-end financial statements in January. So this drove the timing of recording the charges that we did in our fourth quarter results. since the filing we've been working closely with our team and advisers to determine next steps in this process and ultimately understand what our plan looks like moving forward.

Right now, it's really too early to speculate on what potential outcomes could look like. It's very early in the proceedings. And we believe while we boys they want to emerge from insolvency this year possible, we also believe these proceedings could last months -- many months potentially.

Next now to Dan Politzer with JPMorgan.

I just wanted to follow up on the Revo topic. You had the Super MFA earlier this year. I mean, are there other franchisees or agreements that we should be kind of thinking about that are possibly in the danger zone. Has there been any change in your underwriting standards you've kind of sought these higher fee part deals. And then as we think about just kind of in terms of the overall program, what's the collection rate or the rate of this kind of stuff happening just we can gain a little bit more comfort with it? .

Dan. I think what we touched on briefly in our prepared remarks is this circumstance was certainly an outlier on a number of levels. given the size, the history of the relationship that we had with the partner and then ultimately, the level of capital deployed. The way we think about it, when we look at our balance sheet right now and excluding anything that was related to Revo. There is only about $20 million of total additional loan expense across all of our other franchisees that we have around the world.

And then similarly, when we look at our development in that are outstanding, no franchise more than about 5% of that balance. So -- this was really the exception. Ultimately, it was a situation that we feel like was also very different than the Super rate situation earlier this year, which was the legacy Master relationship. So we do view it as an outlier.

In terms of your second part of your question and how we're thinking about it moving forward, deployment of capital to support our business growth will remain and is and has always been our top priority. So short answer, we will absolutely continue to invest in the growth of our business, and we believe and we know we have ample capacity to do that. And so frankly, it does not change our position there. And like we do with all of our deals that have capital tied to them, we always will look back and evaluate what happened and anything that we can do moving forward to make sure that we put ourselves in the best position to succeed.

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

In the presentation, you highlighted a number of initiatives with AI partners. I was hoping you could just share maybe how to think about any costs or potential benefits from some of these initiatives? I know it's very early, but is this something that could eventually end up with new fee streams and what are some of the initial tests revealed in terms of the benefits of the system and what KPIs we should be tracking to evaluate the success of some of these.

Thanks, Stephen. Yes, Matt and Scott Strickland and Mike Mahar, who -- our Chief Technology Officer, put in three great new slides. I'll take the first part of your question on costs. I mean there are nominal costs, say, less than $100,000 to connect our MCPs to the LLMs. There are no transaction costs, however, in Claude today, the guest receives a link to complete the transaction on our brand.com site. Chat GPT works the same way.

And yes, I mean, looking forward, you'll see ads that seek to monetize some of that I think, Claude has said they're not doing it, they're not ever going to do it, but we'll see. In terms of how we think about the benefits and what it's doing for our franchisees, I mean it is just massive opportunity for us on so many different levels. And I think the exciting thing for us is we're no longer piloting these word deploying them. On the second quarter call, we talked about Wyndham Connect, which is a trained large language model, partnered with Canary technologies. There's a quote there on Slide 5 from Canary CEO that is allowing our over 5,000 of our hotels today to talk directly to all of their guests via AI.

And it's taking costs for our franchisees in small business owners out of their front office it's allowing them to make extra money. We talked about this. I think this was your question on the last call by selling early check-ins and late checkouts and upgrades and amenities. And it's providing them with an economic platform free of charge that they did not have before to monetize that platform, small and large.

We have a very engaged Howard Johnson's hotel, outside of the main gates of Anaheim that's making over $10,000 a month in incremental fees that are going to that hotel's bottom line. That's $120,000 a year. In a typical select service economy hotel may generate 5 million. So it's a big, big deal. The Wyndham Connect Plus that we outlined also in the deck, is leveraging Sales force and Canary with 350 AI agents. We talked about this on our last call, that's handling hundreds of thousands of guest calls and handling all the requests, again, saving franchisee labor costs, but most importantly, to your question, it's driving that direct contribution, over 300 basis points of direct contribution to franchisees who who are using it.

And then this call and again, in the IP, we laid out where we are with ChatGPT with Gemini, full AI and with Claude seamless direct booking capabilities. to really with Cloude right now, it's live, click to book through to wyndham.com, and we're launching Wyndham apps on all of the emerging LLM via either our MCPs or our APIs directly. And that will continue to add new capabilities to optimize most importantly, how our brand sites appear in those searches to drive more direct bookings.

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

Just 1 question on net rooms growth. One, are you guys doing more affiliate deals like Chata and then kind of help us understand what's the opportunity set there, and I understand these are higher fee programs, but you're only getting paid on the direct contribution, if that's correct.

And then just any numbers on what percentage of your rooms growth or gross openings in '25 or '26 are coming from these PPAR affiliate deals, but where you're only getting site 10%, 20% of the bookings? Any color there would be helpful.

Yes. Mike, we report on affiliates annually and their properties, as we've talked about, under agreement with either our former Wyndham Worldwide parent. T&L, as we talked about, or new third-party partners like our recent affiliation with Chata, which was a very competitive process, and we were thrilled to be selected. In terms of what percentage to your question of affiliate ads in 2025, I think it will be consistent to what we've been reporting on for the last several years. .

And the first part of your question, I mean, we will always look to add more aspirational hotels and resorts, where they make sense as Chocta does. Where they are providing our guests access to something unique that we don't have upscale vacation experiences. And importantly, where our Wyndham Reward members often most want to redeem and vacation, and I'd also add, they're very accretive and very helpful in driving our credit card and our ancillary our ancillary fee growth that has been doing so well.

We'll go next now to Ben Chaiken at Mizuho.

Jeff, or whoever wants to take this, how do you envision the ranking system within AI, how do you envision the ranking system working as consumers search for hotels to the extent you have a view -- do you think this will be a traditional kind of CPC auction model? Or do you have a sense that it will be determined purely on relevancy in the search. Obviously, it's early. It would all be your opinion on how that plays out. And kind of related, you've talked about the MCP server, maybe you could talk about how you're using this opportunity to differentiate the attributes associated with your assets to make them more relevant. And am I thinking of that in the right way?

