# Wyndham Hotels & Resorts, Inc.: Form 10-K for the period ended Dec 31, 2019

- Company: [Wyndham Hotels & Resorts, Inc.](/companies/wh.md) (CIK 1722684)
- Form: 10-K
- Filed: 2020-02-13
- Accepted by EDGAR: Feb 13, 2020, 16:30 ET
- Period: 2019-12-31
- Accession: 0001722684-20-000007
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1722684/000172268420000007/wh-20191231x10k.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1722684/000172268420000007/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2019-12-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2019-10-01 to 2019-12-31 | $492.0m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 12 months, 2019-01-01 to 2019-12-31 | $2.05bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Operating income | 3 months, 2019-10-01 to 2019-12-31 | $103.0m | us-gaap:OperatingIncomeLoss |
| Operating income | 12 months, 2019-01-01 to 2019-12-31 | $307.0m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2019-10-01 to 2019-12-31 | $25.0m | us-gaap:InterestExpense |
| Interest expense | 12 months, 2019-01-01 to 2019-12-31 | $100.0m | us-gaap:InterestExpense |
| Income tax | 3 months, 2019-10-01 to 2019-12-31 | $14.0m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 12 months, 2019-01-01 to 2019-12-31 | $50.0m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2019-10-01 to 2019-12-31 | $64.0m | us-gaap:NetIncomeLoss |
| Net income | 12 months, 2019-01-01 to 2019-12-31 | $157.0m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2019-10-01 to 2019-12-31 | $0.68 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 12 months, 2019-01-01 to 2019-12-31 | $1.62 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 12 months, 2019-01-01 to 2019-12-31 | $1.63 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2019-10-01 to 2019-12-31 | 95,000,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 12 months, 2019-01-01 to 2019-12-31 | 96,600,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 12 months, 2019-01-01 to 2019-12-31 | $100.0m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 12 months, 2019-01-01 to 2019-12-31 | $50.0m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 12 months, 2019-01-01 to 2019-12-31 | $112.0m | us-gaap:PaymentsOfDividendsCommonStock |
| Share repurchases | 12 months, 2019-01-01 to 2019-12-31 | $242.0m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2019-12-31 | $94.0m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2019-12-31 | $499.0m | us-gaap:AssetsCurrent |
| Total assets | at 2019-12-31 | $4.53bn | us-gaap:Assets |
| Current liabilities | at 2019-12-31 | $462.0m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2019-12-31 | $3.32bn | us-gaap:Liabilities |
| Shareholders' equity | at 2019-12-31 | $1.21bn | us-gaap:StockholdersEquity |

## Business

As filed, 30,541 characters.

Wyndham Hotels & Resorts, Inc. (“Wyndham Hotels”, the “Company”, or “we”) is the world’s largest hotel franchising company by number of hotels, with nearly 9,300 affiliated hotels with 831,025 rooms located in approximately 90 countries and welcoming nearly 150 million guests annually worldwide. Our 20 brands are primarily located in secondary and tertiary cities and approximately 80% of the U.S. population lives within ten miles of at least one of our affiliated hotels. Our mission is to make hotel travel possible for all. Wherever people go, Wyndham will be there to welcome them. We boast a remarkably asset-light business model with only two of our nearly 9,300 hotels being owned, dramatically limiting our capital needs and our exposure to real estate and the rising wage environment.

The following chart presents the number of branded hotels associated with each of the five largest traditional hotel franchise companies as of September 30, 2019:

Source: Companies' public disclosures

Our widely recognized brands with select-service focus offer a breadth of options for franchisees and a wide range of price points and experiences for our guests. We are a global leader in the economy and midscale chain scales where our brands represent nearly 35% of branded rooms in the United States, and we also have a growing presence in the upper midscale, lifestyle and upscale chain scales. With many of our affiliated hotels located along major highways, our brands not only drive online and voice reservations to hotels in our system, but they also attract walk-in guests. With the addition of the “by Wyndham” endorsement in 2018, our brands now enjoy even higher awareness.

The following table summarizes our brand portfolio as of December 31, 2019:

As of December 31, 2019, our brand portfolio consisted of the following:

| Economy | Global RevPAR |  | North America U.S. | Canada | Asia Pacific Greater China | Rest of Asia | Europe, Middle East and Africa | Latin America | Total |
| --- | ---: | --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Super 8 | $27.16 | Properties | 1,551 | 125 | 1,242 | — | 7 | — | 2,925 |
|  |  | Rooms | 93,175 | 8,034 | 75,520 | — | 1,226 | — | 177,955 |
| Days Inn | $36.17 | Properties | 1,432 | 114 | 62 | 16 | 60 | 7 | 1,691 |
|  |  | Rooms | 107,429 | 8,954 | 9,535 | 2,349 | 3,713 | 514 | 132,494 |
| Travelodge | $37.89 | Properties | 349 | 101 | — | — | — | — | 450 |
|  |  | Rooms | 23,913 | 8,285 | — | — | — | — | 32,198 |
| Microtel | $43.17 | Properties | 303 | 19 | 3 | 14 | — | 7 | 346 |
|  |  | Rooms | 21,423 | 1,657 | 550 | 1,037 | — | 835 | 25,502 |
| Howard Johnson | $29.43 | Properties | 174 | 26 | 66 | 3 | 5 | 48 | 322 |
|  |  | Rooms | 13,956 | 1,807 | 21,259 | 1,107 | 500 | 3,059 | 41,688 |
| **Midscale** |  |  |  |  |  |  |  |  |  |
| La Quinta | $60.04 | Properties | 911 | 2 | — | — | 1 | 14 | 928 |
|  |  | Rooms | 88,415 | 133 | — | — | 404 | 1,937 | 90,889 |
| Ramada | $37.35 | Properties | 341 | 82 | 112 | 78 | 215 | 27 | 855 |
|  |  | Rooms | 40,883 | 7,857 | 24,997 | 14,246 | 30,492 | 3,538 | 122,013 |
| Baymont | $38.78 | Properties | 521 | 3 | — | — | — | 1 | 525 |
|  |  | Rooms | 40,563 | 350 | — | — | — | 118 | 41,031 |
| AmericInn | $51.40 | Properties | 205 | — | — | — | — | — | 205 |
|  |  | Rooms | 12,151 | — | — | — | — | — | 12,151 |
| Wingate | $53.89 | Properties | 169 | 9 | 2 | — | — | 1 | 181 |
|  |  | Rooms | 15,335 | 889 | 329 | — | — | 176 | 16,729 |
| Wyndham Garden | $49.36 | Properties | 72 | 3 | 7 | 4 | 17 | 24 | 127 |
|  |  | Rooms | 11,855 | 651 | 1,246 | 541 | 2,838 | 3,236 | 20,367 |
| Ramada Encore | $26.29 | Properties | — | — | 25 | 16 | 20 | 10 | 71 |
|  |  | Rooms | — | — | 4,228 | 4,557 | 2,331 | 1,425 | 12,541 |
| **Extended Stay** |  |  |  |  |  |  |  |  |  |
| Hawthorn | $54.94 | Properties | 103 | — | — | — | 6 | — | 109 |
|  |  | Rooms | 9,737 | — | — | — | 549 | — | 10,286 |
| **Lifestyle** |  |  |  |  |  |  |  |  |  |
| Trademark | $74.32 | Properties | 39 | 10 | — | 1 | 49 | 2 | 101 |
|  |  | Rooms | 11,657 | 1,489 | — | 90 | 8,793 | 67 | 22,096 |
| TRYP | $55.89 | Properties | 9 | — | 1 | 2 | 65 | 20 | 97 |
|  |  | Rooms | 1,099 | — | 95 | 256 | 9,141 | 2,932 | 13,523 |
| Dazzler | $57.37 | Properties | — | — | — | — | — | 13 | 13 |
|  |  | Rooms | — | — | — | — | — | 1,687 | 1,687 |
| Esplendor | $45.00 | Properties | — | — | — | — | — | 8 | 8 |
|  |  | Rooms | — | — | — | — | — | 909 | 909 |
| **Upscale** |  |  |  |  |  |  |  |  |  |
| Wyndham | $58.51 | Properties | 35 | — | 29 | 15 | 16 | 39 | 134 |
|  |  | Rooms | 10,432 | — | 8,697 | 3,007 | 3,150 | 8,764 | 34,050 |
| Wyndham Grand | $65.54 | Properties | 11 | — | 23 | 2 | 13 | — | 49 |
|  |  | Rooms | 3,055 | — | 8,130 | 384 | 3,292 | — | 14,861 |
| Dolce | $93.00 | Properties | 8 | 3 | — | — | 8 | — | 19 |
|  |  | Rooms | 1,639 | 276 | — | — | 2,298 | — | 4,213 |
| **Affiliated properties (a)** |  |  |  |  |  |  |  |  |  |
|  |  | Properties | 109 | 3 | — | 11 | — | 1 | 124 |
|  |  | Rooms | 3,446 | 315 | — | 47 | — | 34 | 3,842 |
| **Total** | **$40.92** | **Properties** | **6,342** | **500** | **1,572** | **162** | **482** | **222** | **9,280** |
|  |  | **Rooms** | **510,163** | **40,697** | **154,586** | **27,621** | **68,727** | **29,231** | **831,025** |

