Wyndham Shrinks Its U.S. Room Count, and Royalties Rise Anyway

Wyndham Hotels & Resorts has fewer rooms in the United States than it did a year ago, and it says that is the plan.

The franchisor's U.S. system stood at 500,000 rooms on Sept. 30, down from 503,400 a year earlier, according to its third quarter report released Oct. 21. Globally, rooms grew 4% excluding Revo Hospitality Group, an insolvent master licensee whose hotels Wyndham expects to leave the system mostly before year end. Royalties and franchise fees still rose 6%, to $156 million from $147 million.

The mechanism is FeePAR, Wyndham's measure of annual royalties per franchised room. On the Oct. 22 earnings call, CEO Geoff Ballotti said terminations of substandard rooms made up the majority of rooms leaving the system in the quarter, and that U.S. openings carried a FeePAR premium of more than 45% over the rooms that left. International openings carried a premium of nearly 40%.

Put simply, a franchisor can drop a weak motel, sign a better hotel and come out ahead on royalties even when the room count barely moves. The cost shows up in the growth target. Wyndham narrowed its 2026 net room growth outlook to approximately 4%, excluding Revo, from a prior range of 4% to 4.5%.

Demand helped. U.S. RevPAR, or revenue per available room, rose 6%, with occupancy up about 300 basis points and average daily rate up about 280 basis points, Ballotti said. He credited midweek travel near manufacturing, data center and industrial projects, citing RevPAR gains of 16% in Iowa and 15% in Illinois. China was the soft spot, with RevPAR down 10%.

The development pipeline hit a record of roughly 264,000 rooms across more than 2,200 hotels, up 4% excluding Revo, and about 78% of it is new construction. Wyndham raised its full year adjusted EBITDA outlook to $740 million to $745 million.

The detail other franchisors will study is on the phone line. Ballotti said Wyndham.AI Concierge, the company's AI voice platform, is now autonomously handling calls at more than 1,700 hotels, up 17% from the prior quarter, and answering tens of thousands of calls that used to go unanswered. He said the reservations it converts carry an average daily rate 15% above hotel booked rates, and that catching those calls before guests drift to third-party booking sites has added more than 500 basis points of direct contribution for franchisees.

Wyndham's royalty math has been tested in court, too. A federal judge in Minnesota ruled Sept. 29 that its Ramada brand could sue for the fees it lost when a franchisee left 13 years early, as we reported.

The open question is how long the pruning lasts. Management said transactions in the domestic economy hotel buy-sell market, where many conversions begin, fell more than 30%, widening the gap between what buyers will pay and what sellers will take. Until that gap closes, Wyndham may keep losing rooms faster than it can replace them with better ones.