Yes, I think you are. I mean, we've One of the things that our investment in our tech foundation allowed us to do is working with class partners like AWS and Oracle and taking a very data-driven approach with with a really mature and an established Salesforce data 360 product. We've been able to personalize a genic Guest 360 experience all in 1 place. It centralized our res, our loyalty, our CRM data, and I mean the way we're thinking about it is in terms of how that is allowing our guests in real time to answer questions in book direct, and check in and check out.

We -- to your point, it's early days. But in terms of how we're communicating with our guests and delivering for them, answering these voice calls and messages and most of that volume through voice right now through the AI completing the booking, driving significant cost reductions for our call centers and and freeing up resources to redeploy in the marketing fund and sending the guests all of our availability, all of our rates, all of our inventory which they were already getting by scraping our brand.com sites.

But by connecting direct, we ensure that the data is the most accurate, the most current it could be and that our rates are always in parity for a guest who's shopping. And so our focus is really on driving more direct bookings, and it's early days, to your point, and that's what we're seeing.

Thank you. We go next now to Ian Zaffino with Oppenheimer.

This is Isaac Sellhausen on for Ian. Could you touch on the drivers of the ancillary fee growth in '25 and then maybe some of the factors that enable you to grow in the low to mid-teens this year.

Sure.Isaac, I think our biggest driver, like we've touched on a number of our previous calls is and will continue to be our U.S. toll brand card. We had the benefit of renewing that partnership with Barclays on a long-term deal and that provided some significant tailwinds, not just for 2025, but also in the early part of 2026. And in conjunction with that, it will -- and it has allowed us and our teams over at Barclays to work specifically on freshening up the program and the suite of products and the value proposition on those cards.

And so we see that to continue to be a big opportunity as we get into the second half of the year and then beyond. But that's not our only lever, of course, and our teams are hard at work. We've announced over the -- now in the last 12 months, a debit product in the U.S., we just announced this morning, you heard Jeff talk about our co-brand card that will be coming later this year in Canada.

And of course, we're not going to stop there. We are evaluating our opportunities around the world. and we'll update you when those are available. And the same thing holds true with our different partnerships and affiliate relationships. And of course, then Wyndham Insider, which we do believe is a -- will be a unique game changer for us as we think about an opportunity to really engage with our members in a way that we have not yet been able to.

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

I was hoping you speak a little bit more about China, and perhaps unpacking a little bit what you saw at the end of the year and how the demand turns figure into the guidance that you gave? And maybe add on a little bit about development there and chain scale strategy. I know you mentioned the Baymont launch. So that would be great.

I'll start, and then I'll let Kurt touch on guidance. Our brands in China were -- Meredith, much like here in the U.S., they were the first to recover coming out of the lockdown. And looking at our overall RevPAR today versus where it was back in '19, we're in line with Smith Travel, and we're actually ahead of the industry by about 400 basis points in our China direct RevPAR, which was down 19% still to 2019 versus STR down 23%.

In the quarter, overall, China ADR, which was good to see improved by 200 basis points from down 8% to down 6%. And what we all know is a deflationary economy, which is the longest inflation streak in China since the 1960s and likely to soon turn. There is just a tremendous occupancy opportunity and tailwind at only 83% at 2019 levels. And we think that has the opportunity to come back as ADR is already coming back for us and for our hotels over there after having been the first to recover.

From a development standpoint, gosh, our room growth in China was spectacular. And the deals that we're signing now have royalty rates approaching 4% and overall royalty rate approaching our international royalty rate, which is great to see. And the bottom line for us is that every China room we add add incremental revenue and annuity like fee stream to our business. We grew rooms overall and delivered a 14% net room growth in the direct fee PAR accretive rooms. We executed 49 new deals in Q4. We -- a lot of those were Baymont to your point, and it brought the year to 182 signings, which was up 10%.

So we're feeling really, really good about our long-term prospects in China as the country recovers. And we do want to add new brands like Baymont, like we have with Hawthorn Suites and La Quinta to capture those guests who are trading up who want a reliable international name at a domestic price point. But Kurt, if you could touch upon the guidance.

Yes. Meredith is the way we're thinking about China is we know that 2025 was a tougher year for our brands in the market. But overall, when you look at how we are stacked up with the industry compared to 2019, basically in about the same place. And so moving forward, we're not expecting to see the same type of year-over-year declines in the market. I think the industry is projected to be about flat for 2026. And that's where our brands are right on top of where the industry is. That's what's driving our underlying assumption is a performance much closer to flat in '26. And that will be would be a significant improvement from what we saw in '25.

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

I wanted to go back to U.S. rooms growth is possible. Obviously, some moving pieces in Q1 that you called out. But curious how to think about U.S. rooms growth just for the rest of the year and even just longer term. It feels like some of the operators are going into more of these conversion-friendly type brands in that kind of premium economy segment, which might overlap with you, but then you also have nice momentum happening right now at mid-scale and above. So just curious how to think about those puts and takes long term.

Yes. I mean we're encouraged, obviously, by the pipeline, Lizzie, that U.S. continues to pick up, really encouraged with, obviously, the conversion rooms, which were just so solid. And we continue to have an opportunity with our economy openings. I mean we opened 10,000 economy rooms domestically this year in 2025 versus 5,000, and in 2024. 2,000 of those were Echo suites. But just that was a 90% growth in economy opens, which drove a 4% U.S. gross adds to our economy system, which we we haven't seen in a while with a best-in-class economy retention rate of over 94%.

And you couple that domestically with how we're growing, at over 2% net room growth in the domestic mid-scale brands that you just mentioned. 2025 was the most opens in 9 years. Conversions are picking up, and the pipeline continues to grow. We're feeling feeling really good about the U.S.

And we'll take our final question today from Trey Bowers with Wells Fargo.

