WYNDHAM HOTELS & RESORTS, INC. Discussion and analysis by management of the financial position and operating results. (Unless otherwise indicated, all amounts are in millions, except per share and per share amounts) (Form 10-Q)

0
Forward-Looking Statements
This report contains forward-looking statements within the meaning of Section
21E of the Securities Exchange Act of 1934 (the "Exchange Act"), as amended.
These statements include, but are not limited to, statements related to our
expectations regarding our strategy and the performance of our business, our
financial results, our liquidity and capital resources, share repurchases and
dividends and other non-historical statements. Forward-looking statements
include those that convey management's expectations as to the future based on
plans, estimates and projections at the time we make the statements and may be
identified by words such as "will," "expect," "believe," "plan," "anticipate,"
"intend," "goal," "future," "outlook," "guidance," "target," "objective,"
"estimate," "projection" and similar words or expressions, including the
negative version of such words and expressions. Forward-looking statements
involve known and unknown risks, uncertainties and other factors, which may
cause the actual results, performance or achievements of Wyndham Hotels to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. You are cautioned not
to place undue reliance on these forward-looking statements, which speak only as
of the date of this report.
Factors that could cause actual results to differ materially from those in the
forward-looking statements include without limitation general economic
conditions; the continuation or worsening of the effects from the coronavirus
pandemic, ("COVID-19"); its scope and duration and impact on our business
operations, financial results, cash flows and liquidity, as well as the impact
on our franchisees and property owners, guests and team members, the hospitality
industry and overall demand for travel; the success of our mitigation efforts in
response to COVID-19; our performance in any recovery from COVID-19, the
performance of the financial and credit markets; the economic environment for
the hospitality industry; operating risks associated with the hotel franchising
and management businesses; our relationships with franchisees and property
owners; the impact of war, terrorist activity, political instability or
political strife; concerns with or threats of pandemics, contagious diseases or
health epidemics, including the effects of COVID-19 and any resurgence or
mutations of the virus and actions governments, businesses and individuals take
in response to the pandemic, including stay-in-place directives and other travel
restrictions; risks related to restructuring or strategic initiatives; risks
related to our relationship with CorePoint Lodging; our spin-off as a newly
independent company; the Company's ability to satisfy obligations and agreements
under its outstanding indebtedness, including the payment of principal and
interest and compliance with the covenants thereunder; risks related to our
ability to obtain financing and the terms of such financing, including access to
liquidity and capital as a result of COVID-19;
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and the Company's ability to make or pay dividends, plans for and timing and
amount of any future share repurchases and/or dividends, as well as the risks
described in our most recent Annual Report on   Form 10-K   filed with the U.S.
Securities and Exchange Commission (the "SEC") and subsequent reports filed with
the SEC. The Company undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, subsequent
events or otherwise.
We may use our website as a means of disclosing material non-public information
and for complying with our disclosure obligations under Regulation FD.
Disclosures of this nature will be included on our website in the "Investors"
section, which can currently be accessed at www.investor.wyndhamhotels.com.
Accordingly, investors should monitor this section of our website in addition to
following our press releases, filings submitted with the SEC and any public
conference calls or webcasts.
References herein to "Wyndham Hotels," the "Company," "we," "our" and "us" refer
to Wyndham Hotels & Resorts, Inc. and its consolidated subsidiaries.

                             BUSINESS AND OVERVIEW


  Wyndham Hotels & Resorts is a leading global hotel franchisor, licensing its
renowned hotel brands to hotel owners in nearly 95 countries around the world.
We operate in the following segments:
•  Hotel Franchising - licenses our lodging brands and provides related services
to third-party hotel owners and others.
•  Hotel Management - provides hotel management services for full-service and
limited-service hotels as well as two hotels that are owned by us.

