Welcome to the Wyndham Hotels & Resorts Third Quarter 2024 Earnings Conference Call. At this time, all participants have been placed on a listen only mode and the floor will be open for your questions following the presentation [Operator Instructions]. I would now like to turn the call over to Matt Capuzzi, Senior Vice President of Investor Relations. Please go ahead.

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 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 Web site 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 Web site. We may continue to provide supplemental information on our Web site and on our social media channels in the future. Accordingly, we encourage investors to monitor our Web site and our social media channels in addition to our press releases, files submitted with the SEC and any public conference calls or webcasts. With that, I will turn the call over to Geoff.

Thanks, Matt. Good morning, everyone. And thanks for joining us today. Q3 illustrates yet another quarter of success in our team's execution against our long term growth strategy, which we outlined with all of you one year ago this week. Last night, we reported strong earnings with comparable adjusted EBITDA and EPS growth of 7% and 10% respectively. We grew our system 4%. We increased both our US and international royalty rates, and we significantly grew our ancillary fee streams. Year-to-date, we've generated over $265 million of adjusted free cash flow and we've returned nearly $380 million to our shareholders. We sustained strong momentum on the development front, opening over 17,000 rooms, bringing our year-to-date total to more than 48,000 rooms globally, up 13% compared to a year ago. We also improved our global franchisee retention rate by 40 basis points year-over-year. Notably, our franchise sales teams here in the United States signed an impressive 10% more deals in the quarter than they did last year, contributing to the 17th consecutive quarter of growth in our global development pipeline, which increased nearly 5% year-over-year to a record 248,000 rooms. Domestically, net rooms grew sequentially and year-over-year, driven by a solid 3% net room growth in our mid-scale and above brands with new conversions like the Wyndham Bloomington adjacent to the Mall of America in Minnesota and the Wyndham Garden, Louisville East near Churchill Downs, the home of the Kentucky Derby. This quarter, we also opened our second new construction ECHO Suites hotel located in Plano, Texas, a fast growing technology hub that's attracted economic investments such as the expansion of Plano’s Children's Medical Center, the new Wells Fargo campus, which is expected to create over 4,000 new jobs and the growing presence of Toyota North America and Frito-Lay's corporate headquarters.…

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 our outlook. Before we get started, let me briefly remind everyone that the comparability of our financial results is impacted by the timing of our marketing funds spent. In the third quarter of this year, marketing fund revenues exceeded expenses by $12 million as expected compared to revenues exceeding expenses by $17 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 $394 million of fee related and other revenues and $208 million of adjusted EBITDA. Prior period fee related and other revenues included $18 million of pass through revenues from our global franchisee conference conducted in September 2023, absent which fee related and other revenues increased 3%, driven by a 5% increase in royalties and franchise fees and 8% growth in ancillary revenues. The increase in royalties and franchise fees reflects our global system growth, expansion of our domestic, international and global royalty rates, driven by our higher fee par growth strategy and higher other franchise fees. Our ancillary revenue growth was primarily driven by higher credit card and partnership fees, as well as increased license fees. This growth continues to trend from the first half of this year where these fee streams meaningfully outperformed industry RevPAR level. Looking ahead, we have exciting new opportunities on the horizon that will build on our momentum and further enhance these ancillary fee streams. Adjusted EBITDA grew 7% on a comparable basis, primarily reflecting our higher…

[Operator Instructions] Our first question will come from Joe Greff with JP Morgan.

Jeff, I just want to ask a question about how you're thinking about net rooms growth for next year. How confident are you that next year's room growth rate could exceed what you end up doing this year? And then when you think about the composition from a brand and a geography perspective, obviously, ECHO would be stronger next year, I would think than this year. How is next year's net rooms growth composition different than what we've seen in the last couple of years?