(a) Affiliated properties represent properties under affiliation arrangements with Wyndham Destinations.

The following charts illustrate our system size (by rooms) as of December 31, 2019:

\* LATAM is representative of Latin America and the Caribbean.

\*\* EMEA is representative of Europe, the Middle East and Africa.

The following table presents the changes in our portfolio for the last three years:

|  | As of December 31, 2019 Properties | Rooms | 2018 Properties | Rooms | 2017 Properties | Rooms |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Beginning balance | 9,157 | 809,900 | 8,422 | 728,200 | 8,035 | 697,600 |
| Additions (a) | 523 | 63,500 | 1,512 | 145,800 | 811 | 72,200 |
| Deletions (b) | (400) | (42,400) | (777) | (64,100) | (424) | (41,600) |
| Ending balance | 9,280 | 831,000 | 9,157 | 809,900 | 8,422 | 728,200 |

(a) 2018 includes the addition of 905 properties and 88,600 rooms from the acquisition of the La Quinta brand and 2017 includes the addition of 202 properties and 11,900 rooms from the acquisition of the AmericInn brand.

(b) 2018 includes the deletion of 351 properties and 21,300 rooms from the disposition of the Knights Inn brand.

In addition to our existing franchisees, we have nearly 1,500 properties and 193,400 rooms under development. As of December 31, 2019, approximately 43% of our pipeline was located in the U.S. and 57% was located internationally; approximately 70% of our pipeline was for new construction properties and 30% represented conversion opportunities.

Our pipeline is typically only a subset of our development activity in any given period as some of our hotel additions are executed and opened in less than 90 days and therefore may never appear in our pipeline. However, we use the pipeline to gauge interest in our brands and our continued ability to drive our net room growth projections. Our development pipeline represents 23.3% of our beginning system size for 2020 as compared to a pipeline in 2019 that represented 22.2% of the then-beginning system size.

### OUR FRANCHISING BUSINESS

### Hotel Franchising Segment Adjusted EBITDA (a) ($ in millions)

(a) See Part II Item 6. Selected Financial Data for our definition of adjusted EBITDA and the reconciliation of net income to adjusted EBITDA.

We license our brands and associated trademarks to over 6,000 franchisees globally, which provides for a highly diversified owner base with limited concentration. Our franchisees range from sole proprietors to institutional investors such as public real estate investment trusts. Our franchise agreements are typically 10 to 20 years in length, providing significant visibility into future cash flows. Under these agreements, our franchisees generally pay us a royalty fee of 4% to 5% of gross room revenue and a marketing and reservation fee of 3% to 5% of gross room revenue. We occasionally provide financial support in the form of loans or development advances to help generate new business.

### OUR MANAGEMENT BUSINESS

### Hotel Management Segment Adjusted EBITDA (a) ($ in millions)

(a) See Part II Item 6. Selected Financial Data for our definition of adjusted EBITDA and the reconciliation of net income to adjusted EBITDA.

As of December 31, 2019, we had 392 hotels under management contracts and two owned hotels - the Wyndham Grand Rio Mar Beach Resort and Spa in Puerto Rico and the Wyndham Grand Orlando Bonnet Creek. We only manage properties under our brands, primarily under the Wyndham, Wyndham Grand, La Quinta, Dolce, Hawthorn and Ramada brands in major markets and resort destinations globally. The duration of our management agreements is typically 10 to 20 years. We earn a base management fee, which is based on a percentage of the hotel’s total revenue, and in some cases we earn an incentive fee, which is based on achieving performance metrics agreed upon with hotel owners. Under our management arrangements, we provide all the benefits of a franchising agreement and also conduct the day-to-day-operations of the hotel on behalf of the owner.

### OUR STRATEGY

Our objective is to be the world’s leading provider of select-service hotel brands by delivering the best value to owners and guests. We expect to achieve our objective by focusing on our core strategic goals:

### Drive net room growth

We intend to drive net room growth by providing exceptional value to franchisees that enables them to optimize the return on their investment. We do this by driving an increasing number of reservations to our franchisees through our direct channels, leveraging our scale to lower operating costs, reduce third party commissions, providing best-in-class technology solutions and offering new prototypes that reduce the cost to both build and operate hotels under our brands.

Our franchise sales team consists of nearly 150 sales professionals throughout the world. Our sales team is focused on growing our franchise business through conversions of existing branded and independent hotels and partnering with developers to brand newly constructed hotels. In addition to a regional presence in the United States, we currently have sales teams located in London, Istanbul, Dubai, Shanghai, Singapore, Canada, Delhi, Mexico City, Sao Paulo and Buenos Aires. Our international presence in key countries allows us to quickly adapt to changes in the increasingly dynamic global marketplace and to capitalize on new opportunities as they emerge.

With a diverse, global network of brands already represented in approximately 90 countries, we intend to introduce our brands into new international markets and to grow in existing markets. As international tourism continues to grow, we are well positioned to capitalize on the rising demand for trusted lodging options for all travelers, particularly everyday travelers and the growing global middle class. Our international development efforts are focused on building scale in key cities and markets, increasing our brand recognition and broadening our appeal to domestic and international guests. Over the past five years, our international portfolio has grown at a compound annual rate of 8%, to nearly 3,000 hotels, and now represents over 30% of the hotels in our system.