                             RESULTS OF OPERATIONS


Discussed below are our key operating statistics, combined results of operations
and the results of operations for each of our reportable segments. The
reportable segments presented below represent our operating segments for which
discrete financial information is available and used on a regular basis by our
chief operating decision maker to assess performance and to allocate resources.
In identifying our reportable segments, we also consider the nature of services
provided by our operating segments. Management evaluates the operating results
of each of our reportable segments based upon net revenues and adjusted EBITDA.
Adjusted EBITDA is defined as net income excluding net interest expense,
depreciation and amortization, early extinguishment of debt charges, impairment
charges, restructuring and related charges, contract termination costs,
transaction-related items (acquisition-, disposition- or separation-related),
foreign currency impacts of highly inflationary countries, stock-based
compensation expense, income taxes and development advance notes amortization.
We believe that adjusted EBITDA is a useful measure of performance for our
segments and, when considered with U.S. Generally Accepted Accounting Principles
("GAAP") measures, gives a more complete understanding of our operating
performance. We use this measure internally to assess operating performance,
both absolutely and in comparison to other companies, and to make day to day
operating decisions, including in the evaluation of selected compensation
decisions. Adjusted EBITDA is not a recognized term under U.S. GAAP and should
not be considered as an alternative to net income or other measures of financial
performance or liquidity derived in accordance with U.S. GAAP. Our presentation
of adjusted EBITDA may not be comparable to similarly-titled measures used by
other companies. During the first quarter of 2021, we modified the definition of
adjusted EBITDA to exclude the amortization of development advance notes to
reflect how our chief operating decision maker reviews operating performance
beginning in 2021. We have applied the modified definition of adjusted EBITDA to
all periods presented.
We generate royalties and franchise fees, management fees and other revenues
from hotel franchising and hotel management activities, as well as fees from
licensing our "Wyndham" trademark, certain other trademarks and intellectual
property. In addition, pursuant to our franchise and management contracts with
third-party hotel owners, we generate marketing, reservation and loyalty fee
revenues and cost reimbursement revenues that over time are offset,
respectively, by the marketing, reservation and loyalty costs and property
operating costs that we incur.
COVID-19
During 2020, the hotel industry experienced a sharp decline in travel demand due
to COVID-19 and the related government preventative and protective actions to
slow the spread of the virus, including travel restrictions. We and the entire
industry experienced significant revenue losses in 2020 as a result of steep
RevPAR declines. Yet, the impact on our business was mitigated by
characteristics unique to our business model. With approximately 70% of bookings
at our hotels being leisure-oriented, our hotel owners were more insulated from
the rapid fall off of corporate transient and group bookings. In fact, less
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than 5% of our bookings come from this segment. Outside of leisure, our business
customers are substantially comprised of truckers, contractors, construction
workers, utility crews and others whose office is the road and do not have the
ability to conduct their work remotely. These customers have provided a steady
state of business for the majority of our hotel owners and, in fact, we have
grown revenue from this customer set by 8% in the third quarter of 2021 versus
pre-pandemic levels in the third quarter of 2019 levels. In addition, nearly 90%
of hotels within our U.S. system are located along highways and in suburban and
small metro areas, on the way to or near outdoor destinations such as national
parks and beach communities. Our hotels are in locations that travelers felt
safe visiting and we invested in sales and marketing efforts to reach travel
seekers and instill confidence that our hotels were clean, safe and welcoming
guests. Finally, over 95% of our U.S. business is originated domestically.
As a result, our platform was naturally set up to capture returning demand
throughout the pandemic and the recovery. Our economy and midscale brands in the
U.S. have outperformed the industry's higher-end chain scales consistently since
the onset of the pandemic and are now leading the industry's recovery with
RevPAR in the third quarter well in excess of 2019 levels.

Internationally, which drives less than 15% of our royalty revenues, recovery
trails the U.S. due to a heavier business mix and a heavier reliance on inbound
travel from the U.S. and China. However, we have experienced significant
improvement over the last few quarters and international RevPAR has recovered to
75% of its pre-pandemic levels during the third quarter compared to 56% in the
second quarter and 55% in the first quarter of this year.
The Company does not anticipate the pandemic to further materially impact the
results from operations, however should there be a resurgence of COVID-19, our
results of operations may be negatively impacted and certain intangible assets,
such as our trademarks, and our franchised and managed goodwill may be exposed
to impairments. For further discussion on the effect of COVID-19 on our
financial condition and liquidity, see the section below Financial Condition,
Liquidity and Capital Resources.

                             OPERATING STATISTICS


The table below presents our operating statistics for the three and nine months
ended September 30, 2021 and 2020. "Rooms" represent the number of hotel rooms
at the end of the period which are either under franchise and/or management
agreements, or are Company-owned, and properties under affiliation agreements
for which we receive a fee for reservation and/or other services provided.
"RevPAR" represents revenue per available room and is calculated by multiplying
average occupancy rate by average daily rate. These operating statistics are
drivers of our revenues and therefore provide an enhanced understanding of our
business. Refer to the section below for a discussion as to how these operating
statistics affected our business for the periods presented.
                                  As of September 30,
                              2021                          2020        % Change
Rooms
United States                         486,800               497,700           (2%)
International                         315,800               306,300             3%
Total rooms                           802,600               804,000             -%

                           Three Months Ended September 30,
                              2021                          2020        % Change
RevPAR
United States       $          57.73                      $ 36.31              59%
International (a)              27.15                        17.72              53%
Global RevPAR (a)              45.80                        29.23              57%

                            Nine Months Ended September 30,
                              2021                          2020        % Change
RevPAR
United States       $          45.64                      $ 30.99              47%
International (b)              20.66                        14.69              41%
Global RevPAR (b)              35.94                        24.73              45%


______________________
(a)Excluding currency effects, international RevPAR increased 49% and global
RevPAR increased 56%.
(b)Excluding currency effects, international RevPAR increased 34% and global
RevPAR increased 44%.

