n n n ‘. concat(e. i18n. t(“search. voice. recognition_retry”),’n
Geoffrey A. Ballotti; President, CEO and Director; Wyndham Hotels
Matt Capuzzi; Senior Vice President of International Relations; Wyndham Hotels
Michele Allen; chief financial officer and chief strategy officer; Wyndham Hotels
Alex Brignall; Transportation Research Partner
Brandt Antoine Montour; Research Analyst; Barclays Bank PLC, Research Division
Charles Patrick Scholes; MD in Research and Equity Analyst in Accommodation, Gaming and Recreation; Truist Securities, Inc. , Research Division
Dan Wasiolek; Senior Equity Analyst; Morningstar Inc. , Research Division
Dany Assad; Vice President and Research Analyst; BofA Securities, Research Division
David Brian Katz; MD & Senior Equity Analyst in Gaming, Hospitality
Isaac Arthur Sellhausen; Research Analyst; Oppenheimer
Joseph Richard Greff; MARYLAND; JPMorgan Chase
Meredith Jane Prichard Jensen; Senior Consumer Analyst; HSBC, Research Directorate
Michael José Bellisario; Director and Senior Research Analyst; Robert W. Baird
Stephen White Grambling; Equity Analyst; Morgan Stanley, Research Division
Steven Donald Pizzella; Research Analyst; Deutsche Bank AG, Research Division
Operator
Welcome to Wyndham Hotels’ First Quarter 2024 Earnings Conference Call
Matt Capuzzi
Thanks operator. Hello and thank you for joining us. I am joined today by Geoff Ballotti, our CEO; and Michele Allen, our CFO and Chief Strategy Officer. Before we begin, I must remind you that our comments today will include forward-looking statements. These statements are subject to risks that could cause our actual effects to differ materially from those expressed or implied. These threat points are discussed in detail in our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission and in all upcoming reports filed with the SEC. We will also refer to a number of non-GAAP measures. The corresponding GAAP measures and a reconciliation of non-GAAP measures to GAAP measures are provided in our earnings release, which is located on our online investor relations page at invest. wyndhamhotels. com. We offer safe measures that discuss the long-term effect on a non-GAAP basis only because without unreasonable efforts, we cannot offer the comparable GAAP measure. Additionally, last night we posted an investor presentation with more details on our online investor relations page. In the long term we may continue to provide more data on our website and social media channels. Accordingly, we encourage our investors to monitor our online page and social media channels, in addition to our press releases, SEC filings and any public convention calls or webcasts. With that, I’ll hand it over to Geoff.
Geoffrey Ballotti
Thank you, Matt, and thank you to each and every one of you for joining us this morning. Despite a challenging RevPAR environment here in the United States, we are pleased to report another strong quarter of progress in executions, openings, retention and net room expansion worldwide. Additionally, beyond last week’s expiration, our Board of Directors increased our inventory repurchases. authorization of $400 million, demonstrating confidence in our ability to generate significant cash flow and commitment to delivering continued returns to shareholders in the coming year. We opened more than 13,000 rooms worldwide, 27% more rooms than last year, our largest first quarter of room openings since we went public just six years ago. We increased our franchisee retention rate across 30 core issues compared to the same period last year, to 95. 6%. We achieved a record 3. 7% increase in net room expansion and, more importantly, for the fifth consecutive quarter, we increased our pipeline by 8% to a record 243,000 rooms. Set of one-year improvement driven by a 3. 3% formula expansion in the more profit-intensive middle and upper segments. We added five0 hotels nationwide, adding 11 hotel conversions under the new WaterWalk Extended Stay via Wyndham brand, located in key markets such as Charlotte, Raleigh, Tucson and Jacksonville. WaterWalk via Wyndham adds premium rate PAR hotels to our formula while expanding our portfolio. in the premium extended stay segment, complementing our new-build ECHO Suites and mid-range Hawthorn Suites Extended Stay brands. Internationally, we increased net rooms by 1% sequentially and 8% year over year. Our Latin America team achieved more than 2% net room expansion sequentially and 6% net room expansion year-over-year, adding significant conversions from competitive brands such as the 600-room Wyndham São Paulo Convention Center hotel as well as the monetary capital of Brazil. such as the new Tryp via Wyndham Asunción are just steps from the famous grocery shopping centers of the capital of Paraguay. Our EMEA team, which added 49% more rooms to its development pipeline than in Q1 2023, once again built net rooms sequentially and across 12% year-over-year, adding ambitious hotels such as the Ramada Sapanca Thermal Resort in Turkey and the renowned Wyndham. H2 hotel in the center of Vienna, Austria. Last month I had the opportunity to stop over at our organizations in Singapore and Shanghai and participated in the signing ceremonies. for 27 of the more than 60 hotel contracts awarded to homeowners this quarter in the Asia-Pacific region. Our Southeast Asia and Pacific Rim region, which increased rooms by 2% sequentially and 16% year-over-year, entered several new markets, adding Pattaya, a booming recreational destination. expansion in Thailand. In January we opened Wyndham John Tien, a new luxury hotel in the first of eight other hotels we plan to open in the Pattaya market over the next five years. And our direct franchise team in China, which grew net rooms 1% sequentially and 13% year over year, also had another strong quarter of openings and fulfillments, awarding 38 new contracts to homeowners, more than 3 times the which was awarded last year. year during the first quarter. quarter and the opening of new hotels in structure and conversion throughout the country, such as the Wyndham Dalian Jinpu, an exclusive five-star hotel located in the city center of Henan province. In total, our organizations awarded 171 contracts for approximately 24,000 room additions. Domestic contracts signed in the first quarter were 50% higher than last year for our mid-scale and upper-scale segments and foreign signings in the first quarter were up 80% year-over-year. This acceleration in our growth activity brought our portfolio to a record 243,000 rooms and almost 2,000 hotels. Progressing midscale and premium brands grew 4% to a record 168,000 rooms and now make up approximately 70% of our portfolio. Our domestic portfolio for midscale and premium brands grew 4%, and the portfolio for our higher RevPAR foreign regions of EMEA and Latin America grew 21%. In the most challenging quarter we will face all year, national RevPAR ended down five% from 