In 2019, our sales team executed new contracts representing nearly 92,000 rooms, an increase of 6% from 2018. As a result, we welcomed 523 new hotels globally in 2019 or an average of one and a half new hotels into our system every day.

A key component of our net room growth strategy is our ability to retain properties within our system. With a heavy concentration in the economy and midscale chain scales, our retention rate will naturally be lower than our competitors with less concentration in these chain scales. Industry-wide, our data suggest economy hotels in the U.S. average 93% retention, while midscale hotels average 96% industry-wide. As we move up the chain scales, our retention rates will continue to improve. Upper midscale retention rates average 97% and upscale brands average 99%. Both globally and in the United States, our retention rate was 95% in 2019, compared to 93% in 2015. In 2019, we retained 96% of the hotels in our economy brands, three points higher than the industry average, and 96% of the hotels in our midscale brands, the same as industry average. Internationally, our retention rate was 94%, one point better than 2015. Our goal is to continue to improve our retention rates to support overall net room growth.

### Elevate the brand experience

Our brands are among the most respected in the industry and have won numerous awards for their quality and consistency. J.D. Power 2019 North America Hotel Guest Satisfaction Index Study awarded Wyndham brands two of the top three spots in both the economy and midscale segments with Microtel by Wyndham, the leading economy brand for 16 of the last 18 years, and Wingate by Wyndham, the leading midscale brand for the fifth consecutive year. We will continue to drive guest satisfaction and a quality experience at every price point through our brand standards, hotel management training, quality assurance programs, and strong operations support model.

We are investing in our brands with several new value-engineered prototypes and redesign packages launched in 2019 including the Microtel Moda prototype, Days Inn Dawn interior redesign, AmericInn Gen-4 interior redesign and La Quinta Del Sol and Hawthorn dual-brand prototype, and recently announced the Wyndham Garden Arbor prototype. These prototypes join existing designs for Super 8, Howard Johnson and La Quinta to create value-engineered, cost efficient options for our franchisees that elevate the experience for the everyday traveler.

### Capture greater market share

We continue to focus on delivering value through our direct channels and growing market share for our franchisees through loyalty, sales, marketing, distribution, and technology programs.

Our loyalty program, Wyndham Rewards, has been recognized as one of the simplest, most rewarding loyalty programs in the hotel industry, providing more value to members than any other program. It has won more than 90 awards in the past five years, including “Best Hotel Loyalty Program” from US News & World Report, “Best Hotel Loyalty Program” in USA TODAY, “10 Best Readers’ Choice Awards”, “Most Rewarding Hotel Loyalty Program” from IdeaWorks and in December 2019, was ranked #1 on WalletHub’s list of “Best Hotel Rewards Programs” for the fifth consecutive year.

Wyndham Rewards has over 81 million enrolled members and accounts for approximately 36% of occupancy at our affiliated hotels globally and over 40% in the United States, up from 30% globally and 37% in the United States in 2018. Total membership has been growing by over 10% annually for the past seven years with approximately 7 million new members added in 2019. Our franchisees benefit from the program through repeat stays and members benefit through free night stays as well as other redemption options for their points, such as gift cards, merchandise and experiences. Additionally, Wyndham Rewards members can redeem their points for stays at thousands of vacation ownership and rental properties globally.

Our global sales organization leverages the size and diversification of our portfolio to gain a larger share of business for each of our hotels through relationship-based selling to a broad range of clients, including corporate business travel clients, corporate group clients, association markets, consortium and travel agent clients, wholesale leisure clients, social group clients, and specialty markets such as trucking companies and travel clubs.

Our cross-channel marketing efforts are designed to build awareness of our 20 brands and Wyndham Rewards and drive revenue to our franchisees through central channels. We offer revenue management services that help franchisees maximize revenue by optimizing rate and managing inventory. We have continued to invest in the effectiveness and responsiveness of our mobile and our brand sites. We also offer Signature Reservation Services from our global customer contact centers to help franchisees manage direct-to-property reservation calls and provide seamless integration to third-party distribution channels.

A key element of our value proposition to franchisees is reservation delivery and profit optimization. Our cloud-based, web-enabled, state-of-the-art technology platform, which includes a fully integrated property management, reservation and revenue management system, is provided to our franchisees at an affordable price. We provide our franchisees with the types of tools used by larger hotels, a capability that was effectively unaffordable to hotels in the economy and midscale sectors. Our scale enables franchisees to take advantage of attractive pricing, and this cloud-based, web-enabled solution eliminates the need for our franchisees to purchase or maintain an on-site server, which traditionally has been a significant burden to hotel owners.

### Foster a values-driven culture

With approximately 14,200 team members, we strive to foster a values-driven culture grounded in the strong foundation established by our former parent company. We remain guided by our core values and signature Count on Me service promise in order to attract, retain and engage the best people in our industry.

### Use cash flow to create value for stockholders

Our asset-light business model, with stable, recurring franchise fee revenue and low fixed capital needs generates predictable cash flows. Approximately 90% of our revenues are fee-for-service primarily from long-term agreements. At a 95% retention, this means we begin each year with a high degree of certainty regarding the majority of our revenue.

We expect to use the cash we generate to either invest in the business, including through acquisitions, or to return capital to our stockholders through dividends and share repurchases. We returned $356 million to stockholders over the past twelve months by repurchasing 4.5 million shares, or 5%, of our common stock for $244 million and paying dividends of $112 million to stockholders. Since our spin-off, we have returned $553 million to stockholders through the repurchase of 7% of our common stock and the payment of $1.91 in dividends per share. We expect to continue to pay a regular dividend and to continue repurchasing our stock.

### OUR HISTORY

Our business was initially incorporated as Hospitality Franchise Systems, Inc. in 1990 to acquire the Howard Johnson brand and the franchise rights to the Ramada brand in the United States. It was an integral part of Wyndham Worldwide Corporation and its predecessor from 1997 to 2018. Wyndham Hotels became an independent, public company in May 2018 when it was spun-off from Wyndham Worldwide. Our business has grown substantially over time through acquisitions and organic expansion.

### COMPETITION

We encounter competition among hotel franchisors and lodging operators. We believe franchisees make decisions based principally upon the perceived value and quality of the brand and the services offered. We further believe that the perceived value of a brand name is partially a function of the success of the existing hotels franchised under the brand.

The ability of an individual franchisee to compete may be affected by the location and quality of its property, the number of competitors in the vicinity, community reputation and other factors. A franchisee’s success may also be affected by general, regional and local economic conditions. The potential effect of these conditions on our performance is substantially reduced by virtue of the diverse locations of our affiliated hotels and by the scale of our base. Our system is dispersed among approximately 6,000 franchisees, which reduces our exposure to any one franchisee. One master franchisor in China for the Super 8 brand accounts for 13% of our hotels. Apart from this relationship, no one franchisee accounts for more than 3% of our hotels.

### 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 fees 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 than in the second half of the year. The seasonality of our business may cause fluctuations in our quarterly operating results, earnings, profit margins and cash flows. As we expand into new markets and geographical locations, we may experience increased or different seasonality dynamics that create fluctuations in operating results different from the fluctuations we have experienced in the past.