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Rooms as of September 30, 2021 remained consistent with the prior year.
Global RevPAR for the three months ended September 30, 2021 increased 57% to
$45.80 compared to the prior year due to the ongoing recovery in travel demand.
Global and international RevPAR began to lap the onset of the COVID-19 pandemic
in January 2021 while the U.S. began to lap its onset in March 2021. As such,
comparisons to 2019 may be more meaningful when evaluating trends as such
highlight the impact of COVID-19 from pre-pandemic levels. On this basis, U.S
RevPAR exceeded 2019 levels by 7% while global RevPAR recovered to 97% of 2019
levels and international RevPAR declined 25%. The 7% increase in the U.S.
compares to a 5% decline in the second quarter of 2021. Importantly, RevPAR for
our economy brands exceeded 2019 levels by 14% in the third quarter representing
improved rates. The 25% international decline demonstrates strong sequential
progress from a 44% decline in second quarter led by growth in regions where
travel restrictions abated such as Canada, which improved 32 points to a 17%
decline, and EMEA, which improved 43 points to a 25% decline, partially offset
by a 10 point sequential decrease in China to a 17% decline, where temporary
travel restrictions were reimposed due to local COVID outbreaks in August and
September.
THREE MONTHS ENDED SEPTEMBER 30, 2021 VS. THREE MONTHS ENDED SEPTEMBER 30, 2020


                                             Three Months Ended September 30,
                                                  2021                   2020              Change                % Change
Revenues
Fee-related and other revenues            $             377          $     255          $      122                      48  %
Cost reimbursement revenues                              86                 82                   4                       5  %
Net revenues                                            463                337                 126                      37  %
Expenses
Marketing, reservation and loyalty
expense                                                 130                107                  23                      21  %
Cost reimbursement expense                               86                 82                   4                       5  %
Other expenses                                           86                 77                   9                      12  %
Total expenses                                          302                266                  36                      14  %
Operating income                                        161                 71                  90                     127  %
Interest expense, net                                    22                 29                  (7)                    (24  %)

Income before income taxes                              139                 42                  97                     231  %
Provision for income taxes                               36                 15                  21                     140  %
Net income                                $             103          $      27          $       76                     281  %



Net revenues for the three months ended September 30, 2021 increased $126
million, or 37%, compared to the prior-year period, primarily driven by:
•$48 million of higher royalty and franchise fees primarily due to the ongoing
recovery of travel demand and its impact on RevPAR;
•$50 million of higher marketing, reservation and loyalty fees, primarily
reflecting the RevPAR increase;
•$20 million of higher management and other fees primarily. also reflecting the
RevPAR increase; and
•$4 million of higher cost-reimbursement revenues in our hotel management
business primarily due to ramping staff in response to the ongoing recovery of
travel demand.
Total expenses for the three months ended September 30, 2021 increased $36
million, or 14%, compared to the prior-year period, primarily driven by:
•  $23 million of higher marketing, reservation and loyalty expenses primarily
due to ongoing recovery of travel demand; and
•$8 million of higher operating expenses, primarily associated with the recovery
of travel demand at our owned hotels.
Interest expense, net for the three months ended September 30, 2021 decreased $7
million, or 24%, compared to the prior-year period as a result of the redemption
of our $500 million senior notes in April 2021.
Our effective tax rates were 25.9% and 35.7% tax provision on pre-tax income
during the three months ended September 30, 2021 and 2020, respectively. The
decrease was primarily due to the impact COVID-19 had in 2020 on the mix of
earnings and losses between the U.S. and foreign jurisdictions in which we
operate that have different tax rates from the U.S. statutory rate.
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As a result of these items, net income for the three months ended September 30,
2021, increased $76 million compared to the prior-year period.
The table below is a reconciliation of net income to adjusted EBITDA.
                                                                 Three Months Ended September 30,
                                                                    2021                   2020 (a)
Net income                                                  $             103          $          27
Provision for income taxes                                                 36                     15
Depreciation and amortization                                              23                     24
Interest expense, net                                                      22                     29

Stock-based compensation expense                                            7                      5
Development advance notes amortization                                      3                      2

Foreign currency impact of highly inflationary countries                    -                      1
Adjusted EBITDA                                             $             194          $         103


______________________

(a) Adjusted EBITDA for 2020 has been restated to conform to current year presentation.

Following is a discussion of the results of each of our segments and Corporate
and Other for the three months ended September 30, 2021 compared to the three
months ended September 30, 2020:
                          Net Revenues                              Adjusted EBITDA
                        2021        2020       % Change           2021           2020 (a)       % Change
Hotel Franchising     $   337      $ 236              43%    $    193           $     119             62%
Hotel Management          126        101              25%          16                   2          700  %
Corporate and Other         -          -              n/a         (15)                (18)          17  %
Total Company         $   463      $ 337              37%    $    194           $     103             88%

______________________

(a)Adjusted EBITDA for 2020 has been recasted to conform with the current year
presentation.