2023. National occupancy finished at 90% of 2019 levels, down four base emissions compared to the first quarter of 2023, while price strength remained strong with ADRs 14% higher. . than pre-COVID-19 levels, but still below inflation, which rose 23% over the same period. RevPAR progressed through 2four0 Foundation issues from February to March and accelerated in April. So far this month through April 20, national RevPAR is up 4% year-over-year, taking advantage of the shift from Easter to the first quarter and the weekend surrounding the solar eclipse on April 8. And profits recorded in May increased 7% compared to the same period last year. International RevPAR accrual increased 14% year over year in consistent currencies, driven by strength in Latin America, where RevPAR accrual increased 41%, and EMEA, where RevPAR accrual increased more than 10% and in China continues to face deflationary pressures and RevPAR is also increasing. grew more than 10% year over year, driven through ADR and occupancy, outpacing STR China’s RevPAR expansion through 700 foundation issuances. Ancillary earnings growth increased 8% in the first quarter, driven by good fortune from our Blue Thread licensing agreement with Travel + Leisure Group, as well as several new product offerings, such as our Wyndham Rewards paid business card from $9 and five, which earned Forbes’ Best Business Card Name for Road Warriors, thanks to its automatic diamond prestige and ability to achieve maximum productivity in class. 8 emissions for every dollar spent on hotel stays and fuel purchases. And last week, we introduced Wyndham Business to streamline the direct booking process for businesses of all types and sizes, as well as for travel planners who outsource hotel nights to our country’s 15 million traveler infrastructure. staff in the United States of America, offering planners a complete set of free equipment that guarantees their companies a minimum 10% room discount, easy direct billing, and instant organization bookings with activity. Personalized Wyndham Rewards to ensure a stylish trip. Plan procedure with personalized help. through committed sales professionals. We anticipate that Wyndham’s activity will not only drive more bookings at our chosen service hotels, but will also drive more memberships in Wyndham Rewards USA TODAY’s #1 loyalty program for 6 consecutive years, as well as more cardholders for our pool. co-branded. credit card products, offering us a new expansion channel for incidental payments. We are currently offering four distinct Wyndham Rewards credit card products beyond expirations in the United States and see significant opportunities to expand those products globally as Wyndham Rewards continues to gain prominence locally and abroad. foreign, more than four0% since 2019 and 7%. year after year, until reaching 108 million members. Finally, we would like to thank our franchisees and team members for their continued commitment and help over the past few months following Choice’s failed acquisition of our business. Still, it was no surprise to see Wyndham Hotels and Resorts chosen through Newsweek as one of America’s Most Trusted Companies on 202four and revered four times as one of the World’s Most Ethical Companies on 202four via Ethisphere. On behalf of our Board of Directors, we would also like to thank our shareholders for their overwhelming support. We are confident in our expansion strategy and our ability to create truly great prices in the short and long term. With that said, I will now turn the land over to Michele. Michelle?
Michele Allen
Thanks Geoff and hello everyone. I will begin my speech today with a detailed review of our effects in the first quarter. Then I’ll review our cash flow and balance sheet, followed by our outlook. Before we begin, let me remind everyone that the comparison of our quarterly results is affected by when we finalize our marketing budget, as discussed in our February call. In the first quarter of this year, marketing fund expenses exceeded revenue by $14 million, as expected, compared to expenses that exceeded revenue by $4 million in the first quarter of last year. To improve transparency and allow for better insight into the effects of our existing operations, I will highlight our effects on a comparable basis, which neutralizes the impact of the marketing budget. In the first quarter, we generated $304 million in payments and other currencies and $141 million in adjusted EBITDA. Fees and other currencies decreased $4 million year over year, reflecting a 4% decrease in royalties and franchise payments and a 3% decrease in merchandising currencies. These declines were partially offset by an 8% increase in incidental expense flows. The decrease in royalties and franchise payments primarily reflects a decline in U. S. RevPAR and the surpassing of our highest quarter by other franchisees, which was partially offset by a larger global formula and foreign RevPAR expansion . Ancillary currency receipts reflect the accrual of license payments and credit card currency receipts, as well as the effects of strategic marketing partnerships driven through projects that leverage the strength of our Wyndham Rewards loyalty program. Adjusted EBITDA accretion increased 3% on a comparable basis and our adjusted EBITDA margin improved by 250 base issues to 83%. First quarter adjusted diluted EPS was $0. 78, an increase of 1% compared to a comparable basis, reflecting adjusted EBITDA expansion as well as benefits from our percentage buyback activity, which were partially offset through an accumulation of interest charges. During the first quarter, we executed $275 million of new forward interest rate swaps on our Term Loan B facility, which will commence in the fourth quarter of 2024 and mature in the fourth quarter of 2027 at a rate slightly below 3. 4%. As a result, nearly all of our B term loans now redeem through the end of 2027 at a constant rate of 3. 3%, more than two hundred base issuances below existing SOFR levels. Free cash flow before progression advances and transaction pricing was $102 million, up 5% year-over-year, primarily reflecting adjusted EBITDA expansion. Development and construction progress increased $18 million year over year, reflecting our continued efforts to capitalize on opportunities in the competitive landscape, namely attracting higher-paying PAR homes to our formula around the world. We returned $89 million to our percentage shareholders in the first quarter through $57 million in percentage repurchases and $32 million in non-unusual inventory dividends. We ended the quarter with over $580 million in overall liquidity and our 3. 4x net leverage ratio was on the back foot. of our target diversity. We expect to end the year with a net leverage ratio of at least 3. 