I guess just building on that, it was noticeable that economy rooms had the lowest declines. I think we've seen in many years, but mid-scale room slowed a little bit. Just on that mid-scale and above -- can you just dig in on some of the brands that are getting you guys excited and feel like could further accelerate that domestic pace? And then I guess I'll ask a piece of that I'm not sure if I missed this, but should we kind of expect to see a similar level of domestic net growth this year to last year? Or should we model for some level acceleration? .

Yes. I think similar, Trey, is fair. And in terms of the brands, I just mentioned day super travel all showing be digit growth. Mid scale brands were our prototype brands. on both the new construction and the conversion side. We domestically signed 30 new construction deals. David Willner and his team just did a great job for our La Quinta new construction, Hawthorn Suites new construction. Obviously, extended stay is really hot right now.

Our Microtel by Wyndham is doing really well. And on the new construction side, the number of projects, the percentage of projects in the ground, I think we talked about this increased 300 basis points. We have a great new leader Keyera architecture design and construction team, and we're really excited about what we're doing on the new construction side. But extended stay is obviously hot for us across all scales. We've got a great economy extended stay brand, Echo Suites, which we talked about in our script, mid-scale with Hawthorn Suites and an upscale with Water walk. All 3 of those are exciting and doing well. But I think it's great to see the acceleration, and we're looking for that to continue.

And that will conclude our question-and-answer session this morning. Mr. Ballotti, back to you, sir, for any closing comments.

Well, thanks, Also, and thanks, everyone, for your questions and your interest in Wyndham Hotels & Resorts. We look forward to talking to and seeing many of you in the months ahead at many of the upcoming investor conferences that we'll be attending. In the meantime, have a great weekend ahead, everybody, and thanks again for joining us. .

Thank you, Mr. Ballotti, and thank you, Mr. Albert. Again, ladies and gentlemen, this does conclude Wyndham Hotels & Resorts Fourth Quarter Full Year 2025 Earnings Conference Call. Please disconnect your lines at this time, and have a wonderful day. Goodbye.

Good morning, ladies and gentlemen. Welcome to the Wyndham Hotels & Resorts Third Quarter 2025 Earnings Conference Call. [Operator Instructions]

Now at this time, I would 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. Our Q3 results illustrate yet another quarter of resilience and execution by our teams around the world.

Despite a challenging macro environment, we delivered a 21% increase in room openings, signed 24% more deals in the quarter and grew our global pipeline by 4% to 257,000 rooms and nearly 2,200 hotels. We drove an 18% increase in ancillary fee streams and year-to-date, our resilient, highly cash generative business has produced over $260 million of adjusted free cash flow and returned $320 million to our shareholders.

As we continue to focus our development on higher FeePAR brands and geographies and expand our direct franchising in regions that previously relied on master licensees, we're adding hotels with stronger long-term economics. As of September 30, our global pipeline carried a FeePAR premium of over 30% domestically and 25% internationally compared to our existing system. Here in the United States, we grew our midscale and above system by over 200 basis points led by solid conversion activity and some great new construction additions, including another 4 ECHO Suites, opening in strong markets like Reno, Nevada and Sterling, Virginia.

Earlier this month, we also introduced Dazzler Select by Wyndham, a domestic extension of our Latin America Dazzler by Wyndham brand into the economy lifestyle space here in the United States, targeting hoteliers seeking flexibility without sacrificing the power of scale. We're attracting owners of high-quality economy hotels who want to preserve their properties individuality while tapping into Wyndham's global distribution, loyalty, technology and marketing platforms. Internationally, we grew net rooms by 9%. EMEA grew its net rooms by 8% with several new construction additions like the stunning new Wyndham Grand Udaipur in India, where we now have 88 direct franchise hotels open across that important country and another 50 in our development pipeline.

Along with spectacular new conversions like the Dolce by Wyndham Commonwealth, an iconic upscale edition with 5-star meeting facilities in the heart of historic [ Arbor ] Denmark. Latin America and the Caribbean grew net rooms by 4% with 5 star additions like the new Wyndham Grand Costa Del Sol located inside of Lima Peru's new [indiscernible] International Airport as well as several exceptional conversions like the Isla Verde, a trademark collection by Wyndham Hotel near some of the most beautiful beaches in the Caribbean.

In China, we grew our direct franchising system 16% with many outstanding new construction additions like the Wyndham Grand in the port city of Yichang on the Yangtze River, our 50th Wyndham Grand in China, along with the La Quinta Turpan in the hub of the World Famous Silk Road, our tenth La Quinta in the Asia Pacific region. In Southeast Asia and the Pacific Rim, net rooms increased 13% with several exceptional additions like the hotel travel time, our first Trademark Collection hotel in downtown Singapore. And in July, we announced a strategic partnership with the Ovolo Group, bringing 4 design forward Ovolo hotels and resorts into our system later this quarter and strengthening Wyndham's upscale offerings in Sydney, Brisbane, Canberra and Melbourne.

RevPAR declined 5% in constant currency, both globally and domestically, reflecting continued consumer caution in an uncertain economic environment, especially within the select service segments here in the United States, where our guests are more price sensitive. While we saw continued outperformance across parts of the Midwest, in states like Oklahoma, Michigan, Illinois and Missouri, Minnesota and in Ohio, which collectively grew RevPAR 4% versus prior year continued softness in the Sunbelt states where Wyndham over indexes from a room count standpoint more than offset that strength. Internationally, RevPAR declined 2%, driven primarily by Asia Pacific, which was down 8%, led by China, down 10% and Latin America, which declined 5%. Elsewhere internationally, performance remained strong. Both Europe and the Middle East grew 4% with considerable strength in Spain, Turkey and Greece.

And in Canada, which continued to impact U.S. leisure drive-to markets, RevPAR increased 8% as Canadian travel domestically remains strong. Beyond RevPAR, our focus on growing our ancillary fees again delivered impressive results. New strategic partnerships, new technology initiatives and growth in our co-branded credit card program, where new accounts increased 11% and average spend grew 7%, fueled an 18% growth in third quarter ancillary fees, raising our year-to-date growth to 14%. A key contributor to this growth is the continued strength of Wyndham Rewards, which achieved a record 53% share of occupancy contribution for our domestic hotels and an 8% increase in our global membership enrollments.