We're very confident about our net room growth driving forward. And I think the most important metric for us to look at is our pipeline and what's been happening in terms of how that record pipeline has been driven. I mean, we have, we believe, the most talented and experienced franchise sales team out there in the industry. They've been selling directly to these franchisees longer than anyone else in over 95 countries. And when we look at where the breakdown is in terms of what's coming into the pipeline that will translate into net room growth next year, we're seeing just again a record executions. So globally, 197 hotel contracts awarded this quarter, that's up 350 basis points versus where we were back pre-COVID. And we've got a record pipeline of 250,000 rooms, which 85% of which is in the midscale and above or the extended stay segments. In terms of -- domestically, we're seeing really strong growth, 95 deals executed this quarter, up 10%. Our new construction prototype brands are selling very, very well. Our new construction pipeline is at an all time high. It was up 300 basis points to nearly 1,500 hotels globally. We're seeing growth in terms of what we'll be seeing coming up and out of the ground in the coming years. We had many new La Quinta’s awarded in the quarter. Our pipeline is up 3% for La Quinta year-on-year. Our dual brands are selling very well. Our Hawthorn Suites pipeline is up. Our new Wyndham Garden prototype is up. And of course, new brands like ECHO Suites, those hotels are just getting started. Conversions have been very strong for us. They're going to be very strong for us throughout the remainder this year and going into next, our conversion pipeline was up 30%. And internationally, that high single digit net room growth, we believe we could continue to drive upwards, 102 deals signed this quarter. Great growth really around the world across all regions with -- and all we need to do this week is look at existing developers like NILE Hospitality who came in with 40 new Microtels in India to be very, very confident in that 3% to 5% long term algorithm for net room growth. And the progress we're making, the continued retention rate, improvements we're making on a global basis, we feel great about the year ahead.

Thank you, Geoff. And then Michele, your comment about month-to-date US RevPAR growth being up 3%, which looks like it's maybe 50 to 60 basis points versus what the Smith Travel data would suggest, which is great. And noting that the comparisons do get easier from here. What specifically is embedded for the US economy and midscale RevPAR performance in the fourth quarter?

I guess, I would start by saying, last year in the US, our RevPAR declined 1 point during the third quarter and then in the fourth quarter, it was down 4%. So we moved from down 1% to down 4%, that's a 300 basis point swing, which does create a much easier comparison this year for the fourth quarter. This is a bit unique to our business due to our heavier concentration in economy, which by the way was down 7 points last year in the fourth quarter compared to only down 3 in the third quarter. So really large swings here for us and not necessarily for some of the other peers. That is predominantly what is built into our base case right now for the full year guide in addition to the infrastructure momentum we saw, that we have always expected in the back half of the year, we saw it in the third quarter and obviously, have it reflected in the outlook for the fourth quarter. And I'd say there is a favorable holiday calendar built into the outlook as well, which should drive increased leisure demand in the fourth quarter, particularly again in contrast to those more reliant on corporate and group business where travel windows are a bit tighter from a calendar perspective, we have two extra leisure travel days between -- over the Christmas holiday period this year. What's not yet reflected in the outlook and we see a potential upside are the benefits we're seeing from the hurricane, the most recent hurricanes. There was no material impact in the third quarter given it only impacted the last week of September. But as we moved into October, we have seen much larger impacts with occupancy up over 10% in the impacted states. Right now, it's already a 40 basis point benefit to our fourth quarter RevPAR and there is potential for more depending on the duration of the relief efforts, which as we all know are ongoing. But remember, when you weight that fourth quarter impact, the 40 basis points translates to probably about 10 basis points on a full year basis at the global level. So it would be -- it's going to be additive but it's not going to be materially different than what's currently -- what the current outlook implies.

Our next question will come from Stephen Grambling with Morgan Stanley.

So on Slide 6 of the deck, you have the 2026 walk on EBITDA. And I know you mentioned confidence in the 3% to 5% net room growth, sounds like RevPAR building back to that 2% to 3% range. But would love to get a scorecard of where you feel you're running ahead, where you may be behind on this trend line for some of the other buckets and if there's any other factors to consider for 2025 that might impact that March to that 2026 number?

That's a loaded question. Let me start by saying we're very confident in the driver assumptions out on Page 6, particularly with respect to system growth and continued retention improvement. RevPAR, it's still early in our budgeting process. For us to be getting specific guidance for 2025 you'll have to wait for the February call for that. But we do expect to exit the year with positive momentum given the fourth quarter inflection point I just discussed. And when we think about the infrastructure, we see that capture just starting to happen in the third quarter and we're going to continue to see that in the fourth quarter, and it's going to continue to increase as more spend gets out into the economy. What we're really excited about is the ancillary revenue opportunities where exactly where we wanted to be at this point in our plan up 8% year-to-date, we have a lot of great things happening on that front. And so we feel highly confident in our ability to continue to deliver that growth rate. So from a long term perspective, this was a three year plan, capturing ‘24, ‘25 and ‘26, we reaffirm this guidance on Page 6. And we have plenty of initiatives planned to be able to bring it to realization, not all of which, by the way, need to hit. We just need a bunch of things to work in our favor, but not everything.