### INTELLECTUAL PROPERTY

Wyndham Hotels owns the trademarks and other intellectual property rights related to our hotel brands, including the “Wyndham” trademark. We actively use, directly or through our licensees, these trademarks and other intellectual property rights. We operate in a highly competitive industry in which the trademarks and other intellectual property rights related to our hotel brands are very important to the marketing and sales of our services. We believe that our hotel brand names have come to represent high standards of quality, caring, service and value to our franchisees and guests. We register the trademarks that we own in the United States Patent and Trademark Office, as well as with other relevant authorities, where we deem appropriate, and otherwise seek to protect our trademarks and other intellectual property rights from unauthorized use as permitted by law.

### GOVERNMENT REGULATION

Our business is subject to various foreign and U.S. federal and state laws and regulations. In particular, our franchisees are subject to the local laws and regulations in each country in which such hotels are operated, including employment laws and practices, privacy laws and tax laws, which may provide for tax rates that exceed those of the United States and which may provide that our foreign earnings are subject to withholding requirements or other restrictions, unexpected changes in regulatory requirements or monetary policy and other potentially adverse tax consequences. Our franchisees and other aspects of our business are also subject to various foreign and U.S. federal and state laws and regulations, including the Americans with Disabilities Act and similar legislation in certain jurisdictions outside of the United States.

The Federal Trade Commission, various states and other foreign jurisdictions regulate the offer and sale of franchises. The Federal Trade Commission requires us to furnish to prospective franchisees a franchise disclosure document containing prescribed information prior to execution of a binding franchise agreement or payment of money by the prospective franchisee. State regulations also require franchisors to make extensive disclosure to prospective franchisees, and a number of states also require registration of the franchise disclosure document prior to sale of any franchise within the state. Non-compliance with disclosure and registration laws can affect the timing of our ability to sell franchises in these jurisdictions. Additionally, laws in many states and foreign jurisdictions also govern the franchise relationship, such as imposing limits on a franchisor’s ability to terminate franchise agreements or to withhold consent to the renewal or transfer of these agreements. Failure to comply with these laws and regulations has the potential to result in fines, injunctive relief, and/or payment of damages or restitution to individual franchisees or regulatory bodies, or negative publicity impairing our ability to sell franchises.

### ENVIRONMENTAL AND SOCIAL RESPONSIBILITY

Our social responsibility initiatives reflect our commitment to valuing diversity and inclusion, protecting human rights, fostering environmental sustainability and supporting our communities. Our 2019 Social Responsibility Report, which is available on our corporate website, contains additional information regarding our commitment to social responsibility.

### EMPLOYEES

As of December 31, 2019, we had approximately 14,200 employees, including approximately 1,300 employees outside of the United States. Approximately 6% of our employees are subject to collective bargaining agreements governing their employment with our Company.

### INFORMATION ABOUT OUR EXECUTIVE OFFICERS

**Geoffrey A. Ballotti**, 58, serves as our President and Chief Executive Officer and member of our Board of Directors ("Board"). From March 2014 to March 2018, Mr. Ballotti served as President and Chief Executive Officer of Wyndham Hotel Group. From March 2008 to March 2014, Mr. Ballotti served as Chief Executive Officer of Wyndham Destination Network. From October 2003 to March 2008, Mr. Ballotti was President of the North America Division of Starwood Hotels and Resorts Worldwide. From 1989 to 2003, Mr. Ballotti held leadership positions of increasing responsibility at Starwood Hotels and Resorts Worldwide including President of Starwood North America, Executive Vice President, Operations, Senior Vice President, Southern Europe and Managing Director, Ciga Spa, Italy. Prior to joining Starwood Hotels and Resorts Worldwide, Mr. Ballotti was a Banking Officer in the Commercial Real Estate Group at the Bank of New England.

**Michele Allen,** 45, serves as our Chief Financial Officer. From May 2018 to December 2019, Ms. Allen served as Executive Vice President and Treasurer. From April 2015 to May 2018, Ms. Allen served as Senior Vice President of Finance for Wyndham Worldwide. From August 2006 to March 2015, Ms. Allen served in positions of increasing responsibility at Wyndham Hotel Group including Senior Vice President of Finance and Controller. Ms. Allen began her career as an independent auditor at Deloitte & Touche LLP.

**Tom H. Barber**, 48, serves as our Global Chief Development Officer. From January 2012 to May 2018, Mr. Barber served as Senior Vice President, M&A and Operational Excellence at Wyndham Worldwide. From June 2004 until January 2012, Mr. Barber served as Director, Mergers & Acquisitions at Credit Suisse Securities. Prior to joining Credit Suisse Securities, he served as Manager, Strategy Consulting at Gemini Consulting and as a business development and product manager at Microsoft Corporation.

**Paul F. Cash**, 50, serves as our General Counsel, Chief Compliance Officer and Corporate Secretary. From October 2017 to May 2018, Mr. Cash served as Executive Vice President and General Counsel of Wyndham Hotel Group. From April 2005 to September 2017, Mr. Cash served as Executive Vice President and General Counsel and in legal executive positions with increasing leadership responsibility for Wyndham Destination Network. From January 2003 to April 2005, Mr. Cash was a partner in the Mergers and Acquisitions, International and Entertainment and New Media practice groups of Alston & Bird LLP and from February 1997 to December 2002 he was an associate at Alston & Bird LLP. From August 1995 until February 1997, Mr. Cash was an associate at the law firm Pünder, Volhard, Weber & Axster in Frankfurt, Germany.

**Lisa Borromeo Checchio**, 39, serves as our Chief Marketing Officer. From May 2018 to January 2019, Ms. Checchio served as our Senior Vice President and Chief Marketing Officer. From April 2017 to May 2018, Ms. Checchio served as Senior Vice President, Global Brands for Wyndham Hotel Group. From August 2015 to April 2017, Ms. Checchio served as Vice President, Brand Marketing for Wyndham Hotel Group. From July 2004 to August 2015, Ms. Checchio held several marketing positions of increasing responsibility and served as Brand Marketing and Advertising Director for JetBlue Airways.

**Mary R. Falvey**, 59, serves as our Chief Administrative Officer. From August 2006 to May 2018, Ms. Falvey served as Executive Vice President and Chief Human Resources Officer of Wyndham Worldwide. Ms. Falvey was Executive Vice President, Global Human Resources for Cendant Corporation’s Vacation Network Group from April 2005 to July 2006. From March 2000 to April 2005, Ms. Falvey served as Executive Vice President, Human Resources for RCI. From January 1998 to March 2000, Ms. Falvey was Vice President of Human Resources for Cendant Corporation’s Hotel Division and Corporate Contact Center group. Prior to joining Cendant Corporation, Ms. Falvey held various leadership positions in the human resources division of Nabisco Foods Company.

**Robert D. Loewen,** 55, serves as our Chief Operating Officer. From March 2013 to May 2018, Mr. Loewen served as Executive Vice President and Chief Operating Officer for Wyndham Hotel Group. From April 2002 to March 2013, Mr. Loewen served as Chief Financial Officer for Wyndham Hotel Group. Mr. Loewen joined Wyndham Worldwide in April 2000 as Director, Corporate Audit.

**Nicola Rossi**, 53, serves as our Chief Accounting Officer. From July 2006 to May 2018, Mr. Rossi served as Senior Vice President and Chief Accounting Officer for Wyndham Worldwide. Mr. Rossi was Vice President and Controller of Cendant’s Hotel Group from June 2004 to July 2006. From April 2002 to June 2004, Mr. Rossi served as Vice President, Corporate Finance for Cendant. From April 2000 to April 2002, Mr. Rossi was Corporate Controller and from June 1999 to March 2000 was Assistant Corporate Controller of Jacuzzi Brands, Inc.