And earlier this week, we introduced Wyndham Rewards Insider, a travel rewards annual subscription program and a first of its kind among our branded peer set in the hotel loyalty space. As the $500 billion subscription economy is projected to grow to over $2 trillion, Wyndham wants to be a part of that. And Wyndham Rewards Insider offers unmatched value to our 121 million Wyndham Reward members for an annual subscription of $95 per year. Members subscribing to these upgraded lifestyle benefits will enjoy savings of up to 30% and earn opportunities across flights, hotels, car rentals, cruises and so much more. There'll be granted annual Wyndham Rewards Gold status, exclusive concierge services, Ticketmaster, earn and burn access, expansive bonus earning opportunities on hotel stays and many additional exciting benefits.

Capturing the essence and generosity that defines Wyndham Rewards is the fastest way to earn a free night. Wyndham Insider will further enhance the program's appeal and reinforce the strength that has kept Wyndham Rewards ranked the #1 hotel loyalty program by the readers of USA today for the eighth consecutive year.

Last quarter, we talked about the success of Wyndham Connect and Wyndham Connect, a suite of supercharged technology innovations that we're promoting to our owners as Wyndham. This quarter, over 230 AI agents with encyclopedic knowledge on each of our 8,300 hotels began leveraging the power of Salesforce, Oracle, and Canary Technologies to generate and modify direct bookings while also answering questions and providing tailored travel recommendations by utilizing large language model AI and first-in-industry a genic AI voice assistance. These new Wyndham AI-agentic assistance are delivering seamless and complete natural language conversations with full guest service support while also handling live messaging through WhatsApp and Apple messaging. Wyndham AI is driving more direct bookings, producing front desk workloads that's accelerating significant ancillary revenues for thousands of our hotel owners through automatic upsell opportunities like early check-ins, late checkouts and in-room amenity upgrades.

To date, Wyndham AI has already handled more than 0.5 million customer interactions delivering faster service, higher booking conversion and a 25% reduction in average handle time all contributing to nearly 300 basis points of improvement in direct contribution for hotels leveraging Wyndham AI to its fullest potential. And with only 7% of our 8,300 hotels now live with this new Agentic AI by Wyndham component and adoption ramping quickly. We're only beginning to unlock what Wyndham AI can deliver.

Before Michele takes us through the financials, we always want to extend our sincere appreciation to our team members and franchisees worldwide without whose passion and collaboration. Our solid performance and execution would not be possible. Their conviction in the opportunities ahead of us, coupled with their commitment to our strategic initiatives to deliver exceptional value continues to be the cornerstone of 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 third quarter results I'll then review our cash flows and balance sheet, followed by an update to 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 third quarter of this year, marketing fund revenues exceeded expenses by $18 million compared to revenues exceeding expenses by $12 million in the third quarter of last year. To enhance transparency and provide a better understanding of the results of our ongoing operations, I will be highlighting our results on a comparable basis, which neutralizes the marketing fund impact. In the third quarter, we generated $382 million of fee-related and other revenues and $213 million of adjusted EBITDA. Fee-related and other revenues declined 3% year-over-year primarily reflecting a 5% decrease in global RevPAR, as Geoff mentioned, as well as lower other franchise fees. These headwinds were partially offset by an 18% increase in ancillary revenues a larger global system and royalty rate expansion, both domestically and internationally.

Despite $12 million of lower fee-related and other revenue, adjusted EBITDA was flat year-over-year on a comparable basis as the revenue decline and elevated costs related to insurance, litigation defense and employee health care programs, all of which are reflected by higher interest expense. Adjusted free cash flow was $97 million in the third quarter and $265 million year-to-date with a conversion rate from adjusted EBITDA of 48%. Development advanced spend totaled $22 million in the third quarter, bringing our year-to-date investment to $73 million. These investments support high-quality FeePAR accretive additions that strengthen our system and future earnings power. Year-to-date, about 30% of our openings have included development advances and these hotels are entering our system at a FeePAR premium roughly 40% above our current system. We returned $101 million to our shareholders during the third quarter through $70 million of share repurchases and $31 million of common stock dividends.

Year-to-date, we have now repurchased 2.5 million shares of our stock for $223 million. We closed the quarter with approximately $540 million in total liquidity, and our net leverage ratio of 3.5x remained as expected at the midpoint of our target range. Last week, we completed the refinancing of our revolving credit facility, increasing total capacity to $1 billion, a more than 30% increase in potential liquidity while reducing the borrowing cost of the facility by 35 basis points and extending maturity to 2030.

Turning to outlook. With RevPAR trends softening throughout the third quarter, we now expect full year constant currency global RevPAR to range between down 3% to down 2%. This represents a reduction of 100 to 300 basis points from our prior outlook and implied fourth quarter global RevPAR of down 7% to down 4%. At the low end, this assumes roughly 200 basis points of additional softening beyond third quarter results, while the high end assumes slightly better performance than the 5% decline experienced in Q3. This outlook also assumes that U.S. performance continues to lag meaningfully behind our international regions and that international trends moderate modestly from recent levels. There are no changes to our net room growth outlook of 4% to 4.6%.

Fee-related and other revenues are now expected to be $1.43 billion to $1.45 billion, down $20 million to $40 million from our prior outlook of $1.45 billion to $1.49 billion. Since our initial outlook in February, RevPAR has come in about 500 basis points softer and our revenue forecast has decreased by approximately $60 million. Through cost containment measures, including both operational efficiencies and onetime variable reduction, we have been able to offset approximately $30 million of that revenue shortfall as well as $15 million of incremental costs primarily related to litigation defense and employee health care programs.