And then maybe one unrelated follow up. Are there any investments needed for project ECHO to ramp from here or was there a bit of front loading things like the development team and/or sales team for the unique demand drivers of that segment?

We did earmark about $100 million of capital, which we started to deploy in 2024. And that is -- the deployment of that capital will ramp over ‘25 and ‘26, some more properties we get out of the ground and open and operating the more of that capital will get deployed. But I think what Geoff was going to comment on is the teams are in place, the operating teams are in place, the sales teams are in place, so that investment is already reflected in our EBITDA.

Exactly, and all the money we've spent, Stephen, on the new design prototypes and support operationally that we've given to our franchisees. Obviously, we'll continue to support them but nothing incremental.

Our next question will come from Michael Bellisario with Baird.

We understand from Matt that there's a -- you thought there was a Cinderella theme going on in your house and that Annie wanted to dress up as Aurora. That is a father of four girls that's sleeping beauty and the witch she wants you to dress up as is not the wicked witch of the north.

Well, last night it was [indiscernible] for me, so a couple more days set aside. Two unrelated questions there for you on development. Just first on the 10 ECHO deals that you signed. Are those deals with franchisees that are new to Wyndham, new to ECHO or are they just more deals that your original developers are doing there, trying to understand the composition of where the signings are now?

No, they are new institutional development groups who have not done new construction deals with us previously until now. And it's just great to see as we called out in our script some of the markets those dozen or so that we signed this quarter.

So it sounds like it's broadening, that's good to hear. And then just on a related note then, you've historically talked about infrastructure spending, you've mentioned oil and gas a couple of times in the last few quarters. Where do data centers fit into all that? And is all the AI spending and build out there, is that incremental to what you've outlined previously and how might that hit RevPAR and unit growth over the intermediate term?

Yes, data centers are primarily private. There is, obviously, when it comes to energy, some infrastructure overlap. But look, AI is just, as we all know, required increasingly vast amounts of data. And as Google, as Amazon, as Meta, all expand their infrastructures, what we're seeing data center construction across the USA is just exploding, significant new construction pickup in major markets where centers are concentrated today. In states like, to the RevPAR question, Texas, especially around the Dallas Fort Worth area, I think, we're, with Echo now, I think, we tipped over 700 hotels in Texas. It's our number one state, we're all headed out there this Sunday for AHLA's annual Hospitality Show. I don't know if you're going to be there. We saw you at lodging. But -- I mean, what's exciting for us is that our franchise sales team and our corporate contracted sales teams, our GSOs, are seeing expansion of these new data center constructions under construction in so many secondary markets. In states like Georgia, you think about Georgia and all the proximity to fiber routes, we have 300 hotels in Georgia and our franchise sales teams are all over where those centers are being built in. New York and New Jersey, obviously, a market really important for data centers close to the financial markets where we have 250 hotels. Florida, we're seeing a pickup in terms of around the Miami area, especially the gateway to Latin America for AI. We've got 300 hotels in Florida. It's our second largest state and we're seeing increased demand there. Arizona, another state that people often miss, I mean, just abundant renewable energy supply, which to your infrastructure question, the Arizona data centers, we believe, will benefit from -- and we're actually seeing that from some of the infrastructure bill spending that's starting to be allocated, we've got over 150 hotels in Arizona. So, so much of what's being built new construction wise, what's attracting our franchise sales teams and GSO teams to these sites will continue, we believe, to drive our brand's weekday market share gains, which we saw and just starting to really pick up this quarter. We think, as Michele said, it could accelerate into 2025. And especially to Joe's question, fuel our record development pipeline with those new construction prototype brands, because there's just a lack of lodging around those centers.

Our next question will come from David Katz with Jefferies.

Firstly, I just wanted to go a little farther. I know, Michele, you talked about some of the comp benefits that worked your way in 4Q. One of your peers talked yesterday about leisure for ‘25 being flat or maybe a little down. And I know that that's an important part but not all leisure is created equal. If you all could just talk about what your kind of leisure expectation is broadly and how that relates to your system would be a good place to start?