5 times, providing more than $400 million of capital available for percentage buybacks this year, or 7% of our notable percentages at recent value levels. Additionally, depending on the ability and ability to exploit M&A opportunities, we may simply increase our leverage to 4x, which would provide us with over $750 million in available capital, which would be equivalent to thirteen percent of our interests. notable. And with the Board’s recent approval of an additional $400 million in buyback authorization percentage, we now have about $800 million available under the program. Now let’s move on to the perspectives. We are raising our adjusted diluted EPS forecast from $0. 07 to a range of $4. 18 to $4. 30 to account for our first quarter percentage buyback activity. This outlook is based on a reduced diluted percentage count of 81. 6 million percentages and, as usual, excludes any potential long-term percentage buyback activity. Our RevPAR outlook remains unreplaced. As you may recall from our February call, we expected a challenging scenario in the first quarter, with slow improvement over the rest of 2024. Last year, in the second quarter, we began to see a shift in travel behavior. as COVID restrictions were lifted. Array cruises and reasonable air travel to destinations such as Mexico and the Caribbean have resumed, while domestic recreational hotels and drive-thru hotels have noted a decline in demand, especially along the coast. We saw national RevPAR slowly worsen in 2023, with birth rates declining modestly by 1% over the course of the year. in the second quarter, then increased to 4% by the end of the year. Now we are born to perceive those effects. Geoff has already mentioned some of the better results we started to see in March, April and May. Combining those recent developments with our expectations for additional infrastructure capture, as we move into the second part of the year and enter strong positive expansion overseas, we continue to forecast global expansion in full-year RevPAR of 2% to 3%. % this year. . There is also no replacement in our expectations related to the marketing budget. For the second quarter, we expect the budget to overspend by $5 million to $10 million, bringing the first-quarter overrun to approximately $20 million, a figure that is then expected to be the opposite during the second quarter of this quarter. anus. 7 million that we recorded in 2023, we now expect prices similar to the failed Choice acquisition attempt to succeed at approximately $50 million in total, down from the previous estimate of $75 million. The vast majority of this amount will be paid in the second quarter and don’t forget that those prices are excluded from our outlook for 2024. In conclusion, our first quarter effects reflect the good execution of our expansion strategy despite a decline in RevPAR throughout the company. sector in the United States. We continue to drive net room expansion and pipeline expansion. We generated a significant expansion in comfortable prices and improved our operating margins, thus generating additional profit expansion. And we continue to generate significant liquidity, while maintaining a strong balance sheet with sufficient leverage to deliver improved percentage returns to shareholders over the remainder of the year. That said, Geoff and I will be happy to answer your questions. Operator?
Operator
(Operator Instructions) We’ll start this morning with JPMorgan’s Joe Greff.
Joseph Richard Greff
Geoff, Michele, I know you communicate with your developers and your developer network frequently. I’d love to hear your feedback on some of the recent conversations you’ve had with them, especially after March 11, when Choice made the decision to end its follow-up on your purchase. Do you see, or are you being communicated, an acceleration or a pivot as far as development is concerned, so that any pause you’ve seen, has been reversed?And is there anything in those conversations that can also be simply more expressing the logo or conversion that you’d like to point out?And my last follow-up question related to this very sensible topic is, is it fair to think that this is actually starting to rise and rise now and it’s possibly you?We’re closer to 4%, the most sensible end of net growth from your bedroom. Target for the year compared to the midpoint?And that’s it for me.
Geoffrey Ballotti
Yes. Thanks joe. Absolutely. We see much less uncertainty in the progression community. Clearly we speak daily with our franchisees. I think our groups have been wonderfully successful, that was your consultation last quarter in the first consultation. In terms of whether last quarter was better, we had a wonderful fourth quarter, a full year of record openings. And again we had our largest first quarter of openings since we went public 6 years ago. But in fact, to answer your question about how to dispel the transaction noise, the homeowners who are unsure about transacting with us, the ones who didn’t need to end up on the Choice formula, agreed to sign. And I think there is no more wonderful example than the dozen WaterWalk conversions we completed this month. So, yeah, I mean, the conversations, the trfinish, the pause, if there was one, have changed, and we’re definitely seeing a lot more activity on the conversion front and new structure signings. Our groups had a very smart quarter, not only on the conversion side, our conversion rooms are opening from a hiring attitude up over 20% during the quarter, but new build executions were also up. increase. They’re up double digits, over 20%, I think, compared to the first quarter and even before COVID. And so, yes, we are actually positive about the tenor of the conversations that are taking place with our franchise progression groups and any uncertainty that existed in terms of doing business with us has really disappeared.
Joseph Richard Greff
And then, in terms of the high end of net room expansion, is it more moderate than the midpoint?
Geoffrey Ballotti
Sure, look, I mean, we’re feeling really smart right now: we’ve increased our rate from 2 to 4% to 3 to 4%, as you saw, and we just ended the first quarter with a net space expansion of 3. 7. % and we think we’re firing on all cylinders. The other piece, of course, is retention, and we’re making wonderful progress. I mean, we’ve said that expanding our retention through one point increases our net space expansion through one point, and our retention continues to improve locally and internationally. In the last few years, since our IPO, we’ve gone from 93% to over 95% and this quarter, nationally, we saw an improvement in retention of: I think it was 20 issuances from one year to the next. And internationally, our retention improved through 30 foundational issuances. Therefore, this 2-4% net room expansion target, which was building up to 3-4% with the first quarter at 3. 7%, our highest quarter on record, gives us the confidence to continue to grow this figure.
Operator
Let’s now turn to David Katz of Jefferies.