As a result, adjusted EBITDA is now expected to be between $715 million and $725 million, down $15 million to $20 million or approximately 2% from our prior outlook of $730 million to $745 million. Our marketing fund expenses are now expected to exceed. As a reminder, we do not adjust the performance of our marketing funds out of our reported results, and we have a strong track record of recovering these investments and fully intended to do so here as well. Adjusted net income is projected to be $347 million to $358 million, and adjusted diluted EPS is projected at $4.48 to $4.62 and which is based on a diluted share count of 77.5 million, and as usual, does not assume future share repurchase activity or incremental interest expense associated with any potential new borrowing. There are no changes to our outlook for development advance spend or free cash flow conversion.

In closing, we remain focused on executing our plan in this challenging economic environment. We're maintaining cost discipline across controllable expenses, delivering strong ancillary revenue growth, our royalty rate and grow our pipeline.

With that, Geoff and I will be happy to take your questions. Operator?

[Operator Instructions] We'll go first this morning to Dan Politzer with JPMorgan.

But as you think about this challenging RevPAR environment that we're currently in, especially in the economy segment. Can you talk about, I guess, what's in your control and what you're doing and what's out of your control and kind of the active things that you're doing? And then similarly, how do we gain comfort that there isn't something structurally wrong with the economy segment, just given the recent RevPAR trends are obviously pretty concerning?

Yes. Thanks, Dan, for the question. structural piece, I'll take first. I mean we're moving into our slowest quarter of the year. And despite the softness that we talked about in Texas, California, Florida, we are seeing nothing structural that concerns us in any of the leading indicators that we look at daily.

Our booking lead times, they're up 2% the prior year. Our length of stay are consistent with last year. Something that if we thought something structural was happening would not be the case. And our cancellation rates have actually improved over last year by 160 basis points in Q3 versus prior year. So on those indicators, we feel good. Slide 11 is an interesting slide that we -- because we know you're getting a lot of questions, we're getting a lot of questions on this structural question. And we're looking at demand and occupancy. And this year, if you look at that slide, we're seeing occupancy down across all chain scales year-over-year with the divergence of RevPAR really being driven by ADR with the upscale segments taking rate. While the economy and the midscale where we're concentrated are not.

Occupancy, as we all know, has not recovered to pre-COVID levels in any segment, but it has more so in economy and mid-scale. If we look versus 2019, STR mid-scale is down 5% to 2019 versus upper upscale and luxury, both down 8% to 2019, 100 basis points worse than economy and 300 basis points worse than midscale. So the question you ask in terms of is there anything structural that we're seeing out there aside from persistent inflation and consumer and lower chain scales are where the guest is obviously more price sensitive.

STR, ADR for economy is up 11% to 2019 versus up 29% in the luxury segment. Luxury is the only segment as we know that's been able to outpace inflation growth at 26%, which is very good news for economy and mid-scale segments from a pricing power standpoint, moving longer term, especially as wage growth continues to outpace inflation providing upside when franchisees to hold rate where it makes sense, especially on leisure versus the corporate contracted pricing and discounting where appropriate, but not playing a gained the most share in the mid-scale. We saw 160 basis points of RevPAR index, and it's being driven by the weekday, which was up 180 basis points for our mid-scale brands. And we're gaining with more rate index, which our revenue management teams really want to see continue for franchisee profitability.

Just a follow on to that, we'll stick on the demand side for a minute. And maybe just talk about business and appreciate if you kind of sort of frame that up for us.

Thanks for the question, Brent. Yes, look, we continue to view the $1.2 trillion of infrastructure as a multiyear tailwind for our franchisees. That's going to drive over $3 billion of revenue to our hotels. And the 150 basis points allocated monies have potentially been frozen as the federal government looks to possibly reallocate among states, and we're seeing some projects being paused as project priorities, which is an air traffic control we read a lot about.

But we're optimistic. The infrastructure spending, again, over 80% of which is not spend is going to [indiscernible]. And to the back part of your question, we're also very confident that private investment in reshoring and manufacturing will continue to boom as it has specifically with data centers, as you mentioned, where our hotels in those markets outperform the hotels from a RevPAR standpoint and have gained 500 to 600 basis points. Many of the states that we called out in our script are certainly benefiting from that. We're spending a lot of time with our teams. We've identified over 150 planned data centers and the Wyndham hotels in those markets that we're tracking and targeting from the $1.6 billion Amazon Web data center in Canton, Mississippi to the $800 million meta data center in Granite ville. There -- it's a really big deal and something that we're very excited about.

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

Michele, in your prepared remarks, you mentioned that you expect U.S. RevPAR in Q4 to be in line with Q3. Look, we're obviously still early in the quarter, but any early read you can share with us as to where we're trending today relative to that domestic down 5 expectation?

Yes, sure. I'd say from an [indiscernible] Florida, we're seeing RevPAR track about 100 basis points above September performance. We've also seen stabilization in U.S. booking pace month to date in October and a really strong October best in Germany. So those are -- those are some of the green shoots that we're tracking. The rest of the portfolio appears to be performing more in line with third quarter results.

So our fourth quarter implied RevPAR is at the midpoint anchor to those third quarter results and also includes, I'd say, the headwinds from last year's hurricane. And then the high end would assume some modest improvement from those trends, not a sharp rebound at all. And again, it's supported by those things that I just mentioned. And then, of course, the low end would allow for some further softening. But we believe I certainly believe it is potentially achievable as booking trends hold and some of that strength I mentioned continues through the end of the year.

We'll go next now to David Katz of Jefferies.

With respect to net unit growth, right, presumably, the bigger it gets, the easier it is to weather RevPAR volatility. Geoff, can you -- or Michele, can you talk about what kinds of momentum we can expect to see from you in terms of net unit growth and what the gating factors or puts and takes would be toward next year being the same or better than what we have in terms of total net unit growth in geography

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RevPAR to get back. But we're feeling very good about our NRG outlook, accelerating in the higher fee segments, it's continued. And what we're really happy about and confident about looking forward is that openings are pacing ahead of prior year. And net room growth sequentially is pacing ahead each quarter throughout the year. So Q1, we added net 4,800 rooms, Q2 6,800 net rooms were added. And Q3, 8,700 net rooms were added in the quarter. So as of September 30, we have opened scale and the above segments.