Hotel Franchising
                              Three Months Ended September 30,
                                     2021                        2020        % Change
Total rooms                    758,600                         748,200               1%
Global RevPAR (a)    $           44.67                        $  28.83              55%


______________________
(a)  Excluding currency effects, global RevPAR increased 54%.
Rooms increased 1% from the prior year period primarily due to higher
international openings.
Global RevPAR increased 55% from the prior year period primarily due to a 56%
increase in U.S. RevPAR.
Net revenues increased $101 million, or 43%, compared to the third quarter of
2020, primarily driven by the ongoing recovery of travel demand and its impact
on global RevPAR which resulted in:
•$46 million of higher royalty and franchise fees; and
•$50 million of higher marketing, reservation and loyalty revenues.
Adjusted EBITDA increased $74 million, or 62%, compared to the third quarter of
2020, primarily driven by higher royalty and franchise fees discussed above and
a $29 million timing benefit in connection with our marketing, reservation and
loyalty funds.
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Hotel Management
                              Three Months Ended September 30,
                                     2021                       2020        % Change
Total rooms                     44,000                         55,800            (21%)
Global RevPAR (a)    $           64.63                        $ 34.34              88%


______________________
(a)  Excluding currency effects, global RevPAR increased 87%.
Rooms declined 21% from the prior year period, driven by CorePoint Lodging asset
sales.
Global RevPAR increased 88% from the prior year period primarily due to a 100%
increase in U.S. RevPAR.
Net revenues increased $25 million, or 25%, compared to the prior-year period,
primarily driven by:
•$18 million of higher owned hotel revenues due to ongoing recovery of travel
demand;
•$4 million of higher cost-reimbursement revenues as discussed above, which have
no impact on adjusted EBITDA; and
•$4 million of higher management fees and royalties and franchise fees primarily
due to the increase global RevPAR.
Adjusted EBITDA increased $14 million, compared to the prior-year period
primarily driven by the revenue increases discussed above (excluding cost
reimbursements), partially offset by $7 million of higher volume-related
expenses primarily associated with the recovery of travel demand at our owned
hotels.
Corporate and Other
Adjusted EBITDA was favorable by $3 million compared to the prior-year period,
primarily due to lower general and administrative expenses.

 NINE MONTHS ENDED SEPTEMBER 30, 2021 VS. NINE MONTHS ENDED SEPTEMBER 30, 2020


                                              Nine Months Ended September 30,
                                                  2021                  2020              Change                % Change
Revenues
Fee-related and other revenues             $           931          $     730          $      201                      28  %
Cost reimbursement revenues                            242                274                 (32)                    (12  %)
Net revenues                                         1,173              1,004                 169                      17  %
Expenses
Marketing, reservation and loyalty expense             327                311                  16                       5  %
Cost reimbursement expense                             242                274                 (32)                    (12  %)
Other expenses                                         246                486                (240)                    (49  %)
Total expenses                                         815              1,071                (256)                    (24  %)
Operating income/(loss)                                358                (67)                425                         n/a
Interest expense, net                                   73                 83                 (10)                    (12  %)
Early extinguishment of debt                            18                  -                  18                         n/a
Income/(loss) before income taxes                      267               (150)                417                         n/a
Provision for/(benefit from) income taxes               72                (25)                 97                         n/a
Net income/(loss)                          $           195          $    (125)         $      320                         n/a



Net revenues for the nine months ended September 30, 2021 increased $169
million, or 17%, compared to the prior-year period, primarily driven by:
•$94 million of higher royalty and franchise fees primarily reflecting a 45%
increase in global RevPAR due to the ongoing recovery in travel demand;
•$65 million of higher marketing, reservation and loyalty fees primarily due to
the RevPAR increase; and
•$32 million of higher management and other fees due to the ongoing recovery in
travel demand; partially offset by
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•$32 million of lower cost-reimbursement revenues in our hotel management
business as a result of CorePoint Lodging asset sales.
Total expenses for the nine months ended September 30, 2021 decreased $256
million, or 24%, compared to the prior-year period, primarily driven by:
•  a $206 million decrease in impairment charges due to the absence of
impairments in 2021;
•$32 million of lower cost reimbursement expenses as discussed above;
•$29 million of lower restructuring charges; and
•$13 million of lower transaction-related expenses; partially offset by
•$16 million of higher marketing, reservation and loyalty expenses primarily due
to the ongoing recovery of travel demand.
Interest expense, net for the nine months ended September 30, 2021 decreased $10
million, or 12%, compared to the prior-year period as a result of the redemption
of our $500 million senior notes in April 2021.
Early extinguishment of debt was $18 million in the nine months ended September
30, 2021 as a result of the redemption of our $500 million notes.
Our effective tax rates were a 27.0% tax provision on pre-tax income and a 16.7%
tax benefit on pre-tax loss during the nine months ended September 30, 2021 and
2020, respectively. The change was primarily related to goodwill impairment
charges that are nondeductible for tax purposes in 2020 and the absence in 2021
of nonrecurring foreign and state tax benefits.
As a result of these items, net income for the nine months ended September 30,
2021 increased $320 million compared to the prior-year period.
The table below is a reconciliation of net income/(loss) to adjusted EBITDA.
                                                                       Nine Months Ended September 30,
                                                                          2021                 2020 (a)
Net income/(loss)                                                  $           195          $       (125)
Provision for/(benefit from) income taxes                                       72                   (25)
Depreciation and amortization                                                   70                    73
Interest expense, net                                                           73                    83
Early extinguishment of debt                                                    18                     -
Stock-based compensation expense                                                20                    14
Development advance notes amortization                                           7                     7
Separation-related expenses                                                      3                     1
Impairments, net                                                                 -                   206
Restructuring costs                                                              -                    29
Transaction-related expenses, net                                                -                    13