**Scott R. Strickland**, 49, serves as our Chief Information Officer. From March 2017 to May 2018, Mr. Strickland served as Chief Information Officer of Wyndham Hotel Group. From November 2011 to March 2017, Mr. Strickland served as Chief Information Officer for Denon Marantz Electronics. From February 2005 to June 2010, Mr. Strickland served as Chief Information Officer for Black & Decker HHI. From 1999 to 2005, Mr. Strickland served as an Associate Partner with PricewaterhouseCoopers.

## Risk factors

As filed, 47,936 characters.

### RISK FACTORS

You should carefully consider each of the following risk factors and all of the other information set forth in this report. Based on the information currently known to us, we believe that the following information identifies the most significant risk factors affecting our Company. However, the risks and uncertainties we face are not limited to those set forth in the risk factors described below. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business. In addition, past financial performance may not be a reliable indicator of future performance and historical trends should not be used to anticipate results or trends in future periods.

If any of the following risks and uncertainties develops into actual events, these events could have a material adverse effect on our business, financial condition or results of operations. In such case, the trading price of our common stock could decline.

### Risks Relating to Our Business and Industry

**The lodging industry is highly competitive, and we are subject to risks related to competition that may adversely affect our performance and growth.**

Our continued success depends upon our ability to compete effectively in markets that contain numerous competitors, some of whom may have significantly greater financial, marketing and other resources than we have. We compete with other hotel franchisors for franchisees and we may not be able to grow our franchise system. New hotels may be constructed and these additions to supply create new competitors, in some cases without corresponding increases in demand for lodging. Competition may reduce fee structures, potentially causing us to lower our fees, and may require us to offer terms to prospective franchisees less favorable to us than current franchise agreements, which may adversely impact our profits. Our franchisees also compete with alternative lodging channels, including third-party providers of short-term rental properties and serviced apartments. Increasing use of these alternative lodging channels could adversely affect the occupancy and/or average rates at franchised hotels and our revenues. The use of business models by competitors that are different from ours may require us to change our model so that we can remain competitive.

**We are subject to business, financial, operating and other risks common to the hotel, hotel franchising and hotel management industries which also affect our franchisees and hotel owners, any of which could reduce our revenues, limit our growth or otherwise impact our business.**

A significant portion of our revenue is derived from fees based on room revenues at hotels franchised under our brands. As such, our business is subject, directly or through our franchisees, to risks common in the hotel, hotel franchising and hotel management industries, including risks related to:

- our ability to meet our objectives for growth in the number of our franchised hotels, hotel rooms in our franchise system and hotels under management and to retain and renew franchisee and hotel management contracts, all on favorable terms;
- the number, occupancy and room rates of hotels operating under our franchise and management agreements;
- the delay of hotel openings in our pipeline;
- changes in the supply and demand for hotel rooms;
- our ability to develop and maintain positive relations and contractual arrangements with current and potential franchisees and hotel owners under our hotel management agreements and other third parties, including marketing alliances and affiliations with e-commerce channels;
- our franchisees’ pricing decisions;
- the quality of the services provided by franchisees and their investment in the maintenance and improvement of properties;
- the bankruptcy or insolvency of a significant number of our franchised or managed hotels;
- the financial condition of franchisees, owners or other developers and the availability of financing to them;
- adverse events occurring at franchised or managed hotel locations, including personal injuries, food tampering, contamination or the spread of illness, including the 2019 Novel Coronavirus;
- negative publicity, which could damage our hotel brands;
- our ability to successfully market our current or any future hotel brands and programs, including our rewards program, and to service or pilot new initiatives;
- our management contract or relationship with CorePoint Lodging, Inc. (“CorePoint”), which in aggregate owns approximately 69% of our managed hotels and any decision by CorePoint to divest additional hotels;
- changes in the laws, regulations and legislation affecting our business, internationally and domestically;
- our failure to adequately protect and maintain our trademarks and other intellectual property rights;
- the relative mix of branded hotels in the various hotel industry price categories;
- corporate budgets and spending and cancellations, deferrals or renegotiations of group business;
- seasonal or cyclical volatility in our business;
- operating costs, including as a result of inflation, energy costs and labor costs, such as minimum wage increases and unionization, workers’ compensation and health-care related costs and insurance; and
- disputes, claims and litigation and other legal proceedings concerning our or our franchised or managed hotels’ operations regarding human trafficking or other matters, including with consumers, government regulators, other businesses, franchisees and hotel owners, organized labor activities and class actions.

Any of these factors could reduce our revenues, increase our costs or otherwise limit our opportunities for growth.

### Declines in or disruptions to the travel industry may adversely affect us.

We face risks affecting the travel and hotel industries that include: economic slowdown and recession; economic factors such as increased costs of living and reduced discretionary income adversely impacting decisions by consumers and businesses to use travel accommodations; terrorist incidents and threats and associated heightened travel security measures; political and regional strife; acts of God such as earthquakes, hurricanes, fires, floods, volcanoes and other natural disasters; war; concerns with or threats of pandemics, contagious diseases or health epidemics, such as the 2019 Novel Coronavirus; environmental disasters; lengthy power outages; increased pricing, financial instability and capacity constraints of air carriers; airline job actions and strikes; and increases in gasoline and other fuel prices. Any such decline in or disruptions to the travel or hotel industries may adversely affect our franchised hotels, the operations of current and potential franchisees, developers and hotel owners with which we have hotel management contracts.

### Third-party Internet travel intermediaries and peer-to-peer online networks.

Consumers increasingly use third-party Internet travel intermediaries, including search engines, and peer-to-peer online networks to search for and book their lodging accommodations. As the percentage of internet reservations increases, travel intermediaries may be able to obtain higher commissions and reduced room rates to the detriment of our business. Additionally, such travel intermediaries may divert reservations away from our direct online channels or increase the overall cost of Internet reservations for our affiliated hotels through their fees and a variety of online marketing methods, including the purchase by certain travel intermediaries of keywords consisting of or containing our hotel brands from Internet search engines to influence search results and direct guests to their websites. If we fail to reach satisfactory agreements with intermediaries, our affiliated hotels may not appear on their websites and we could lose business as a result.

**Our revenues could be impacted if we are unable to maintain our contractual relationships with CorePoint.**

In connection with the La Quinta acquisition, we entered into hotel-management agreements and hotel franchise agreements with CorePoint. We are also subject to certain agreements related to CorePoint’s previously completed spin-off of its real estate business. In October 2019, we entered into an additional agreement with CorePoint to collaborate on a number of new technology and operating initiatives, support CorePoint’s efforts to enhance its portfolio and resolve open issues between CorePoint and us; our obligations under our amended hotel-management agreements include, among other things, the obligation to develop and launch enhanced automated revenue management, sales and reservations technology by specified dates and timely deliver a satisfactory annual System and Organization Control Report (SOC-1) commencing in 2021 for the calendar year 2020. If we are unable to maintain a good relationship with CorePoint, if we are unable to perform our obligations to CorePoint under our agreements and CorePoint terminates these agreements, if CorePoint is unable to perform its obligations to us under our agreements and we terminate these agreements, or CorePoint or we do not renew these agreements following their expiration, our profitability and revenues could decrease and our growth potential may be adversely affected.