In terms of next year, given just how strong the pipeline is, we're feeling very, very good. This was our 21st consecutive quarter of pipeline growth and it's up sequentially, and it's up 4% versus year-over-year with, again, a concentration in higher RevPAR segments in markets not only across the U.S. but obviously internationally as well, 60% of our pipeline is international with really steady growth across Europe, the Middle East, Eurasia, Latin America, which have grown 140% since spin and 170% in Latin America's case in spin. So with that type of continued growth in net rooms, we're feeling confident about the rest of the year, obviously, and more importantly, next year and '27.

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

Two-parter for you, probably for Michele here. Just first on the franchise fees in the third quarter. Can you maybe give us a little more detail on what's in that other bucket that you mentioned, maybe also why were they down? More than you thought? Any color there would be helpful. And then second part is just as we think about the provision to next year, maybe help us put some of the moving pieces with G&A, the cuts this year and maybe any step-ups that you expect next year?

Sure. With respect to franchise fees, Mike, that line item captures a number of items that aren't tied directly to rooms or RevPAR. So those are things like termination fees, transfer fees, application fees, transactional revenue that's subject to varying revenue recognition policies. These items are event driven. So the level of activity can vary quarter-to-quarter.

For example, the number of transfers in any given quarter can shift based on deal timing and obviously, transaction volume, which is down quite meaningfully this year, industry-wide 24% for the select service space. So I think when we look at these fees, they're healthy and high margin part of our business, but naturally variable. And that's why, occasionally, you're going to see some movement year-over-year in this line item. This quarter, we saw a $7 million decline versus last year third quarter. But in terms of our internal expectations, we were only short about $3 million. to our forecast. And year-to-date, I think these fees are just roughly maybe $2 million ahead of last year. So we really look at the Q3 decline as timing related.

I think the second part of your question was with respect to next year, and I'd say it's still too early to talk about our 2026 expectations, we're just beginning our planning process now. We are, of course, approaching the budget the same way we always do. We're staying very focused on what we can control. From an expense perspective, we did have some variable reductions this year. About half of those we expect will be permanent to the margin and the other half are more temporary for 2025.

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

Maybe we could pivot to ancillary revenue. Can you talk about your expectations for ancillary fee growth to accelerate from low teens this year to mid-teens in 2026. What are the drivers of that specifically from a credit card perspective? How should we think about lapping the tough compares for most of this year? And do you expect the procurement business to also accelerate next year?

Okay. Yes. There's a lot in there. I'm going to try to remember your 6-part question. We're really pleased with how ancillary revenues are performing up 18%, I think, in the quarter. Year-to-date, we're tracking 14%. Pretty much in line with maybe modestly ahead of our low teens expectation.

On the credit card side, we saw a 10% increase in new accounts. We saw a 7% lift in average spend per cardholder. That's an acceleration from the Q2 metrics, which were 5% and 2%, so 5% in new accounts and 2% in average spend. For ancillary revenues, we've got several initiatives driving this multiyear above algo growth. So credit card is obviously the largest contributor to growth this year, but we've got the replatforming happening later this year as well as early next year. That's another inflection point from a growth perspective. Then we've got international expansion. We've got the debit card, which is ramping slowly and intentionally slowly.

We've got technology like Wyndham Connect. And then we're really excited about Wyndham Insider. It's first of its kind, as Geoff mentioned, to add on subscription service. It won't drive much in EBITDA this year or even perhaps next year as we focus on ramping the program and testing and proving out the model, but we think there's real opportunity here in future years from an ancillary perspective. So at this point in time, like I just mentioned, still a little too early to talk about 2026. We don't consider the forecast or the 2026 period as lapping a tough comparison, we see we're growing off of a higher base, obviously, post renewal but we still think there is a significant growth opportunity, not just in 2026, but like I said, multiyear tailwinds from the number of initiatives we currently have in flight.

I think the only thing you missed, Steve asked about was sourcing team that Michele leads and a team that's making significant strides, Steve. We've got new sourcing categories and global expansion of programs that are really benefiting our franchisees. New sourcing brands that Michele's team are adding like Nestle, Seattle Best, Starbucks on the coffee side. And a great program for franchisees when it comes to sourcing insurance through a program that's driving significant savings on franchisee insurance quotes, which is a big issue for small business owners resulting in a lot of savings for franchisees. So we're optimistic as well that we've got a lot of upside on the sourcing side.

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

You noted in the presentation that your new deals, which require key money coming in at about a 40% VPA premium versus the portfolio. But then China is also becoming, has become a bigger part of the mix. curious like how we should think about the kind of balance of that mix shift, the benefit from the key money deals versus China? And whether this is kind of accretive or dilutive to RevPAR over time?

So key money is absolutely accretive to RevPAR over time. We are having great success with that strategy, bringing in high-quality product in higher demand, higher RevPAR market. I think your question more has to do with the mix of net room growth, right? So as we grow faster in international regions that have lower royalty rate that could wind up looking dilutive to the overall royalty rate and maybe even dilutive to FeePAR on a global basis, but still very accretive to revenue and very accretive to EBITDA.

So we have -- from our perspective, the world is a very big place. Nothing -- no market is off limits just because it's a lower RevPAR market. We may not be incentivizing our development team as much to tap into those markets, and we may be adding more feet on the street in higher RevPAR markets, all of those things are very true. But if the deal comes our way and we can support it appropriately and drive the value proposition, we're not going to say no, just at the RevPAR market itself is a lower RevPAR market. And again, like I said, I think from a key money perspective, feel highly confident that where we are deploying our money is for higher FeePAR product coming into our system.