We -- look, if leisure demand were to wane in any way and we're not seeing that we’re certainly the beneficiaries as we've been in the past. Our brands have always significantly outperformed the broader lodging market, David, as we've talked about in slowdowns. But we are not seeing any significant softness or any trade down as those gaps between the chain scales continue to strengthen. I mean, think about it. There is no signs yet of any discounting or impression. There hasn't been that $50 gap between the economy segment and the upper midscale segment. ADR is now increased to $60, that $70 gap between the upper midscale and the upper upscale is now grown to $80. And all the leading indicators we look at remain positive. Our booking windows continue to tick up, up 5% to last year, year-to-date from 16 to 17 days now. We're seeing longer lengths of stay. We're seeing credit card data spending for September up 200 basis points. And leisure travel sentiments continuing to improve among these everyday blue collar workers who are more employed, their wages and savings are higher, it's creating a very resilient employment backdrop. And it's driving very strong disposable personal income where they've shifted their priorities when coupled with, if interest rates do come down, lower mortgage payments and moderating essential spending, should drive the improvement in cash flow for our consumers to vacation, and all of the worry around the normalization. I mean, we are seeing things improve. We're right on trend. We're seeing continued growth momentum that economy RevPAR continues to normalize. Each quarter of 2024 has improved in economy. Q2 is better than Q1, Q3 was better than Q2. And economy RevPAR's a full point ahead of the overall domestic RevPAR growth to 2019. So pricing power is strong. It's still trailing inflation. We're up I think 17% to 19% versus 23%. And we think pricing power could continue to be flexed for our franchisees. And as Michele said, when we look at quarter-to-date for the first three weeks economy being up 330 basis points and midscale, I think, it was up 450 basis points coupled with a more favorable year-on-year comparable not only for Q3 but for the next four quarters. We believe that we'll continue to see positive momentum, no waning at leisure travel demand as we head into the Q4 and as we continue through the Q4 and throughout 2025, especially as our economy and midscale brands continue to gain market share during the midweek, and we pick up on that infrastructure business that we talked about.

And as my follow up, I wanted to touch on the ancillary fees. Should we be -- I know that we've seen across the industry those fees even for those that may be just a little more mature with them than you are, they are outgrowing the RevPAR driven fees. My take is that in your case you're at a much earlier stage of those. And so the ultimate growth and when we think about terminal valuing those long term valuing those, you should be growing at a much higher rate than what kind of the core RevPAR fees would grow at. Is that a fair context and any color on it would help?

Yes, we do expect over the longer term, in the short term and over the longer term, the growth rate for our ancillary fee streams will outpace the growth rate of the compounded franchising model.

Our next question will come from Ian Zaffino with Oppenheimer.

Just wanted to maybe drill down on the market share gains, and congratulations on that. Maybe just talk to us about which of the states those were, maybe which brands kind of saw the best traction? And also is that just the function of the location being around infrastructure projects, are you doing anything different there? And maybe I'll [indiscernible] this one and another one as it relates to this topic is, what sort of the sustainability of this do you think at least the numbers we've seen less than half of the [indiscernible] spend has been dispersed. So kind of any comments or color, or meat on the bone you could provide there?

Yes, a lot there to unpack, Ian. We have -- in terms of where we saw strong by state gains RevPAR, we talked a bit about our oil markets coming back, and I just talked about Texas being up 5%, North Dakota being up 6%, Alabama and Louisiana strong oil markets were up strong double digits. And the infrastructure states that we have always talked about were all pretty much positive. And we're expecting that growth to continue certainly on the oil and gas side as crews continue to come back into these markets and absolutely, on the infrastructure side as infrastructure ramps. It is, as we've said before, such early days for us. We are seeing that double digit uptick in leads from companies bidding on the federal infrastructure work with a 15% increase in corporate contracted accounts that our Wyndham sales teams are contracting with. And that is what has been growing our share gain. Combined infrastructure lifted our overall domestic weekday RevPAR by 100 basis points. Occupancy was most of it and demand is everywhere. But it's, again, really early days. Less than 20% in terms of how early it is that $1.2 trillion bill, not including the incremental, has been allocated. So $400 billion has been allocated but only $300 billion of it has actually been announced to date. And only $100 billion of that $300 billion is outlaid or leased to date. So think about that, only 112 of the $1.2 billion is paid out. So it is a very meaningful multiyear driver for our franchisees over the next 10 plus years. And even beyond that, there's still another $100 billion of annual infrastructure spending ongoing, which is not in the incremental. And we're capturing an outside share of that given our investment in technology and tools and teams. To your market share question, domestically, our largest brands like Super 8, Days Inn, La Quinta, all over-indexing in our most recent FDD filings, Days Inn being the strongest, having jumped from 117% to 120% fair market share. And specifically in the quarter, against their STR competitive sets, Super 8 gained another 10 basis points, Microtel another 50 basis points and Days Inn has been just really screaming another 80 basis points of market share.