David Brian Katz
In relation to the topic of NUG, I wanted to go a little further. One of the things that I noticed and I think the offer that you’ve included in your ad is an example of that, because we’re seeing affiliate-type offers. Can we communicate more about the NUG environment in general?Should we see more such transactions? And give us a little insight into the intensity of the gains from those kinds of deals, because it turns out to be more than just yourself, an industry trend.
Geoffrey Ballotti
Of course. I mean, I think if you look at our portfolio, what you’ll continue to see, David, is that it’s more geared toward higher RevPAR premium logos like WaterWalk, which I’ll talk about in a second. I mean, if you look at our openings this quarter, we will continue to be leaders in the economy segment, however, when it comes to the mid-scale and high-end segments, our openings in the first quarter, mid-scale, upper-mid scale, high-end high, they increased. 30%. Our executions in terms of what our organizations were promoting were more in that profit-intensive segment. The number of executions increased by up to 70% year after year. And that’s actually reflected in the way we’ve laid it out in our intellectual property, in our portfolio, our mid-tier and upper-tier portfolio in the more profit-intensive segments, which are not only related to higher PAR rates, but that also They also have higher royalties, the ability to increase those that have higher royalties. As for WaterWalk, it is a direct franchise agreement with conversion, something we are very excited about. This is a quote with a premium logo that is very strong in more profit-intensive segments and has the perfect pedigree. It is run through the highly motivated granddaughter of the late Jack DeBore, who I think many on this call know was the founder of Residence Inn, Summerfield and Candlewood Suites and it is run through an organization of very experienced expanders. Jim Anhut, 20-year veteran of IHG, Jim Mrha, 35-year veteran of Marriott and MGM, and Jim Strawn, president of WoodSpring. These guys have built a dozen high-end smart hotels in some primary markets that we talk about in the script. I mean, if you look at Matt’s IP cover, which you posted last night, you’ll see a photo of one of those big-grossing hotels, like the WaterWalk through Wyndham Boise, which just earned nine out of 10 stars in the maximum number of online review sites. . Therefore, it is an excellent high-end complement to our economy and a mid-range long-term product. This is a new conversion and new construction and conversion opportunities for us and our organizations reaching out to older generation 1 homeowners who are still premium logos facing PIP calls. There is currently no pipeline, but we plan to build one. Our long-term supply is underserved and demand is increasing. Therefore, our franchise sales organizations will look to aggressively expand this logo. And it allows us to sell a long-term premium logo that we haven’t had to sell before. And a final point to your question: Are there other deals like this that we can make, absolutely?
David Brian Katz
So, to keep us up to date, that’s right, Michele, I go back to a part of your comment about the possibility of achieving 4x leverage. Obviously, we pay attention with a high level of scrutiny. Does that mean maybe there are some things in attitude that we deserve to keep in mind and prepare for the rest of this year?Or was it just setting boundaries?
Michele Allen
I think it’s about setting boundaries, maybe a floor and a ceiling for the buyback rate, David. But our first priority, we have said, when it comes to capital allocation, is to invest in our business for long-term expansion, and that can be done through biological or inbiological opportunities, and that would come with mergers and acquisitions. We are pleased with the progress we made this quarter toward our net room expansion and pipeline expansion approvals. Therefore, our strategy is in place and we can enter into a long-term franchise agreement that generates great income. I think WaterWalk is a smart example of implementing this strategy. But when we think about inventory buybacks, I think we’re probably moving toward doing a minimum of $400 million, and then we could exceed $400 million depending on the availability and viability of those opportunities. ‘investment. And the one thing I would probably say is that we think the inventory is particularly undervalued at existing trading levels, so this represents an interesting investment opportunity, which is why our recommendation to management recently legalized another $400 million in inventory buyback, which then gives us the opportunity to exceed that $400 million.
Operator
Now we’ll talk about Dany Asad of Bank of America.
Dany Asad
In his opening remarks, he indicated that the national occupancy rate is 90% of that of 2019. Maybe you can help us get an idea of the remaining 10 points, where do they come from, whether it’s geographies or segments?
Michele Allen
The remaining 10 occupancy issues will come from across the U. S. , followed by the Southeast Asia and China regions, which we continue to index below 2019 degrees in the U. S. and Asia-Pacific. We see it not only in the middle of the week, but also on weekends today. So we really believe that there is an opportunity around the world to improve the occupancy rate. I think for the rest of the year, the RevPAR forecast assumes that we’re going to gain some other point. of occupation. I don’t think it’s specific to any specific region.
Dany Asad
They gave it to me. It is ok. And then, as a follow-up, maybe at a slightly higher level. Just keep an eye out for the expansion of your units, which has accelerated a lot over the years; We’re at the 3-4% room expansion diversity you’ve had. Guided. But when we take a look at its nationwide expansion, it turns out that much of that additional expansion comes from the scale of its premium chain. And at the same time, we go back to what his footprint looked like. in 2018, 2019, and has 12-13% fewer budget rooms than it did back then. So could you help us understand what’s driving this dynamic, and if you’re looking at it from a strategic perspective?What if Wyndham is actively applying to succeed in larger chains?
Geoffrey Ballotti
Yes, Dany, I would actively say, we are surely moving towards the higher chains, as I said in the previous consultation. But we will seek to become leaders in the economic segment. Now, to answer the first component of your question about the reasons for the decline of the economy, I would say that despite the limited supply of newcomers to the economic segment, where a third of the outputs of our economic formula go to non-use hotelier. And second component of that question, why are they leaving? These majority were older and lower quality homes. This quarter we again experienced the highest rate of economic expansion since 2017, to return to its point, before our IPO. Our owner-focused pricing proposition is sure to resonate with franchisees. We recorded a gross profit in the economic sector of 3%. And our retention rate, I think STR Economy’s retention rate was several hundred core issues lower than our 95%+ retention rate at Economy. Therefore, we are pleased that our retention rate in economics continues to improve. We are pleased with the transaction volumes we have seen. Surely with ECHO we will improve our economic prospects. And yes, we are very pleased nationally with the 3% net room expansion in the midscale and upper scale segments, which, to answer your question, we will continue to focus on.