Foreign currency impact of highly inflationary countries                         1                     2
Adjusted EBITDA                                                    $           459          $        278


______________________
(a)Adjusted EBITDA for 2020 has been recasted to conform with the current year
presentation.
Following is a discussion of the results of each of our segments and Corporate
and Other for the nine months ended September 30, 2021 compared to September 30,
2020:
                           Net Revenues                               Adjusted EBITDA
                        2021         2020        % Change           2021           2020 (a)       % Change
Hotel Franchising     $   829      $   661              25%    $    464           $     315              47%
Hotel Management          344          343               -%          38                  14             171%
Corporate and Other         -            -              n/a         (43)                (51)             16%
Total Company         $ 1,173      $ 1,004              17%    $    459           $     278              65%

______________________

(a) Adjusted EBITDA for 2020 has been restated to conform to current year presentation.

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Hotel Franchising
                              Nine Months Ended September 30,
                                     2021                       2020        % Change
Total rooms                    758,600                        748,200               1%
Global RevPAR (a)    $           34.88                       $  23.92              46%


______________________
(a)  Excluding currency effects, global RevPAR increased 44%.
Global RevPAR increased 46% from the prior year period primarily due to a 47%
increase in U.S. RevPAR.
Net revenues for the nine months ended September 30, 2021 increased $168
million, or 25%, compared to the prior-year period, primarily driven by the
ongoing recovery of travel demand and its impact on global RevPAR which resulted
in:
•$93 million of higher royalty and franchise fees;
•$66 million of higher marketing, reservation and loyalty revenues; and
•$12 million of higher other revenues.
Adjusted EBITDA for the nine months ended September 30, 2021 increased $149
million, or 47%, compared to the prior-year period, primarily driven by higher
royalty and franchise fees discussed above and a $54 million timing benefit in
connection with our marketing, reservation and loyalty funds.
Hotel Management
                                     Nine Months Ended September 30,
                                     2021                      2020        % Change
Total rooms                     44,000                        55,800            (21%)
Global RevPAR (a)    $           52.67                       $ 35.20              50%


______________________
(a)  Excluding currency effects, global RevPAR increased 49%.
Global RevPAR increased 50% from the prior year period primarily due to a 59%
increase in U.S. RevPAR and a 28% increase in international RevPAR.
Net revenues for the nine months ended September 30, 2021 increased $1 million
compared to the prior-year period, primarily driven by:
•$28 million of higher owned hotel revenues due to ongoing recovery of travel
demand;
•$5 million of higher management fees and royalties and franchise fees due to
ongoing recovery of travel demand; partially offset by
•$32 million of lower cost-reimbursement revenues as discussed above, which have
no impact on adjusted EBITDA.
Adjusted EBITDA for the nine months ended September 30, 2021 increased $24
million, or 171%, compared to the prior-year period, primarily driven by the
higher owned hotel revenues discussed above, partially offset by higher
volume-related expenses principally related to our owned hotels.
Corporate and Other
Adjusted EBITDA for the nine months ended September 30, 2021 was favorable by $8
million compared to the prior-year period primarily due to lower general and
administrative costs.

                                  DEVELOPMENT


We awarded 151 new contracts in the third quarter of both 2021 and 2020. The 151
new contracts in the third quarter of 2021 was 3% higher than 2019. On September
30, 2021, our global development pipeline consisted of over 1,450 hotels and
approximately 193,000 rooms. The pipeline grew 440 basis points year-over-year
and 120 basis points sequentially, including 90 basis points domestically and
140 basis points internationally. Approximately 65% of our development pipeline
is international and 76% is new construction, of which approximately 34% has
broken ground.