And I think it's fair to say, Michele, that we're not deploying key money in China today, correct or very little. Yes. I mean we're, Lizzie, just having a great success over there with -- as we've talked a lot about with you when we've been out on the road driving that double-digit net room growth increase in direct FeePAR accretive rooms without key money. And it was just so great to see what happened again this quarter, the team executed 52 new deals in the quarter in China, 30% more than last year and 11% now more than last year-to-date. And it was great to see that net room growth grow sequentially and the pipeline grow sequentially, pipeline was up 3% in China without key money.

And so many of those contracts awarded are new construction, I mean, just absolutely positively stunning new adds this quarter, Wyndham Grands and just some phenomenal locations competing against our larger peers in so many cities across China without the use of key money. So we're really excited that, that could continue. And congratulations on your recent [ nutshell ].

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

Geoff, I appreciate some of the detail you gave on the AI front, but I want to make sure I understood some of what you're doing there. Is that largely an internal AI tool to drive bookings in the direct channels? And if so, how do you think about partnerships or opportunities with indirect channels for example, what would make partnering with an LOM more or less attractive versus other LLMs or even considering compared to OTAs?

Yes. Well, a lot to unpack there, Stephen, how we would consider it. I mean, certainly chat perplexity, Gemini are reshaping how guests book hotels. And it is presenting a unique opportunity for us to continue to reduce our dependency on OTAs. I've heard you asked this question before. We continue to add new capabilities to optimize how our brand.com sites appear in LLM searches, and we're currently experimenting with an MCP server a sort of USB port, if you will for AI to allow LLM to plug into us to directly access all of our hotel availability, all of our rates, all of our inventory, making it easier for an LLM to receive fully updated hotel information from a trusted source.

What we referenced in the script and that we -- not put into the IP is what the last 6 years of investment, the $375 million that we have invested in our industry-leading tech stack with best-in-class providers who all embrace AI. We don't think we could build it better than Oracle or Adobe or any of these great providers we partner with. We were the first to cloud with a very scalable system that is fully optimized right now 100% optimized to drive down cost. You could read a lot about our tech team success. [indiscernible], a global leader in cloud management recently said that Wyndham's cloud environment is more optimized for AI than most, if not all of its competitors. And that's enabling us to innovate faster and innovate at a lower cost. I mean, AI has been helping everyone in the industry for years on the security front, the marketing front, the operations front. But what we're doing with Wyndham AI, which is an industry first is leveraging now that we have the system built Salesforce and Canary technologies with the 250 AI agents that we talked about, who are handling hundreds of thousands of guest costs.

Mrs. Grambling calls, and she wants to book the Grambling's on a holiday. And one of our AI agents know everything about whichever one of our 8,300 hotels, the Grandland kids want to visit. And it's able to answer any question on any question that, that guest might have about any of our hotels and seamlessly book it. And that's what's driving direct bookings. That's what is allowing our franchisees to save on the labor cost. And it's what's driving right now, 300 basis points of increased direct contribution for only 600 of our 8,300 hotels have that specific Wyndham AI piece enabled so far. We talked last call on Wyndham Connect, which is allowing us to talk to customers with AI. A lot of our competitors are doing that. We're taking labor intense tasks away from our franchisees, we're allowing them to make extra money by seamlessly selling an early check-in or a check-out to the Grand line or an upgrade or amenities in terms of what the kids want the refrigerator.

But what we are doing right now with Wyndham AI in terms of that direct booking piece is what really excites our franchise sales team and our franchisees. And we're told by Oracle, who works with all of our peers that we're doing things really no one else is, and it's something that our franchisees are very, very excited about.

We'll go next now to Ian Zaffino of Oppenheimer.

I just wanted to ask kind of a follow-up on the Wyndham Rewards Insider. Michele, I know you said kind of not a lot of EBITDA impact either this year or next year, but how do we kind of frame the opportunity here maybe just longer term, like when you conceptualize what it could deliver to you from either a profitability standpoint, et cetera? Or maybe point us to kind of a comparable program that you might think your reward system could deliver? And then also, how do you actually get there? Would that just be on the fees? Would it be on more loyalty? Just any other type of color you could give us there would be helpful.

Sure. Thanks, Ian. I would frame it, and Michele could add to this, but we're very excited about it. I think it has the potential to deliver engagement on par at some point with our credit card. Wyndham Insider right now, as Michele said, we expect a strong take rate from members over the next 24 months. And over time, it has that type of potential. So long-term fee growth is certainly the goal. But short term, as Michele said, the focus is more on proving out the model and using returns to further grow Wyndham Rewards. Our new co-branded credit card complements it. And with the credit card rewarding everyday spend, and we're really excited about that, but Insider enhancing Wyndham Rewards value proposition.

I mean we know to frame the opportunity that the subscription economy is absolutely booming. The hotel loyalty travel subscriptions are really in their infancy of those that have something like this in the hotel space, they're tied and they're limited to select brands or hotel-only benefits. But at $95 a year, we expect the savings for the average Wyndham Reward member to more than cover the fee after just 1 trip. Plus members earn a free night. And we hope you subscribe to this, Ian, at thousands of hotels with the 7,500 annual bonus points. It expands our value prop to our most important members, and it basically stacks their discount.

So if our promo rate to you is 10% off as an Insider, Ian Zaffino is a Wyndham Insider gets an additional discount on top of that with a 50% acceleration in the points earned and without impacting our franchise, and that's a very important point, without impacting our franchisees cost. The program is absorbing the costs. We've had a lot of interest, a lot of excitement from franchisees. A lot of interest, obviously, from the media upgraded points to premium credit card fee programs, which are charging anywhere between $795 to $895 that we see. We're partnering with American, with United, with JetBlue, with Avis who else, we're partnering with Carnival with up to 30% discounts from some of those providers, and that's really driving the value prop and the affinity to most importantly, increase our Wyndham Reward members engagement and their share from wallet. So we're super excited about this.

We'll go next now to Alex Brignall of Redburn.