**Our license and other revenues from former Parent could be impacted by any softness in Wyndham Destinations’ sales of vacation ownership interests or decline in the volume of affinity leads which we generate for Wyndham Destinations.**

In connection with the spin-off, we entered into a number of agreements with Wyndham Destinations that govern our ongoing relationship with Wyndham Destinations. Our success depends, in part, on the maintenance of our ongoing relationship with Wyndham Destinations, Wyndham Destinations’ performance of its obligations under these agreements, including Wyndham Destinations’ maintenance of the quality of products and services it sells under the “Wyndham” trademark and certain other trademarks and intellectual property that we license to Wyndham Destinations. Under the license, development and noncompetition agreement, Wyndham Destinations pays us significant royalties and other fees based on the volume of Wyndham Destinations’ sales of vacation ownership interests and other vacation products and services. If Wyndham Destinations is unable to compete effectively for sales of vacation ownership interests, our royalty fees under such agreement could be adversely impacted. If we are unable to maintain a good relationship with Wyndham Destinations, or if Wyndham Destinations does not perform its obligations under these agreements, fails to maintain the quality of the products and services it sells under the “Wyndham” trademark and certain other trademarks or fails to pay such royalties, our earnings could decrease.

**Our international operations are subject to additional risks not generally applicable to our domestic operations.**

Our international operations are subject to numerous risks including: exposure to local economic conditions; potential adverse changes in the diplomatic relations of foreign countries with the United States; hostility from local populations; political instability, including potential disruptions from the United Kingdom’s exit from the European Union, trade disputes with trade partners, including China and other geopolitical risks; threats or acts of terrorism; the effect of disruptions caused by severe weather, natural disasters, outbreak of disease, such as the 2019 Novel Coronavirus or other events that make travel to a particular region less attractive or more difficult; the presence and acceptance of varying levels of business corruption in international markets; restrictions and taxes on the withdrawal of foreign investment and earnings; government policies against businesses or properties owned by foreigners; investment restrictions or requirements; diminished ability to legally enforce our contractual rights in foreign countries; forced nationalization of hotel properties by local, state or national governments; foreign exchange restrictions; fluctuations in foreign currency exchange rates; conflicts between local laws and U.S. laws, including laws that impact our rights to protect our intellectual property; withholding and other taxes on remittances and other payments by subsidiaries; and changes in and application of foreign taxation structures including value added taxes. Any adverse outcome resulting from the financial instability or performance of foreign economies, the instability of other currencies and the related volatility on foreign exchange and interest rates could adversely impact our results of operations, financial position or cash flows.

**Changes in U.S. federal, state and local or foreign tax law, interpretations of existing tax law or adverse determinations by tax authorities could increase our tax burden or otherwise adversely affect our financial condition or results of operations.**

We are subject to taxation at the federal, state and local levels in the United States and various other countries and jurisdictions. Our future effective tax rate and cash flows could be affected by changes in the composition of earnings in jurisdictions with differing tax rates, changes in statutory rates and other legislative changes, changes in the valuation of our deferred tax assets and liabilities, changes in determinations regarding the jurisdictions in which we are subject to tax, and our ability to repatriate earnings from foreign jurisdictions. From time to time, U.S. federal, state and local and foreign governments make substantive changes to tax rules and their application, which could result in materially higher corporate taxes than would be incurred under existing tax law and could adversely affect our financial condition or results of operations. We are subject to ongoing and periodic tax audits and disputes in U.S. federal and various state, local and foreign jurisdictions. An unfavorable outcome from any tax audit could result in higher tax costs, penalties and interest, thereby adversely affecting our financial condition or results of operations.

In addition, we are directly and indirectly affected by new tax legislation and regulation and the interpretation of tax laws and regulations worldwide. Changes in such legislation, regulation or interpretation could increase our taxes and have an adverse effect on our operating results and financial condition. This includes potential changes in tax laws or the interpretation of tax laws arising out of the Base Erosion Profit Shifting project initiated by the Organization for Economic Co-operation and Development.

**We are subject to risks related to our debt, hedging transactions, our extension of credit and the cost and availability of capital.**

As of December 31, 2019, we had aggregate outstanding debt of $2,122 million. We may incur additional indebtedness in the future, which may intensify the risks related to our debt. Our debt instruments contain restrictions, covenants and events of default that, among other things, could limit our ability to respond to changing business and economic conditions; take advantage of business opportunities; incur or guarantee additional debt; pay dividends or make distributions; make investments or acquisitions; sell, transfer or otherwise dispose of certain assets; create liens; consolidate or merge; enter into transactions with affiliates; and prepay and repurchase or redeem certain indebtedness. Failure to meet our payment obligations or comply with other financial covenants could result in a default and acceleration of the underlying debt and under other debt instruments that contain cross-default provisions.

In order to reduce or hedge our financial exposure to the effects of currency and interest rate fluctuations, we may use financial instruments. As a result, changes in interest rates may adversely affect our financing costs and/or change the market value of our hedging instruments. Any failure or non-performance of counterparties to foreign exchange and interest rate hedging transactions could result in losses.

Our credit facility gives us the option to use the London Interbank Offered Rate (“LIBOR”) as a base rate and our interest rate swaps are based on the one-month U.S. dollar LIBOR rate. The Federal Reserve has established the Alternative Reference Rates Committee to identify alternative reference rates in the event that LIBOR ceases to exist after 2021. Our credit facility allows us and the administrative agent to replace LIBOR with an alternative benchmark rate, subject to the rejection of the majority of the lenders as set forth in the credit facility. The International Swaps and Derivatives Association is expected to issue protocols to allow swap parties to amend their existing contracts. Any such discontinuation of LIBOR or the use of an alternative benchmark rate could cause our costs to increase.

In addition, we extend credit to assist franchisees and hotel owners in converting to or building a new hotel under one of our hotel brands through development advance notes and mezzanine or other forms of subordinated financing. The inability of franchisees and hotel owners to pay back such loans could materially and adversely affect our cash flows and business.

We may need to dedicate a significant portion of our cash flows to the payment of principal and interest. Our ability to obtain additional financing for working capital, capital expenditures, acquisitions, debt service requirements, or general corporate or other purposes may be limited, and we may be unable to renew or refinance our debt on terms as favorable as our existing debt or at all. Additionally, certain market liquidity factors, including uncertainty or volatility in the equity and credit markets, outside of our control could affect our access to credit and capital in the future and adversely impact our business plans and operating model. Our credit rating and the market value of our common stock could also be affected. While we believe we have adequate sources of liquidity to meet our anticipated requirements for working capital, debt service and capital expenditures for the foreseeable future, if we are unable to refinance or repay our outstanding debt when due, our results of operations and financial condition will be materially and adversely affected.

**Changes to estimates or projections used to assess the fair value of our assets or operating results that are lower than our current estimates may cause us to incur impairment losses and require us to write-off all or a portion of the remaining value of our goodwill or other intangibles of companies we have acquired.**

Our total assets include goodwill and other intangible assets. We evaluate our goodwill for impairment on an annual basis or at other times during the year if events or circumstances indicate that it is more likely than not that the fair value is below the carrying value. We may be required to record a significant non-cash impairment charge in our financial statements during the period in which any impairment of our goodwill, other intangible assets or other assets is determined, which would negatively impact our results of operations and stockholders’ equity.

