PARSIPPANY, New Jersey—Hotel industry fundamentals are still growing, but that growth has become muted of late, executives said during Wyndham Worldwide Corporation’s third-quarter earnings call Wednesday.
Revenue per available room growth in particular is “moderating,” said Stephen P. Holmes, chairman and CEO of Wyndham Worldwide. The company reported that total system-wide RevPAR increased by 3% when adjusted for constant currency.
Holmes told analysts he is not concerned about the growth slowdown in RevPAR. “We don’t see any (RevPAR) cliff coming,” he said.
Looking back over the previous several hotel cycles, it’s common to see growth lag at times, Holmes said.
“I don’t think this is anything, frankly, unusual,” he said.
Holmes attributed the slower growth to increased new-build startups in the sector, especially in urban markets such as New York.
“We continued to see new construction financing, even during the downturn,” he said. “There’s always been a little bit out there.”
While Holmes said he has seen an increase in construction financing, the growth in availability of that kind of debt is “nothing dramatic.”
Development opportunities
Indeed, Holmes said development opportunities are expanding for the company, even as RevPAR slows. The company’s development pipeline includes approximately 950 hotels and 108,300 rooms, of which 55% were new construction as of 30 September and 47% were global.
The company will “aggressively” pursue additional rooms growth, Holmes said.
As of the end of the third quarter, Wyndham’s hotel system consisted of nearly 7,260 properties and approximately 618,100 rooms.
Asia/Pacific is one of the hottest development regions for Wyndham, Holmes said. Development in the region is up 26%, led by growth of the Super 8 brand.
But one interesting phenomenon in that development growth is that it has led to RevPAR dilution as RevPAR at Super 8 properties has historically been lower than other company brands, Holmes noted.
There are other higher RevPAR Wyndham brands in the Asia/Pacific pipeline, but it will take between 12 months and 24 months to see lift in the region’s RevPAR. “It will be with us for a while,” he said of the lower RevPAR.
Shift in leisure travel
Thomas G. Conforti, Wyndham’s executive VP and CFO, said the company saw a subtle shift in U.S. leisure travel trends during the third quarter, which historically has been the quarter in which Wyndham sees the most leisure travel.
He said travelers appeared to be drawn more to the West Coast and northwest portions of the United States. Leisure travel was not as strong on the East Coast and the northeast, he said.
U.S. RevPAR was up 5% during the quarter. Holmes said full-year 2012 system-wide RevPAR will be at the lower end of its guidance of between 5% and 8% growth.
