US: Ratings agency Fitch has assigned first-time ratings to Wyndham Hotels & Resorts, including a Long-Term Issuer Default Rating (IDR) of BB+.
Fitch has assigned issue level ratings to Wyndham’s senior secured debt of BBB-/RR1 and senior unsecured debt of BB+/RR4. The Rating Outlook is stable.
The rating reflects Fitch’s expectations that EBITDAR leverage will remain in the 4x range throughout the forecast period.
Fitch says Wyndham’s asset-light operating model, which is primarily focused in the select-service space, had demonstrated strong results through the cycle. “The flexible cost structure of the recurring fee-based income produces attractive margins and experiences less cash flow volatility during economic downturns,” it said.
Fitch expects future growth to be driven by high margins amidst operating model simplification and net rooms growth. “WH’s extensive development pipeline requires minimal capital expenditures on its behalf. However, owner financing is an important consideration in assessing future net room growth given the current volatility in the financing environment,” it said.
Fitch singled out the recently launched ECHO Suites economy extended stay brand, which it expects to “contribute significantly” to Wyndham’s growth, starting in 2024. As of Q1 2023, 205 contracts have been executed for the brand.
“Wyndham is positioned well to take advantage of the limited penetration in the extended stay space. ECHO was the fastest growing new construction brand in the hotel industry as of December 31, 2022,” said Fitch.