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Contents

             FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES


Financial condition
                               September 30, 2021       December 31, 2020       Change
Total assets                  $             4,310      $            4,644      $ (334)
Total liabilities                           3,187                   3,681        (494)
Total stockholders' equity                  1,123                     963         160



Total assets decreased $334 million from December 31, 2020 to September 30, 2021
primarily due to a reduction in cash as a result of the redemption of our $500
million 2026 senior notes, partially offset by cash generated from operations
year-to-date. Total liabilities decreased $494 million from December 31, 2020 to
September 30, 2021 primarily due to the redemption of our senior notes
(discussed above). Total equity increased $160 million from December 31, 2020 to
September 30, 2021 primarily due to our net income for the period, partially
offset by $53 million of dividends and $27 million of stock repurchases.
Liquidity and capital resources
Historically, our business generates sufficient cash flow to not only support
our current operations as well as our future growth needs and dividend payments
to our shareholders, but also to create additional value for our stockholders in
the form of share repurchases. However, due to the negative impact that COVID-19
was having on the travel industry, in 2020 we took a number of preventative
steps to conserve our liquidity and strengthen our balance sheet:
•In March 2020, we suspended share repurchase activity;
•In April 2020, we amended our revolving credit facility agreement to waive the
quarterly-tested leverage covenant until April 1, 2021. The covenant was also
modified for the second, third and potentially fourth quarters of 2021 to use a
form of annualized EBITDA, as defined in the credit agreement, rather than the
last twelve months EBITDA, as previously required;
•In May 2020, we decreased our quarterly cash dividend to $0.08 per share; and
•In August 2020, we issued $500 million of senior unsecured notes, which mature
in 2028 and bear interest at a rate of 4.375% per year, for net proceeds of $492
million, which were used to repay a portion of the then outstanding borrowings
under our revolving credit facility.
As a result of our confidence in the continued recovery of travel demand, we
have taken the following actions in 2021:
•In the first quarter of 2021, we increased our quarterly cash dividend to $0.16
per share;
•On April 15, 2021, we redeemed all $500 million of our outstanding 5.375%
senior notes due in 2026, primarily from cash on hand. We expect this redemption
to reduce our annual cash interest expense by approximately $27 million. Coupled
with the issuance of 4.375% senior notes in August 2020, this redemption
effectively returns our balance sheet to pre-pandemic debt and liquidity levels
while extending $500 million of maturity by approximately 2.5 years at a 100
basis point or 19% lower interest rate;
•In July 2021, we increased our quarterly cash dividend by $0.08 to $0.24 per
share;
•In August 2021, we resumed our share repurchase program; and
•In October 2021, our Board authorized a 33% increase in the quarterly cash
dividend to the pre-pandemic level of $0.32 per share, beginning with the
dividend expected to be declared in fourth quarter 2021.
As of September 30, 2021, our liquidity approximates $930 million. Given the
minimal capital needs of our business, the flexible cost infrastructure and the
mitigation measures taken, we believe that our existing cash, cash equivalents,
cash generated through operations and our expected access to financing
facilities, together with funding through our revolving credit facility, will be
sufficient to fund our operating activities, anticipated capital expenditures
and growth needs. As of September 30, 2021, we were in compliance with the
financial covenants of our credit agreement and expect to remain in such
compliance with no additional waivers or amendments required. As of September
30, 2021, we had a term loan with an aggregate principal amount of $1.6 billion
maturing in 2025 and a five-year revolving credit facility maturing in 2023 with
a maximum aggregate principal amount of $750 million, of which none was
outstanding and $15 million was allocated to outstanding letters of credit. The
interest rate per annum applicable to our term loan is equal to, at our option,
either a base rate plus a margin of 0.75% or LIBOR plus a margin of 1.75%.
Our revolving credit facility is subject to an interest rate per annum equal to,
at our option, either a base rate plus a margin ranging from 0.50% to 1.00% or
LIBOR plus a margin ranging from 1.50% to 2.00%, in either case based upon the
total




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leverage ratio of the Company and its restricted subsidiaries. During the
amendment period as discussed above, the revolving credit facility was subject
to an interest rate per annum equal to, at our option, either a base rate plus a
margin of 1.25% or LIBOR plus a margin of 2.25% with the LIBOR rate subject to a
0.50% floor. The amendment period expired on April 1, 2021.
As of September 30, 2021, $1.1 billion of our $1.6 billion term loan is hedged
with pay-fixed/receive-variable interest rate swaps hedging of our term loan
interest rate exposure. The aggregate fair value of these interest rate swaps
was a $42 million liability as of September 30, 2021.
The Federal Reserve has established the Alternative Reference Rates Committee to
identify alternative reference rates in the event that U.S. dollar LIBOR ceases
to exist after June 2023. Our credit facility, which includes our revolving
credit facility and term loan, gives us the option to use LIBOR as a base rate
and our interest rate swaps are based on the one-month U.S. dollar LIBOR rate.
In the event that LIBOR is no longer published, the credit facility allows us
and the administrative agent of the facility to replace LIBOR with an
alternative benchmark rate, subject to the right of the majority of the lenders
to object thereto. The International Swaps and Derivatives Association issued
protocols to allow swap parties to amend their existing contracts, though the
Company's existing swaps will continue to reference LIBOR for the foreseeable
future.
As of September 2021, our credit rating was Ba1 from Moody's Investors Service
and increased from BB to BB+ from Standard and Poor's Rating Agency. A credit
rating is not a recommendation to buy, sell or hold securities and is subject to
revision or withdrawal by the assigning rating organization. Reference in this
report to any such credit rating is intended for the limited purpose of
discussing or referring to aspects of our liquidity and of our costs of funds.
Any reference to a credit rating is not intended to be any guarantee or
assurance of, nor should there be any undue reliance upon, any credit rating or
change in credit rating, nor is any such reference intended as any inference
concerning future performance, future liquidity or any future credit rating.
Our liquidity and access to capital may be impacted by our credit ratings,
financial performance and global credit market conditions. We believe that our
existing cash, cash equivalents, cash generated through operations and our
expected access to financing facilities, together with funding through our
revolving credit facility, will be sufficient to fund our operating activities,
anticipated capital expenditures and growth needs.