Operator
Now we’ll move on to Baird’s Michael Bellisario.
Michel José Bellisario
Just my first question, I need to go back to net unit growth, but concentrate on pocket coins in complex progression notes. Perhaps it will help us understand what returns you are looking for on those investments?And then secondly, we can look at the dollars that appear on the statement of the coins, but maybe it helps us understand what percentage of signed or open deals you’re actually investing coins in.
Michele Allen
From a performance perspective, we aim for minimum rates of return that are well above our capital charge, and that’s part of our underwriting process. Geoff just talked about moving to higher RevPAR chains and over 75% of the deals we fund. The quarter fell into that category. And then, of course, we’re also starting to see some of our investment in ECHO disappear. So we’re excited about the progress we’ve made and the strategy of employing a key budget to get into those top sectors. Large-scale, higher-RevPAR markets work. And I would argue that the key amount is not necessarily tied to an express percentage of transactions. We are happy to take advantage of opportunities when they arise. Was there a time to ask that question, I think I possibly would have missed.
Michel José Bellisario
I guess the percentage of signed or open deals that you’re investing cash in, the more productive question is how much higher compared to previous years or not?
Michele Allen
No, I think it is. As more of our openings and additions to the formula reach a higher point: the upper RevPAR chains and the higher RevPAR markets. We must participate and we are willing to participate more in those spaces because they constitute greater returns, only from a subscription perspective.
Michel José Bellisario
Compris. Compris. Et then my follow-up is on the buyback, but in the same vein on the expense front, what are the resources?Or what is the source of capital for this slow redemption?Are those lines of credit loans, or are there other capital resources you can use to fund those buybacks and better manage interest costs?
Michele Allen
No, most of that will come from leverage this year.
Operator
Now let’s move on to Patrick Scholes of Truist.
Charles-Patrick Scholes
My first question is this: when I look at where inventory is traded, I look at the valuation multiple, it turns out to be as reasonable as ever, and the spread of valuation multiples between you and the C Corps maximum. What do you think investors are missing here?I’d like to hear your thoughts on that.
Geoffrey Ballotti
Yes, that’s a wonderful question, Patrick. And it’s a question we ask ourselves every day. I mean, we’re actually excited about what’s happened to us since we went public 6 years ago. I think compared to everyone else, we are an absolutely natural player now. We sold our own hotels as investors asked us to do. We sold our controlled hotels. We have terminated all HMA guarantee agreements we had in place and are now developing the way investors want us to do so. That’s why I think investors want us to continue producing the same effects as we have until now. We have a larger pipeline since our IPO, up to 40%, to reach, as seen in the pipeline presentation, almost 2,000 hotels. And we will have to continue to keep our promises. There have been thirteen consecutive quarters in which EPS and adjusted EBITDA have been above consensus. And we have an industry-leading EBITDA margin. That’s why we want to continue telling our story of shareholder setbacks. We have supported $2 billion of capital for our shareholders and continue to execute on our actions. I believe we opened more hotels last year than any other public company, with over 500 openings and 66,000 rooms. While there may be concerns, and we hear this every day regarding the RevPAR macro environment, which is indeed weighing on us, we believe that we simply want to continue doing what we are doing, and in fact, we are pleased with each and every one of the things we’re doing in terms of retention, to grow our business, to continue to add revenue-generating rooms to the portfolio and to continue our retention rates. And we want to continue to show investors that there is a huge ancillary payment opportunity that we are starting to take advantage of. See, you started seeing that this quarter. And I think ultimately we want to continue to show investors that we’re very disciplined in capital allocation in terms of the accretive deals that we’ve done, like Vienna House and launching new brands like ECHO and now WaterWalk. while we continue to distribute a dividend rate in the 30s and return excess money to shareholders.
Charles-Patrick Scholes
It is ok. I think anything that might prove useful would be to organize a great investor day. I don’t think he’s had one of his in several years. So that’s my unsolicited opinion on anything that might help. Let us move on to my supplementary question. Is there anything that you, as members of the leadership team, think you can do better right now?
Geoffrey Ballotti
I mean, I think the one thing the last 10 months have shown us is that we can continually improve when it comes to our communications with each and every one. In 10 months, I think the only thing we’ve learned is that more communication is more with our team members, in fact, as you pointed out, with our shareholders and investors and with our franchisees. I mean, we feel like we have a franchisee engagement point that’s at an all-time high. The most productive measure of this is, in fact, our retention rate, and we want to continue to work on that.
Operator
Now let’s move on to Brandt Montour of Barclays.
Brandt Antoine Montour
So, that’s the infrastructure spending and implied accumulation that they expect for the rest of the year in this segment. Can you give us an idea of what you think you did in the first quarter?Or what kind of delta or did you get that activity in the first quarter of that segment?And then when, essentially in this component of your business, is that activity already booked?Or what kind of dynamic is there around your visibility for that express company that gives you that confidence?
