Wyndham CEO Talks Labor, Loyalty and Gen X During Q2 2021 Earnings Call
During Wyndham Hotels & Resorts Inc Q2 2021 Earnings Call on Jul 30, 2021, Geoff Ballotti, President and CEO, shared that the company was “very pleased” with its second quarter performance. According to Ballotti, global RevPAR increased 110 percent versus last year and domestic economy RevPAR exceeded 2019 levels by nearly 4 percent.
Additionally, occupancy in the U.S. improved nearly 600 basis points in June compared to May. While June domestic RevPAR grew nearly 80 percent to 2020 and was up 1 percent to 2019. June was also the third consecutive month that Wyndham’s economy brands exceeded 2019 levels with a 7 percent RevPAR increase versus 2019.
“The week leading into July is our busiest independent holiday week on record and for the past three weeks domestic Rev Par is up 75% month-to-date versus last year and upper remarkable 7% versus 2019,” Ballotti said.
As so many hotels are reporting, leisure demand is driving much of the recovery for Wyndham with nine out of 10 of guests driving to their hotel this quarter. Ballotti also noted that booking windows continue to expand and average rates of stay once again grew.
Change in Consumer Travel Patterns Fuel Profits
Ballotti believes that this return to a more normal travel pattern, is being fueled by a few important factors. First, household savings have hit a 10-year high with most consumers improving their financial situation during the pandemic and these same consumers are also ranking travel as a top priority for discretionary spending.
“Second, consumers are vacationing more often. Survey tracking post stay data reveal that approximately 60 percent of our customers have already stayed in a hotel in 2021 with nearly 70 percent are planning a trip over the next 90 days,” Ballotti revealed. “This intent to travel among our leisure customers is higher than it was a year ago. Weekend and short four night breaks generated the largest percentage of our guests leisure stays, followed by travel to visit family and friends.”
Wyndham believes that new consumer travel patterns could significantly disrupt the traditional revenue management model where Sundays and Mondays are the lowest demand nights.
“In fact, this is exactly what we're experiencing right now with Sunday and Monday occupancy having picked up 10 points of growth in Q2 versus Q1 as compared to 2019,” Ballotti added.
Labor Woes
In June, domestic ADR exceeded 2019 by 9 percent and this accelerated in July with month-to-date ADR surpassing 2019s ADR by 10 percent, Ballotti revealed.
“Our teams have provided more training than ever on the importance of driving average rate over occupancy, particularly in this challenging labor environment and ensuring that our franchisees are taking advantage of the suite of revenue management and technology tools and services that we provide to them,” he added.
When asked to elaborate on the company’s viewpoint of the staffing shortage, Ballotti noted that “labor has been an issue in this industry long before the pandemic. In 2019 our industry had 10 million jobs available and only 9 million were filled.”
For Wyndham in particular, Ballotti explained that its economy and midscale hotels were having “much less of an issue” with staffing woes. But that wasn’t to say the brand, and the industry in general, isn’t in need of more workers.
“Our industry needs more housekeepers. We need more guest service agents. We need more culinary team members,” he added. “And our operation support teams are working very hard on educating our owners on what they can be doing from a daily labor monitoring basis. We've got a lot of tools and software out there. What we could be providing to attract employees and associates better benefits workers flexibility, and how we could leverage staff among neighboring hotels. Our franchisees, our small business owners are working very hard at recruiting and trying to get the word out on just what a great industry this is.”
Wyndham Wins with Direct Bookings
Ballotti also noted that its hotels are benefitting from a greater share of direct bookings. When comparing 2021 direct bookings to 2019 direct bookings, the company saw an increase of 500 basis points in Q1 and 600 basis points in Q2, outpacing the growth of OTA and third-party channels.
“Our award winning Wyndham Hotels and Resorts mobile app continues to be our fastest growing direct booking channel with second quarter reservations up approximately 60% versus 2019,” Ballotti shared.
Wyndham Rewards is also contributing to a significant growth in direct bookings, reports the brand. Wyndham rewards share of occupancy grew 500 basis points domestically and over 550 basis points globally from where it was at the end of the Q2 2019. This proves, according to Ballotti, “the increasing preference for both the program and for our brands with nearly one out of every two domestic guests asking for their Wyndham rewards points at check-in.”
Wyndham plans to continue to build upon this affinity through the remainder of the summer season by marketing directly to non-members with incentives around long weekend getaways and mid-week leisure vacations. Specifically the brand plans to encourage non-members to book direct, stay longer, and enroll in the rewards program.
Wyndham Targets Gen Z & Gen X
In particular, the brand will be targeting Gen Z and Gen X travelers since they appear to be the “most eager to vacation with nearly 40 percent identifying budget friendly as a key consideration,” Ballottti added. “This younger demographic now represents our number one segment from a demand standpoint and it's grown from 62 percent of arrivals in 2019 to 65 percent of arrivals year-to-date.
“We believe that continuing to expand our marketing funnels to cast a wider net to target these younger consumers with data lead engagement strategies and close user group loyalty incentives will allow us to continue to grow member enrollments as we aim to drive more than 50% of the nightly check-ins through non-OTA commissionable channels,” he said.
Ballotti went on to explain during the Q&A section of the conference call that Alphabet – parent company to Google – mentioned on a call a few days earlier that across all of their search and display and YouTube channels, Wyndham was driving two times the number of direct bookings at a lower cost of acquisition, which is generating incremental impressions that Millennials are seeing on their devices.
“If we can enroll those Millennials into Wyndham rewards, we believe we could add another two million members this quarter and grow that all important shared occupancy, which is now contributing roughly one out of every two check-ins.”