The first one is on the marketing expense over spend. Could you just talk a little bit about what that specific is, and you talked about getting it back? Does that specifically mean in the next couple of years? And what are the benefits that you're getting? And who's sort of sharing between you and franchisees? And then the second, you talked a lot about the structural dynamics of RevPAR and demand in the U.S. It's obviously something that's a curiosity for a lot of people. In September, it was obviously a very, very hard comp for the economy segment because of the hurricane impact last year. But versus 2019, the gap between luxury and economy was actually there was no gap having previously been a very large gap in the months before.

I guess what I'm wondering is if that gap is to close and you talked about franchisees passing rates, are you worried that it will be because the higher segments will have to see price deterioration to because you become a better value prop versus them because of the relative cumulative price growth over the time? Or do you think that the economy segment can see sort of a big bounce back in pricing in 2026?

Well, I'll take the fun question, Geoff, and then maybe you want to address the second part of Alex's question. I mean it's $5 million overspend to the marketing side. Let's keep it in perspective. The fund is over $0.5 billion, right, so in annual activity. So it's only roughly 1% of total spend. So still a very immaterial amount when we're trying to kind of manage that level of spend. And remember, we're the only large lodging corporation that does not adjust these marketing funds out of our reported earnings.

If you look at the peer set, the variability from their marketing funds is much larger than $5 million. So we feel pretty good about how we've been able to manage that level of annual activity in this RevPAR environment specifically. And I think as RevPAR deteriorated specifically throughout the third quarter, we had to make a conscious decision on whether or not we were going to stop some in-flight initiatives or we were going to continue them. And certainly, there were ones that we decided to pause, but there were a bunch of other ones that we looked at the overall benefits of those investments to our franchisees and to our -- the overall health of our franchise system, things like Wyndham Insider, for example, some of the initiatives that Geoff was talking about, a bunch of personalization initiatives that we're doing and some updates we're doing even to our digital platform to our website.

And so we decided that we were going to continue to invest in those programs. They will have benefits, not just in 2025, but well beyond 2025. So ultimately, we view this modest overspend as an investment, and we do have a very strong track record of recovering these funds in future periods, and we're really comfortable with that decision when we recover this $5 million could be as early as 2026. It could be 100% in 2026, it could be 100% in 2027. It could be some in '26 and some in 2027, but certainly more in the nearer term as opposed to the longer term.

In the back half, Alex, it's a really good question. I've seen you sort of answer on it, I think, in your hitchhikers guide. If you think about the rate for economy up, whatever it is, 10% to where we were pre-COVID and luxury right now at up 30%. And to your point, what's happening there, it is very good news for our economy and mid-scale segments from a pricing power standpoint. And at some point, we do believe, to your question, that can flip when consumer confidence stabilizes. Remember, both of those segments, economy and mid-scale, we're the first to recover coming up out of COVID. And we know that at some point, domestic RevPAR is going to return to that 2% to 3% long-term CAGR, that it's always average.

And especially given the earlier comments, everything that's out there from a macro setup on the infrastructure and private investment side, the historically low levels of supply. And more over on the leisure side, I mean, we've got a lot to look forward to next year, like America 250, the FIFA World Cup, which is a $20 billion impact in markets like say Atlanta's impact is $2.1 billion. We've got a lot of hotels in Atlanta, along with Dallas and Houston, right, which right now with all of the consumer uncertainty and immigration activity is stressed, but Dallas and Houston are both going to benefit from that next year. L.A. in California where we're down is going to benefit Miami is going to benefit from FIFA World Cup next year, where we've got a lot of hotels in Florida, 300 in Florida, 400 California, 700 hotels in Texas, our 3 largest states, and we've got a half a dozen other cities that this FIFA World Cup is going to play in where we've got collectively about 1,000 hotels. So it's an interesting observation.

We'll go next now to Meredith Jensen with HSBC. So many questions. I don't know where to start. So I was thinking about something touching upon what Stephen mentioned. So realizing how the lodging sector supply continues to evolve and there's a wider array of options for consumers. -- including short-term rental and distribution shifting all these moving parts. Of course, this is nothing new to Wyndham. But it is something we're increasingly fielding questions on given the push from OTAs like booking in [indiscernible] and Airbnb to get into the lodging sector. So I was really hoping you might be able to a little bit about how Wyndham views these opportunities and how you're going up against some of these challenges in nontraditional or as some might label it shadow supply. So that would be really helpful.

Yes. It's an interesting question. Our teams think about a lot, Meredith. Genetic AI, the possibility of STR's short-term rentals coming into the space from a distribution standpoint is they're all certainly bringing a different rhythm to search that's more frequent and more automated. AI is really moving the traditional SEO to GEO, which we talk a lot about that generative engine optimization with these new channels searching for more trust and more contextual relevance.

And so how we think about it is all about with our franchisees and our teams and our brand teams is our reputation and the confidence, which is always the top signal in any search. Whenever you go on vacation, you're doing your own research and we're trying to find ways and we are finding ways through Wyndham Connect, which we've talked a lot about and Matt put in the deck, it's improving that confidence with guests and more frequent reviews from our guests. We're engaging more frequently and more immediately through so many different ways. SMS messaging, voice and digital to add context to your search, and we're boosting higher online review scores because immediately, when Meredith Jensen checks out now from one of our hotels, we're asking you for a view on TripAdvisor, on Google reviews on all of the major OTAs because we want your feedback, and we want to improve that feedback because we know it's the key indicator of quality. And it's the whole point of consistency for overall satisfaction in those large language model searches.

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

All right. As always, both. Thank you very much, and thanks, everybody, for your questions and your interest in Wyndham. Michele, Matt and I look forward to talking to and seeing many of you in the weeks ahead at several of the upcoming investor lodging conferences that we'll be attending.

In the meantime, have a great weekend ahead. and happy Halloween, everyone. Thanks again for joining us today.

Thank you, Mr. Ballotti, and thank you, Ms. Allen. Again, ladies and gentlemen, that will bring us to the conclusion of today's Wyndham Hotels & Resorts Third Quarter 2025 Earnings Conference Call. Again, thank you so much for joining us, everyone, and we wish you all a great day. Goodbye.