And then just as a follow-up to that, how do you think about the mix between economy, midscale, ECHO Suites, et cetera? Just given that a lot of these kind of new -- call them new drivers or recent drivers have popped up. Is it kind of making you rethink maybe that there's other sources of upside here? So maybe any kind of comments on that?

Well, in the economy segment, certainly, ECHO Suites is another upside for us in terms of just the demand that is out there from an extended state standpoint. And there's not a lot of economy, new construction, extended state lodging out there. I mean, extended state lodging is outpacing existing supply by a 3:1 margin. And if you look at Q3 STR economy, extended stay RevPAR was another 200 basis points higher than the overall economy industry. And it's really no surprise that extended stay is 36% of the domestic pipeline supply right now when you look at the STR reports. So we're looking at that as certainly incremental.

Our next question will come from Patrick Scholes with Truist Securities.

Geoff, Michele, can you give an update on continued progress with the retention rates? You are getting close to, I believe, your target of 96%. Is there further opportunity beyond that? And then within that retention rate, can you give us a breakout of what that looks like US versus international?

We are really pleased with tshe progress we've made on retention thus far and we do expect to continue to improve it. You can see steady improvement over a number of years now. And it really is reflective of our increasing value proposition as well as our owner first philosophy. We've always said 96% was kind of the first stop, maybe the first base around and there's room once we get there to continue to push higher. In terms of the breakout, the timing I'd say of terminations is dependent upon many factors, including contractual terms, notice periods, cures on defaults, all of those things. And some culling of the system is necessary from time-to-time, especially as we bring in higher value properties. So while retention remains priority across our portfolio, we don't measure it quarterly. It's measured over time. And our focus this year has been on improving our global retention rate. We've made great progress on that front. Domestically, our primary focus is on overall net room growth, again, especially as we continue to push into these higher value segments. I think this is the 13th consecutive quarter now we've seen positive growth in the US. Our teams are really proud of that, especially in what has been a limited new supply market.

I guess, just a bit of a follow up. When we do think about that blended 96 roughly retention rate, how does that percentage break out US versus international? If you can, I don’t know, share that?

From an outlook perspective, we definitely don't guide to that level of detail.

Not a guide, but where are you currently at now?

We're currently at 95.7%, Patrick. Our retention on a global basis was up 40 basis points. And our teams -- I think, the most important thing, to Michele's point, they're successfully swapping these lower value termination rooms for higher value new rooms. I mean, for example, the double digit net room growth that we saw over in Asia Pacific is it's coming in at 3 times the license fee. And since then we've been able to move that 93%, 94% to 95%, 96% to over the last 12 months, which is how we look at this globally, another 40 basis points to 95.7%.

Our next question will come from Brandt Montour with Barclays.

I wanted to double click on the hurricane impact and obviously, no one's rooting for this relief effort to drag on or become more egregious from here. But just objectively speaking, if you could compare this hurricane season and the devastation with the aftermath of the 2017 hurricanes Harvey and Irma. And the reason I ask is because those relief efforts trailed into, all the way into the second quarter of 2018 and you had a pretty large lift related to that in the order of 200 to 300 basis points in US. So maybe you could just help us sort of understand compare and contrast the two situations?

Yes, absolutely. And you're 100% right. Our select service hotels, they do provide a vital role in accommodating displaced families and emergency workers. And so the impact though on RevPAR can vary significantly depending on the storm scale and then our footprint in the affected region. Here, we had about 500 hotels that were impacted but we only have one hotel that currently remains closed. I think, it's our Super 8 in Asheville. So the hotels are open operating and they're accepting emergency crews and displaced families. And that's really -- that increased demand is really what's driving the 40 basis points I discussed earlier. If you look specifically at 2017, we had two major hurricanes hit our two largest footprint states, Florida and Texas and we did see a 200 to 300 basis point impact over a two to three quarter period. But in other cases, many other cases, the impacts are not nearly as large and are much shorter duration, typically in the range of 50 to 100 basis points for one quarter only. FEMA has deployed 9,000 personnel into the impacted region. We've got over 100 hotels right now that are running occupancy month to date greater than 90%. So we are seeing a lot of our hotels filled with crews and lots of large pieces of business. Yesterday, there was a $0.5 million booked for one specific vendor and so that's new business coming in today. So we do think there is going to be continued benefit. It's just really hard to say how long that's going to last for.