Geoffrey Ballotti
It’s a wonderful question, Brandt, in terms of visibility. There’s a slide in our investor presentation that indicates we saw a slight increase in federal government allocations, from 15% last year to almost 40% of the $640 billion in additional spending in the $1 trillion pool. billions of dollars. And it’s primarily for the states, although only a fraction of that amount has been spent from a visibility standpoint. I mean, when you think about those big bridge, highway, train, and airport projects, the shovels haven’t hit the ground yet. But since investing in our capabilities, we have seen an 11% increase in infrastructure profits for our franchisees. And everything we do around that. Last week we launched Wyndham Business to help manage business needs, offering discounts and allowing planners to book directly without needing to submit a request for proposal or contract with one of our franchise hotels. And the velocity of the programs quickly doubled, and we think that’s going to help drive this double-digit increase that we’re seeing in leads for those projects. We saw a 20% increase in new accounts. Therefore, we believe that we have enormous prospects in the coming quarters. We think, Michele, that will translate into about $5 million in royalty profits for us this year. And we’ve explained what we think that means for us once those projects are live. Maybe it would stop him there. Well, despite everything I would say one thing. I think an opportunity that we also believe exists and that we are starting to see is the recovery of the oil and fuel markets. I mean, when you think, Brandt, about the expansion of the country’s demand for electric power due to the structure of knowledge centers, the rise of AI, or the electric vehicle charging stations that are driving the electrification of the United States , plant fuel is making a comeback. . And some of the largest oil and fuel companies in our country. States are experiencing a steady recovery that they are increasingly excited about. Last night I had the opportunity to speak with the CEO of one of our giant landlords, who owns a lot of properties, a lot of Microtel Super 8s and Hawthorn Suites in West Virginia. He sees trucks in his parking lot. He said the profession was slowly losing ground. ADR is not there yet, but is very optimistic. And when we take a look at the states that performed much better than last year in some of those oil and fuel states. I think West Virginia went up about 5% over the last year and Louisiana went up the same. Alaska rose double digits. So with more than 10% of our formula located in the oil and fuel markets, we also feel, in addition to the infrastructure, very well placed to take advantage of this pullback as a tailwind.
Brandt Antoine Montour
It is ok. And perhaps, on the other hand, when it comes to domestic recreation, I think we have a smart idea of easing measures, but we don’t take into account what we’re all seeing elsewhere in the macroeconomic context and for low- and middle-income countries. -Revenue customers, I’m guessing we’re headed into the big recreational season this summer. This is regularly a strong calendar era for you. What are some signs they might point out or what do they observe year after year that gives you an idea of how that customer is preparing for this summer?
Geoffrey Ballotti
Of course. I go back a bit to Patrick’s earlier question about what weighs on our actions. This is the fear of this middle-income guest. But what we’re seeing is that those middle-income clients also have more jobs, and we’re chasing their salaries and their savings. It’s. . . they’re above what they were before COVID-19. Their house prices have increased, their stock has increased, their deposit levels are strong and they are in good shape. We take a look at customer trust. It is growing noticeably. If you take a look at the monthly report, I think customer confidence increased, particularly from around 65% to almost 80% between last March and last March. We took a look at dwell lengths and continue to see dwell lengths that are a few hundred fundamental issues longer than before things slowed down. We review booking windows daily and they continue to grow. We talked about our trends ahead of Memorial Day weekend and the month of May. But our booking windows also increased by 7% compared to last year, now going from 19 to 21 days. Cancellation rates are strong and people are driving more than before COVID, accounting for around 90% of our domestic demand. And we believe it will continue to be the number one vacation preference this summer.
Operator
Now let’s move on to Stephen Grambling of Morgan Stanley.
Stephen White Grambling
I’m guessing I’m following up on shareholder feedback. I guess one of the spaces we’re wondering about is how the net expansion of units in process and portfolio translates into fees. Looking at the project portfolio, you provided some statistics on expansion in the mid-range and upper-range. Can you quantify or give us an idea of how the portfolio’s royalty rates and RevPAR compare to the existing base, i. e. if we think about some of the new logo launches and how the portfolio has evolved over the past few years?
Michele Allen
Yes, right. If you think about our progression focused on maximum revenue generation deals, our domestic portfolio currently has a RevPAR premium of more than 15% compared to our existing formula and an average royalty rate that is at least five base issuances higher than our current one. formula. formula. And in particular, by double-clicking on the mid and high-scale segment, we see a 30% RevPAR premium for those hotels compared to our existing formula. But it’s not just in the U. S. We are targeting the U. S. for this purpose of expanding royalties. Rate and introduction of higher rate PAR rooms, we are seeing it around the world and as we concentrate on developing our direct franchise business. And here we see royalty rates that are on average 15% higher than our existing foreign formula.
Stephen White Grambling
Worked.
Operator
We will now talk about Steve Pizzella of Deutsche Bank.
Steven Donald Pizzella
The improvement in RevPAR seen from February to March was impressive, especially against a backdrop of STR, a limited service, with RevPAR slowing down from February to March, implying some percentage gains in the market for you. What do you think motivates you this, and how do we deserve to take a look at this in the future?
Geoffrey Ballotti
Yes. In fact, Steven, we saw this recovery in March. I think we saw a steady increase in the percentage of over a hundred foundation issues in March as the recreational sector increased, and a lot of our business is driven by the recreational sector. I think we’re also seeing travelers whose government and corporate subsidies have dried up are starting to look at us. Our brands have traditionally outperformed broader segments of the accommodation market when macroeconomic pressures exist, and we believe we can continue to do so. And in fact, our brands, our core brands, continue to become over-indexed from a stock market standpoint. Our newest ADD for April, our big brands, La Quinta and Hawthorn Suites, as well as Microtel, are more than fair. Days Inn, once again, is very proud of our team and all of the wonderful paintings we make. With Days Inn and Su for 8, Days Inn went from 117% to 120% of the market right according to the percentage in our last presentation. And that’s actually because of all the wonderful work that our market placement teams are doing on the Wyndham Rewards side. Our percentage-consistent occupancy continues to grow. It’s up – I think it’s up over 700 foundation issuances nationally from what it was pre-COVID. So, we will continue to announce that and we will look to continue to increase our steady share of energy, making them more competitive, even in ADR, in the long term. And look for that core business, that infrastructure business, to get it on the books as much as possible, because our global sales groups can just contract that business, allowing franchisees to get their pricing closer to arrival on weekends. . . And that’s what we’re starting to see.