**Acquisitions and other strategic transactions may not prove successful and could result in operating difficulties and failure to realize anticipated benefits.**

We regularly consider a wide array of acquisitions and other potential strategic transactions, including acquisitions of hotel brands, businesses and real property, joint ventures, business combinations, strategic investments and dispositions. Any of these transactions could be material to our business. We often compete for these opportunities with third parties, which may cause us to lose potential opportunities or to pay more than we may otherwise have paid absent such competition. We may not be able to identify and consummate strategic transactions and opportunities on favorable terms and any such strategic transactions or opportunities, if consummated, may not be successful.

### We are subject to risks related to litigation.

We are subject to a number of disputes, claims, litigation and other legal proceedings as described in this report, and any unfavorable rulings or outcomes in current or future litigation and other legal proceedings may materially harm our business. Along with many of its competitors, the Company and/or certain of its subsidiaries have been named as defendants in litigation matters filed in state and federal courts, alleging statutory and common law claims related to purported incidents of sex trafficking at certain franchised and managed hotel facilities. For additional information, see our Commitments and Contingencies note (Note 13) in the notes to our financial statements.

**Our operations are subject to extensive regulation and the cost of compliance or failure to comply with regulations may adversely affect us.**

Our operations are regulated by federal, state and local governments in the countries in which we operate. In addition, U.S. and international federal, state and local regulators may enact new laws and regulations that may reduce our profits or require us to modify our business practices substantially. If we are not in compliance with applicable laws and regulations, including, among others, those governing franchising, hotel operations, lending, information security, data protection and privacy (such as the General Data Protection Regulation or similar laws or regulations), credit card security standards, marketing, including sales, consumer protection and advertising, unfair and deceptive trade practices, fraud, bribery and corruption, licensing, labor, employment, anti-discrimination, health care, health and safety, accessibility, immigration, gaming, environmental, intellectual property, securities, stock exchange listing, accounting, tax and regulations applicable under the Dodd-Frank Act, the Office of Foreign Assets Control, the Americans with Disabilities Act, the Sherman Act, the Foreign Corrupt Practices Act and local equivalents in international jurisdictions, including the United Kingdom Bribery Act, we may be subject to regulatory investigations or actions, fines, civil and/or criminal penalties, injunctions and potential criminal prosecution. Changes to such laws and regulations and the cost of compliance or failure to comply with such regulations may adversely affect us.

**Failure to maintain the security of personally identifiable and proprietary information, non-compliance with our contractual obligations regarding such information or a violation of our privacy and security policies with respect to such information could adversely affect us.**

In connection with our business, we and our service providers collect and retain large volumes of certain types of personal and proprietary information pertaining to guests, franchisees, stockholders and employees. Such information includes, but is not limited to, large volumes of guest credit and payment card information. We are at risk of attack by cyber-criminals operating on a global basis attempting to gain access to such information. In connection with data security incidents involving a group of Wyndham brand hotels that occurred between 2008 and 2010, one of our subsidiaries is subject to a stipulated order with the U.S. Federal Trade Commission (the “FTC”), pursuant to which, among other things, it is required to maintain an information security program for payment card information within its network, and which provides it with a safe harbor provided it continues to meet certain requirements for reasonable data security as outlined in the stipulated order.

While we maintain what we believe are reasonable security controls over personal and proprietary information, a breach of or breakdown in our systems that results in the unauthorized release of personal or proprietary information could nevertheless occur or our subsidiary could fail to comply with the stipulated order with the FTC. Additionally, the legal and regulatory environment surrounding information security and privacy in the U.S. and international jurisdictions is constantly evolving. Violation or non-compliance with any of these laws or regulations, contractual requirements relating to data security and privacy, or with our own privacy and security policies, either intentionally or unintentionally, or through the acts of intermediaries could have a material adverse effect on our hotel brands, reputation, business, financial condition and results of operations, as well as subject us to significant fines, litigation, losses, third-party damages and other liabilities.

**We rely on information technologies and systems to operate our business, which involves reliance on third-party service providers and on uninterrupted operation of service facilities.**

We rely on information technologies and systems to operate our business, which involves reliance on third-party service providers such as Sabre Corporation and its SynXis Platform and uninterrupted operations of service facilities, including those used for reservation systems, hotel/property management, communications, procurement, call centers, operation of our loyalty program and administrative systems. We and our vendors also maintain physical facilities to support these systems and related services. As a result, in addition to failures that occur from time to time in the ordinary course, we and our vendors may be vulnerable to system failures, computer hacking, cyber-terrorism, computer viruses and other intentional or unintentional interference, negligence, fraud, misuse and other unauthorized attempts to access or interfere with these systems and our personal and proprietary information. The increased scope and complexity of our information technology infrastructure and systems could contribute to the potential risk of security breaches or breakdown. Any natural disaster, disruption or other impairment in our technology capabilities and service facilities or those of our vendors could adversely affect our business. In addition, failure to keep pace with developments in technology could impair our operations or competitive position.

**We are dependent on our senior management and the loss of any member of our senior management could harm our business.**

We believe that our future growth depends in part on the continued services of our senior management team. Losing the services of any members of our senior management team could adversely affect our strategic relationships and impede our ability to execute our business strategies. The market for qualified individuals may be highly competitive and finding and recruiting suitable replacements for senior management may be difficult, time-consuming and costly.

**The insurance we carry may not always pay, or be sufficient to pay or reimburse us, for our liabilities, losses or replacement costs.**

We carry insurance for general liability, property, business interruption and other insurable risks with respect to our business and franchised, managed and owned hotels. We also self-insure for certain risks up to certain monetary limits. The insurance coverage we carry, subject to our deductible, may not be sufficient to pay or reimburse us for the amount of our liabilities, losses or replacement costs, and there may also be risks for which we do not obtain insurance in the full amount or any amount concerning a potential loss or liability, or at all, due to the cost or availability of such insurance. As a result, we may incur liabilities or losses in the operation of our business that are not sufficiently covered by the insurance we maintain, or at all, which could have a material adverse effect on our business, financial condition and results of operations.

### We are subject to risks related to corporate social responsibility.

Our business, along with the hospitality industry generally, faces scrutiny related to environmental, social and governance activities and the risk of damage to our reputation and the value of our hotel brands if we fail to act responsibly or comply with regulatory requirements in a number of areas, such as safety and security, responsible tourism, environmental stewardship, supply chain management, climate change, diversity, philanthropy and support for local communities.

### We are subject to risks related to human trafficking allegations.

Our business, along with the hospitality industry generally, faces risk that could cause damage to our reputation and the value of our hotel brands along with litigation-related fees and costs in connection with claims, actions, litigations and other legal proceedings alleging statutory and common law claims related to purported incidents of sex trafficking at hotel facilities.

### Risks Relating to the Spin-Off

**We may be unable to achieve some or all of the expected benefits from our spin-off from Wyndham Destinations.**

As a result of our separation from Wyndham Destinations, we may be more susceptible to market fluctuations and other adverse events than we would have been were we still a part of Wyndham Destinations. If we fail to achieve some or all of the expected benefits or do not achieve them in the timeframe expected, our results of operations and financial condition could be materially and adversely affected.