And then a follow-up question. Yesterday, Hilton called out a greater impact from the election in November than they had originally expected. I assume that they -- well, presumably, they were talking about group and group doesn't really affect you guys. But we have heard other smaller operators in different industries call out, in swing states specifically, election distraction sort of keeping people at home and making them depressed with all the commercials and whatnot. I was curious Geoff or Michele, if there's, and I know you don't have the visibility for -- no we're getting to the point where you probably do have the visibility. Any sort of distraction on sort of leisure travel or anything you think might be keeping people at home that you're sort of baking in?

I would say, because you referenced, Hilton specifically, I would just say, there are a number of different dynamics between our business, particularly in the fourth quarter and what we're going to see in some of these more business oriented brands. And the impact of the presidential election is, we are expecting to be one of those differences. So it's coming up in a few weeks. It often reduces not just group and conference business but overall corporate travel, but our business traveler is wearing hard hats and work boots, so we're not expecting it to have -- it typically would not have an impact on our business. Now this is not a typical election so it still remains to be seen. The second is that Christmas holiday period where again, you're going to see tighter business travel windows but longer leisure travel windows. So that's going to be a favorable shift for us in the fourth quarter and maybe unfavorable for some of the peers.

Our next question will come from Lizzie Dove with Goldman Sachs.

Sounds like you're seeing some really nice green shoots in the economy segment in the fourth quarter, it's a change scale that has been a laggard. Curious to what extent you have seen any impact from some of the newer brands in the premium economy segment taking any share, something like a spark, for example, or especially with the improvements you've seen, do you see those challenges in an economy over the last 18 months is more kind of cyclical and a function of comp?

Yes, I'd say more cyclical and function of comp, I mean, it's been two years and really none of the new brand launches out there have been slowing our NRG or our accelerating development pipeline, especially in the midscale and above segments that really these brands are playing in according to Smith Travel. And where we've been able to accelerate our domestic midscale and above net room growth to plus 3%, Lizzie, over the last several quarters since their introduction and we don't view the reflagging of the handful, I think, it's 10 of our over 9,200 hotels is incremental in any way to our normal term activity.

And then just one follow up on China, which I guess is a decent chunk of your international rooms. You obviously got the stimulus announcement last month or so. How does that change your outlook at all? Does that -- is that something you think can have a meaningful impact for China in 2025?

I don't think it changes our outlook. It definitely makes it a little bit easier. But we'd always been expecting continued recovery in China and that view has not changed. We just feel a little bit more confident in it with the stimulus coming in.

Our next question will come from Steve Pizzella with Deutsche Bank.

On development, I believe Slide 15 noted net rooms growth pacing ahead of historical performance. Is that just a pull forward of new rooms or should we expect to see historical seasonal net room adds in the 4Q this year?

So we are -- I think, we're pacing well ahead of where we were last year. We’re at 70%. I think, last year we were about 50% and the teams have been really productive bringing in deals earlier in the year. But with respect to the fourth quarter, I'd say some of our international teams had pretty large quarters bringing in some [indiscernible] open. And so we do think this fourth quarter will be a bit lower than it was last year as a lot of those openings are already captured in the year-to-date but full year, will be up. And we remain confident in our ability to deliver in line with expectations.

And then margins continue to show solid year-over-year growth ex the marketing spend. What is driving the expansion from a cost control perspective? Is there any margin benefits embedded in the 2026 algorithm and how should we think about margins going into next year?

So what's driving the margin benefits right now are our ancillary revenue growth and efficiencies we're gaining there. Some of the efficiencies we have from an organizational perspective when we combine our -- when we've created our commercial organization and then some AI and technology enhancements that we've been deploying in the back end, the back house of the business, all of those are contributing to the margin impact. Also on a year-to-date basis and on a full year, we did have about $4 million of insurance proceeds that had a small benefit to the margin. Excluding that insurance benefit, the rest of the margin will stick moving forward into ‘25. And then with respect to where the margin will be for 2025, hard to say until we get through our budgeting process.