Steven Donald Pizzella
It is ok. And then you just have to take a look at the margins. Margins excluding marketing expenses were strong in the quarter. How much of your year-over-year margin targets comes from higher-margin ancillary revenue?And how much of the fundamental operating expenses are there? And how do we deserve to take a look at this in the future?
Michele Allen
I think it’s quite a lot, out of the most sensible of my head, and Matt, I have to back up to confirm, however, I think it’s about 2/3 of the auxiliaries and maybe 0. 33 of the load side.
Matt Capuzzi
Yes, that sounds good.
Michele Allen
We, yes, and we expect it, we expect margins to be comparable year-over-year on a full year-over-year basis.
Operator
Now we’ll move on to Oppenheimer’s Ian Zaffino.
Isaac Arthur Sellhausen
I’m Isaac Sellhausen for Ian. Just a follow-up on the effects on the infrastructure. Could you help us understand how the 1% to 2% accrual is distributed between ADR and occupancy?I don’t know if you can detail it specifically, yet. It is clear that there is a great opportunity to close the gap with 2019 occupancy levels.
Geoffrey Ballotti
We’re seeing a massive occupancy rate, more than the rate. One of our biggest disruptions is our tariff, our pre-pricing, as we said in our immediate statements, with a fare that goes up to 14%. We teach and work with our franchisees to make sure that when one of our sales reps in the field, global sales groups bring them an infrastructure account, they not only respond promptly to the RFP, but also realize that foundation. The cases I just mentioned are very important, even if they require a much longer length of stay and a lower average rate.
Isaac Arthur Sellhausen
Okay, I get it. And then a quick follow-up on extended stays. When do we expect the first ECHO Suites locations to open their doors?And maybe what’s the timeline for WaterWalk conversions as well?
Geoffrey Ballotti
Of course. This is a wonderful question we ask our developers all the time. Slide 8 of our investor presentation, if you look over there, shows part of a dozen dozen that are nearing completion and expected to open soon across the country. We now have a dozen hotels under construction in 10 states from Texas (well, from Florida to the entire country) and another 30 locations in active development. It will be up to the local inspection offices who receives your first certificate of occupancy. But I suppose it deserves to take place this summer. I guess developers in Plano, Texas, and Spartanburg, South Carolina, are vying for the grand opening we’re all sure to witness. As far as WaterWalk goes, I think in terms of timing, and we just announced this deal, we’re doing everything we need to do lately to get them on our distribution platforms and move more combines into live. and provide them with more Wyndham Business to generate operating margins. But like I said, this is a channel that our franchise sales team is very excited to start building. And it will be a combination of conversion and new structure in the future.
Operator
Now we’ll hear from Alex Brignall of Redburn Atlantic.
Alex Brignall
The first one is about RevPAR. This is a broader query that I asked everyone. But in the comparisons to which he refers, evidently, the year-over-year figure in the first quarter of 23 was the highest. But according to its own information, the figure compared to 2019 was the lowest in the first quarter of 2023. And that’s around 700 more complicated fundamental issues compared to 2019 and the second part of 2023. In Europe, it is clear that all this is not the case in the United States. Everything is international. . . In Europe, we’re starting to see year-on-year numbers turn negative, especially in the UK, because compared to 2019, that’s when things got trickier. to reconcile the way he looks at that comparison to 2019 than the year-over-year number he talked about.
Geoffrey Ballotti
Thanks Alex. I’ll let Michele dive into competitions year after year. But in general we are very satisfied with what happened in Europe. All of our largest countries recorded positive year-on-year results. And let’s communicate for a moment from one year to the next, because then I think I’ll get to the heart of the matter, which is the tailwind that we still have going into 2019. But we looked at Germany and you talked about the United Kingdom. , whether with some sort of low single-digit annual expansion. The United Kingdom was for us rate and occupancy. I think we are up about 3% in the UK in a year, 1 point was -2 issues for the rate. The profession was probably flat. And we also saw double-digit expansion in Türkiye and Spain. But the opportunity for the rest of the year is still a tailwind in terms of occupancy if you look back at 2019. I mean, compared to 2019, overseas has accelerated, and I think that’s at play, going from 45% from the third quarter to the fourth quarter to 60%, was for the first quarter compared to 2019. So there are 14 solid occupancy issues to capture on a foreign scale. And around the world, all of our regions are experiencing a very strong increase. And obviously foreign corporations have contracted and MICE is very vital for us. We see a pickup there. European tour operators are very optimistic. European cheap airlines predict an unprecedented summer. Therefore, our European team is encouraged and we see opportunities there, as well as in Asia. But Michele, I don’t know if you need to upload anything about that.
Michele Allen
I think the only thing that would go up is that the peak of the expansion we saw in the first quarter compared to 2019 is due to ADR and pricing power. This is not the resumption of the occupation. We still have a long way to go in terms of occupancy recovery in EMEA, Asia Pacific and most overseas regions. So that’s what we’re focusing on from an external recovery perspective.
Alex Brignall
It is ok. Fantastic. And then just a follow-up. He has had phenomenal firm roles during the COVID crisis, far greater than some of his peers. And it turns out that it continued like that after the break you had and that it wasn’t your fault. Do you think the strength of the first quarter is due to the stronger market?Or would you largely regard it as part of your own kind of functionality and perhaps pick up some component that had been retained while dealing with other people?