                                   CASH FLOW

The following table summarizes the changes in cash, cash equivalents and restricted cash during the nine months ended. September 30, 2021 and 2020:

                                                                    Nine 

Ended months September 30,

                                                                2021                2020            Change
Cash provided by/(used in)
Operating activities                                       $        327          $    57          $    270
Investing activities                                                (21)             (24)                3
Financing activities                                               (606)             609            (1,215)

Effects of changes in exchange rates on cash, cash equivalents and restricted cash

                                       -               (1)                1

Net change in cash, cash equivalents and restricted cash $ (300)

$ 641 $ (941)



Net cash provided by operating activities increased $270 million compared to the
prior-year period primarily due to the ongoing recovery in travel demand and
related RevPAR growth as well as favorable collections experience and working
capital management, partially offset by $14 million of higher payments for
development advance notes.
Net cash used in investing activities decreased $3 million compared to the
prior-year period, primarily due to repayments of loans.
During the nine months ended September 30, 2021, we used $606 million of net
cash in financing activities compared to generating $609 million of net cash
during the nine months ended September 30, 2020, resulting in a reduction of
$1,215 million in cash generated year-over-year from financing activities. This
change reflects borrowing activities in 2020 in connection with the pandemic and
repayment activities in 2021 as COVID-19 uncertainties were resolved.
Specifically, in 2020, we issued $500 million of 4.375% senior unsecured notes
and borrowed a net $234 million of funds from our revolving credit facility;
while in 2021, we redeemed $500 million of higher-cost, nearer maturity debt
effectively replacing it with the August 2020 issuance of lower-cost, longer
maturity debt.




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Capital deployment
Our first priority is to invest in the business. This includes deploying capital
to attract high quality assets into our system, investing in select technology
improvements across our business that further our strategic objectives and
competitive position, business acquisitions that are accretive and strategically
enhancing to our business, and/or other strategic initiatives. We also expect to
maintain a regular dividend payment. Excess cash generated beyond these needs
would be available for enhanced shareholder return in the form of stock
repurchases.
During the nine months ended September 30, 2021, we spent $23 million on capital
expenditures, primarily related to information technology. During 2021, we
anticipate spending approximately $40 million on capital expenditures.
In addition, during the nine months ended September 30, 2021, we spent $25
million, net of repayments on development advance notes. During 2021, we
anticipate spending approximately $40 million on development advances. We may
also provide other forms of financial support.
We expect all our cash needs to be funded from cash on hand and cash generated
through operations, and/or availability under our revolving credit facility.
Stock repurchase program
In May 2018, our Board approved a share repurchase plan pursuant to which we
were authorized to purchase up to $300 million of our common stock. In August
2019, the Board increased the capacity of the program by another $300 million.
Under the plan, we may, from time to time, purchase our common stock through
various means, including, without limitation, open market transactions,
privately negotiated transactions or tender offers, subject to the terms of the
tax matters agreement entered into in connection with our spin-off.
Due to our confidence in our ability to generate significant cash flow, the
resiliency of our business model and the ongoing recovery of travel demand, we
resumed our share repurchase program in August of 2021. Under our current stock
repurchase program, we repurchased approximately 0.4 million shares at an
average price of $73.13 for a cost of $27 million during the three months ended
September 30, 2021. As of September 30, 2021, we had $164 million of remaining
availability under our program.
Dividend policy

In response to COVID-19, our Board approved a reduction in the quarterly cash
dividend from $0.32 per share to $0.08 per share, beginning with the dividend
that was declared during the second quarter of 2020. On February 10, 2021, the
Board approved an increase in the quarterly cash dividend to $0.16 per share and
in July 2021, the Board approved an additional increase in the quarterly cash
dividend to $0.24 per share.

We declared cash dividends of $0.16 per share in the first and second quarters
of 2021 and $0.24 per share in the third quarter of 2021 ($53 million in
aggregate), which is 75% of our pre-pandemic quarterly dividend per share. In
October 2021, our Board authorized a 33% increase in the quarterly cash dividend
to the pre-pandemic level of $0.32 per share, beginning with the dividend
expected to be declared in fourth quarter 2021.