Our last question will come from Meredith Jensen with HSBC.

Quickly on the technology front, I know you spoke quite a bit about your advantage being cloud based versus competitors who may have to rebuild that tech stack to get there. I was wondering if you have kind of any internal targets on the merchandising front, like how many bookings might add on some of those sort of build a room options. I do think we got one of the competitors was saying currently they have low teens percentage of bookings that have some of those additions. So I was wondering if you have any sort of metrics we could follow on that.

I think, Meredith, the investments that we made over the last six years, which has really laid the foundation for us, a $300 million investments and spend in our industry leading tech stack is what is really helping us drive, from a direct contribution standpoint and a Wyndham Rewards standpoint, so much of our success. I mean, we're seeing record enrollments in our loyalty program, which is driving a member occupancy up 240 basis points in the Q3 and is now 50% over one out of every two check ins directly for our guests to our franchisees are coming through our technology stack, and that's really important. It's an all-time high for any Q3 that we've had. It's up 600 basis points to where we were in 2019. We're going to continue to invest in that technology stack. We're going to continue to, as we said furiously, execute and implement and speed up all aspects of the operation for our franchisees, which is really reducing the labor load on their front desks. And it's our ability to allow those hotel teams to interact directly with the guests that, through our automation of all of the manual processes and seamlessly offering that early check-in and late checkout, that's also helping drive our net room growth. It's one of the biggest points of differentiation, our franchise sales teams believe when they're out there selling our value proposition versus our competitor. And so, we're huge believers. We're big partners with Salesforce, Mark Benioff on CNBC, Mad Money. I don’t know if you saw it, but Matt could send you the clip. Talked about how our technology and digital teams are really innovating. I mean, coupled with Salesforce's data cloud, we are amalgamating the data. We're delivering a level of automation that, as Mr. Benioff said, has never been envisioned. And we're taking that ebb and flow of the manual tasks and the customer demand and automating every customer touch point that we can really supercharging our 360 strategy with our data and building a much stronger data cloud. And we think the opportunities ahead for us are endless.

One very quick addition, on the important ancillary fees, just to dig in a little bit more. You mentioned that the business card had this incredible 70% jump year-over-year in spend. Is that sort of -- will you be able to provide some of those trends going forward and some of the breakdown of ancillary growth that we can sort of look to going forward?

I think, we're -- go ahead, Michele. We're both excited about it.

We are very -- there's a lot to be excited about here. I'd say, our credit card program will be the largest contributor to our ancillary fee growth. And it has been in ‘24, will be likely in ‘25. Growth here is accelerating due to a number of initiatives, which helped to generate higher cardholders as well as higher purchase volumes. One of those is Wyndham business that we -- that Geoff discussed in his prepared remarks. And there are many opportunities to enhance our marketing and reach a broader base of consumers to increase the number of card holders. There's also new product opportunities and international expansion. Wyndham business itself is just ramping now. So we're expecting to see not just the increased card holders there but the elevation in purchase volumes. Outside of the credit card, we've got our Blue Thread with TNL that’s continuing to drive higher license fees there. We know that consumers value the Wyndham Rewards currency and we're looking to capitalize upon that in strategic partnerships. And then the investments that Geoff mentioned about -- mentioned in our back end and on property technology, those are presenting incremental opportunities, not just for our franchisees who the 40% of owners that are engaged and opted in to Wyndham Connect are seeing $1,500 a month in incremental revenue, that's sizable for them but we're earning a portion of that as well. So there are numerous opportunities here. Other things that we're working on that we're not talking about. And we're really excited about all the progress we're making on this front and we'll continue to update as we have more to talk about.

Thank you. At this time, I would like to turn the floor back over to Geoff Ballotti for closing remarks.

Thanks Scott. And thanks to everyone who's still with us, we're sorry for going over. But we appreciate everyone's interest in Wyndham Hotels & Resorts. Certainly, Michele and I and Matt look forward to talking to and seeing many of you in the weeks ahead at so many of the upcoming investor 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. This does conclude today's Wyndham Hotels & Resorts third quarter 2024 earnings conference call. Please disconnect your line at this time, and have a wonderful day.