Geoffrey Ballotti
Of course. I’d say it’s more of the latter, Alex. I, our new one, you look at it, we look at it either way, from a conversion point of view and from a new build point of view, but our new build prototypes are La Quintas, our double logo La Quinta and Hawthorn, our Microtel, our ECHOs. Suites. I mean, they all worked well with the developers. And all this uncertainty of the pause that reigned, all the conversations that we had that can be interrupted, are starting all over again. Our executions of new structures were up 20% compared to, as I said, pre-COVID times. And you can see that reflected in our project portfolio and, indeed, in the conversion room firms: because of the owner-first price proposition that we offer, we are still, in our view, performing well in the metal business. And there’s no explanation as to why we can’t do that. Keep doing it.
Operator
Now we’ll answer the next one from Dan Wasiolek of Morningstar.
Dan Wasiolek
You’ve talked about it before in some ways, but just in relation to that, I guess the favorable outlook for the ADR rate narrows that hole with inflation and the recovery in employment that you would possibly still have. What do you think of this beyond this year?I mean, barring an economic downturn and a possible tailwind of a few years for the RevPAR expansion that we can expect, is that the kind of expansion that’s expected this year over the next few years?
Michele Allen
I think it’s a multi-year recovery, especially on the occupancy side, and we know that during periods of developing demand, it’s conceivable to push rates up. I would say that in the absence of a recovery in the occupancy rate I think there is still room for ADR expansion, especially compared to the inflation rate. Therefore, we see it as a multi-year recovery in occupancy rate and ADRs worldwide.
Operator
Now let’s move on to HSBC’s Meredith Jensen.
Meredith Jane Prichard Jensen
Were you interested in Wyndham for Business and how the new platform might differ from what existed before?And what kind of metrics or types of questions can we ask in the long run to track progress, keeping in mind what teams and small businesses look like for your company?the whole business?
Geoffrey Ballotti
Of course. Well, we raised it a lot. Meredith, we’ve clearly been focused on helping businesses manage their needs and offer them discounts, but we’re looking to help planners make e-booking easier. And I think the metric to look at is the number of members we have and the velocity of the programs and the signing of those programs. And as I’ve said since we introduced it just a week ago, our weekly velocity has doubled and will continue to motivate the 1. 8 million businesses booking this infrastructure activity for our mid-range hotel and service economy around the world. . . country. So, this is just one of them. We’ve done a lot of things from a generational mindset to continue to make it less difficult to do business with us. We have invested a lot in our capabilities. And we grew our sales team to sell Wyndham Business. We have increased our sales team by 25% and we will continue to implement more new generation like this that allows them to make e-books without having to pass out to bid. This is something the team is really passionate about because they know it. I think we talked about this in the last call, over 3,600 projects within 10 miles of our hotel markets, with several hotels in those markets seeking contracts, because again, it’s very early. Although 40% of those expenses have been allocated, they have not yet been allocated and we must ensure that they are allocated with us.
Meredith Jane Prichard Jensen
A last and quick one, and sorry if I missed this before. If you can talk only about the type of engagement and loyalty program between brands. If there is any kind of difference in terms of profession or involvement, and internationally, what do you see?
Geoffrey Ballotti
Of course. Our occupancy rate, and you didn’t miss it, I don’t think so, Meredith, we talked about that. But I highlighted that our occupancy rate increased to more than 700 basis points, which is vital for our franchisees. This is one of the most important marketing pricing proposals our franchise sales team has. And it is higher domestically than abroad. Approximately one in two registrations is made in the United States of America. Here in this country we will ask for your loyalty points. Abroad, this percentage of profession is lower. But abroad the number is increasing. Its expansion is faster and it has the opportunity to continue growing. I think our overall occupancy rate nationally is about 1 in 2. I think globally we’re getting to a 40% occupancy rate. And thanks to the work our marketing teams are doing in countries like China, our Chinese team is very optimistic. Wyndham’s reputation continues to grow. We’re thinking about incidental payment opportunities there. I mean, we’ve focused a lot more. And from a virtual marketing perspective, I mean, they’re doing a lot of artistic things there, we may continue to surpass that level.
Operator
And our last consultation will come from Patrick Scholes from Truist with a follow-up consultation.
Charles-Patrick Scholes
Just a follow-up query here related to quarterly results, especially foreign ones. Certainly, in Latin America, their numbers have been phenomenal. Can you give us a little more detail about how you achieved 41% RevPAR?Certainly, this surprised us all.
Geoffrey Ballotti
That’s a smart question, most of Patrick’s. It’s in Argentina, and you know all about hyperinflation there. Excluding Argentina, our RevPAR for Latin America is around 3% and that’s because Argentina clearly had a wonderful quarter. A vital market for us, but that’s the most important thing. We had smart effects in Brazil. We had smart effects in Peru.
Charles-Patrick Scholes
It is ok. And finally, in China, you did much more than the whole market. What motivated this?
Geoffrey Ballotti
Of course. Again, our Chinese team, as I just told Meredith, is very, very optimistic. We’re seeing more domestic travel. The ability to fly is one of them. Obviously, some of our colleagues have talked about not being able to fly in terms of cargo like they did before. But our team says load awareness is also a component of it. If we take a look at the travel behavior of Chinese people this year, they are choosing to stay closer to home, especially during the Chinese New Year period. It was February 10th, I think it was for 8 days. We have noticed a very strong repetition. more domestic travel. And we think that will continue for the rest of the year. In terms of where that’s going to happen, our Tier 1 cities, our great Wyndhams, the big Wyndham brands are doing very, very well and probably outperforming the Tier 2 and 3 towns that we’re in.
Operator
At this point, Mr. Ballotti, I would like to come back to you, sir, for any final remarks.
Geoffrey Ballotti
It is ok. Thank you and thank you all for your questions and at Wyndham Hotels.
Operator
Thank you, Mr. Ballotti. This concludes today’s Wyndham Hotels first quarter 2024 earnings conference call.