The declaration and payment of future dividends to holders of our common stock
is at the discretion of our Board and depends upon many factors, including the
impact of COVID-19 on travel demand, our financial condition, earnings, capital
requirements of our business, covenants associated with certain debt
obligations, legal requirements, regulatory constraints, industry practice and
other factors that our Board deems relevant.

                            LONG-TERM DEBT COVENANTS


Our credit facilities contain customary covenants that, among other things,
impose limitations on indebtedness; liens; mergers, consolidations, liquidations
and dissolutions; dispositions, restricted debt payments, restricted payments
and transactions with affiliates. Events of default in these credit facilities
include, among others, failure to pay interest, principal and fees when due;
breach of a covenant or warranty; acceleration of or failure to pay other debt
in excess of a threshold amount; unpaid judgments in excess of a threshold
amount, insolvency matters; and a change of control. The credit facilities
require us to comply with a financial covenant to be tested quarterly,
consisting of a maximum first-lien leverage ratio of 5.0 times. The ratio is
calculated by dividing consolidated first lien indebtedness (as defined in the
credit agreement) net of consolidated unrestricted cash as of the measurement
date by consolidated EBITDA (as defined in the credit agreement), as measured on
a




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trailing four-fiscal-quarter basis preceding the measurement date. As of
September 30, 2021, our annualized first-lien leverage ratio was 1.9 times.
In April 2020, we completed an amendment to our revolving credit facility
agreement to waive the quarterly-tested leverage covenant until April 1, 2021.
The covenant was also modified for the second, third and potentially fourth
quarters of 2021 to use a form of annualized EBITDA, as defined in the credit
agreement, rather than the last twelve months EBITDA, as previously required.
However, during this period we never exceeded the maximum first-lien leverage
ratio of 5.0 times.
The indenture, as supplemented, under which the senior notes due 2028 were
issued, contains covenants that limit, among other things, our ability and that
of certain of our subsidiaries to (i) create liens on certain assets; (ii) enter
into sale and leaseback transactions; and (iii) merge, consolidate or sell all
or substantially all of our assets. These covenants are subject to a number of
important exceptions and qualifications.
As of September 30, 2021, we were in compliance with the financial covenants
described above.

                                  SEASONALITY


While the hotel industry is seasonal in nature, periods of higher revenues vary
property-by-property and performance is dependent on location and guest base.
Based on historical performance, revenues from franchise and management
contracts are generally higher in the second and third quarters than in the
first or fourth quarters due to increased leisure travel during the spring and
summer months. Our cash provided by operating activities tends to be lower in
the first half of the year and substantially higher in the second half of the
year. However, given the impact of COVID-19 in 2020, our second quarter was the
most severely impacted and as such, we had higher revenues and cash flows in the
third and fourth quarters. We believe during 2021 that our revenues and cash
provided by operating activities will return to the historic seasonality as our
business recovers from the pandemic.

                         COMMITMENTS AND CONTINGENCIES


We are involved in claims, legal and regulatory proceedings and governmental
inquiries related to our business. Litigation is inherently unpredictable and,
although we believe that our accruals are adequate and/or that we have valid
defenses in these matters, unfavorable results could occur. As such, an adverse
outcome from such proceedings for which claims are awarded in excess of the
amounts accrued, if any, could be material to us with respect to earnings and/or
cash flows in any given reporting period. As of September 30, 2021, the
potential exposure resulting from adverse outcomes of such legal proceedings
could, in the aggregate, range up to approximately $11 million in excess of
recorded accruals. However, we do not believe that the impact of such litigation
should result in a material liability to us in relation to our financial
position or liquidity. For a more detailed description of our commitments and
contingencies see Note 11 - Commitments and Contingencies to the Condensed
Consolidated Financial Statements contained in Part I, Item 1 of this report.

                         CRITICAL ACCOUNTING POLICIES


In presenting our financial statements in conformity with U.S. GAAP, we are
required to make estimates and assumptions that affect the amounts reported
therein. Several of the estimates and assumptions we are required to make relate
to matters that are inherently uncertain as they pertain to future events.
However, events that are outside of our control cannot be predicted and, as
such, they cannot be contemplated in evaluating such estimates and assumptions.
If there is a significant unfavorable change to current conditions, it could
result in a material impact to our consolidated results of operations, financial
position and liquidity. We believe that the estimates and assumptions we used
when preparing our financial statements were the most appropriate at that time.
These Condensed Consolidated Financial Statements should be read in conjunction
with our 2020 Consolidated and Combined Financial Statements included in our
most recent Annual Report on   Form 10-K   filed with the U.S. Securities and
Exchange Commission (the "SEC") and any subsequent reports filed with the SEC,
which includes a description of our critical accounting policies that involve
subjective and complex judgments that could potentially affect reported results.

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