**We have a limited operating history as a separate public company, our financial information from before the spin-off from Wyndham Destinations may not reflect our current or future results as an independent company and we may not be able to make, on a timely or cost-effective basis, the changes necessary to operate as an independent company and, as a result, we may experience increased costs.**

Prior to the spin-off, Wyndham Destinations performed various corporate functions for us, including tax administration, governance, compliance, accounting, internal audit and external reporting. Our historical financial results reflect allocations of corporate expenses from Wyndham Destinations for these and similar functions that may be less than the comparable expenses we would have incurred had we operated as a separate publicly traded company. In connection with the spin-off, we entered into transition agreements and licensing, marketing and other agreements that govern certain commercial and other relationships between us and Wyndham Destinations; however, those arrangements may not capture the benefits our business enjoyed as a result of being integrated with the other businesses of Wyndham Destinations prior to the spin-off. The loss of those benefits could have an adverse effect on our business, results of operations and financial condition.

Generally, our working capital requirements, including acquisitions and capital expenditures, were satisfied as part of the corporate-wide cash management policies of Wyndham Destinations before the spin-off. Since the completion of the spin-off, Wyndham Destinations has not and will not be providing us with funds to finance our working capital or other cash requirements, and we may need to obtain financing from banks, through public offerings or private placements of debt or equity securities, strategic relationships or other arrangements. We may be unable to replace in a timely manner or on comparable terms and costs the services or other benefits that Wyndham Destinations previously provided to us, which could have an adverse effect on our business, results of operation and financial condition. In addition, other significant changes may occur in our cost structure, management, financing and business operations as a result of our operations as a separate company.

**We may have received better terms from unaffiliated third parties than the terms we received in our agreements with Wyndham Destinations entered into in connection with the spin-off.**

We entered into agreements with Wyndham Destinations related to the spin-off while we were still part of Wyndham Destinations. Accordingly, these agreements may not reflect terms that would have resulted from arm’s-length negotiations among unaffiliated third parties and we may have received better terms from third parties because third parties may have competed with each other to secure our business.

**Our failure to maintain effective internal controls or meet the financial reporting and other requirements to which we are now subject could have a material adverse effect on our business.**

As a result of the spin-off, we are subject to reporting and other obligations under U.S. securities laws and are required to comply with applicable internal controls and reporting requirements. If we are unable to maintain adequate financial and management controls, reporting systems, information technology systems and procedures, our ability to comply with the financial reporting requirements and other rules that apply to reporting companies under U.S. securities laws may be impaired and could cause investors to lose confidence in our reported financial information, which could have a material adverse effect on our business.

**In connection with the spin-off and Wyndham Destinations’ sale of its European vacation rentals business, we agreed to indemnify Wyndham Destinations and Wyndham Destinations agreed to indemnify us for certain liabilities, and if we are required to perform under these indemnities or if Wyndham Destinations is unable to satisfy its obligations under these indemnities, our financial results could be negatively affected.**

The contingent liabilities we assumed in connection with the spin-off and Wyndham Destinations’ sale of its European vacation rentals business could adversely affect our results of operations and financial condition. In connection with the spin-off, Wyndham Destinations agreed to indemnify us for certain liabilities, and we agreed to indemnify Wyndham Destinations for certain liabilities, including cross-indemnities that are principally designed to place financial responsibility for the obligations and liabilities of our business with us, and financial responsibility for the obligations and liabilities of Wyndham Destinations’ business with Wyndham Destinations. Pursuant to the Separation and Distribution Agreement (the “SDA”), we assumed one-third and Wyndham Destinations assumed two-thirds of certain contingent and other corporate liabilities of Wyndham Destinations, which we refer to in this Report as “shared contingent liabilities,” incurred prior to the spin-off, including liabilities of Wyndham Destinations related to, arising out of or resulting from certain terminated or divested businesses, certain general corporate matters of Wyndham Destinations and any actions with respect to the spin-off brought by any third party.

Additionally, in connection with the sale of Wyndham Destinations’ European vacation rentals business, we provided certain post-closing credit support in the form of guarantees, which as of December 31, 2019 were approximately $127 million, to ensure that the business meets the requirements of certain service providers and regulatory authorities. Such post-closing credit support may be enforced or called upon if the European vacation rentals business fails to meet its primary obligation to pay certain amounts when due. The European vacation rentals business has provided an indemnity to Wyndham Destinations in the event that the post-closing credit support is enforced or called upon. Pursuant to the terms of the SDA, we assumed one-third and Wyndham Destinations assumed two-thirds of any such losses actually incurred by Wyndham Destinations or us in the event that these credit support arrangements are enforced or called upon by any beneficiary and any amounts paid by Wyndham Destinations or us in respect of any indemnification claims made in connection with the sale of the European vacation rentals business.

Should our indemnification obligations exceed applicable insurance coverage, our business, financial condition and results of operations could be adversely affected. Additionally, the indemnities from Wyndham Destinations may not be sufficient to protect us against the full amount of these and other liabilities. Third parties also could seek to hold us responsible for any of the liabilities that Wyndham Destinations has agreed to assume. Even if we ultimately succeed in recovering from Wyndham Destinations any amounts for which we are held liable, we may be temporarily required to bear those losses ourselves. Each of these risks could negatively affect our business, financial condition, results of operations and cash flows.

**The spin-off and related transactions may expose us to potential liabilities arising out of state and federal fraudulent conveyance laws and legal distribution requirements.**

Although we received a solvency opinion from an investment bank confirming that we and Wyndham Destinations were adequately capitalized immediately after the spin-off, the spin-off could be challenged under various state and federal fraudulent conveyance laws. An unpaid creditor could claim that Wyndham Destinations did not receive fair consideration or reasonably equivalent value in the spin-off, and that the spin-off left Wyndham Destinations insolvent or with unreasonably small capital or that Wyndham Destinations intended or believed it would incur debts beyond its ability to pay such debts as they mature. If a court were to void the spin-off as a fraudulent transfer, it could impose a number of different remedies, including, returning our assets or your shares in our company to Wyndham Destinations or providing Wyndham Destinations with a claim for money damages against us in an amount equal to the difference between the consideration received by Wyndham Destinations and the fair market value of our Company at the time of the spin-off.

**Certain of our Directors and executive officers may have actual or potential conflicts of interest because of their ownership of Wyndham Destinations equity or their current or former positions at Wyndham Destinations.**

Two of our Directors also serve on the Wyndham Destinations Board and certain of our executive officers and non-employee Directors own shares of Wyndham Destinations common stock because of their current or former positions with Wyndham Destinations. This could create, or appear to create, potential conflicts of interest when our or Wyndham Destinations’ management, officers and directors face decisions that could have different implications for us and Wyndham Destinations.

**If the spin-off, together with certain related transactions, were to fail to qualify as a reorganization for U.S. federal income tax purposes under Sections 368(a)(1)(D) and 355 of the Code, then our stockholders, we and Wyndham Destinations might be required to pay substantial U.S. federal income taxes.**

The spin-off was conditioned upon Wyndham Destinations’ receipt of opinions of its spin-off tax advisors to the effect that, subject to the assumptions and limitations described in the opinions, the spin-off, together with certain related transactions, would qualify as a reorganization for U.S. federal income tax purposes under Sections 368(a)(1)(D) and 355 of the Internal Revenue Code of 1986, as amended (the “Code”), in which no gain or loss would be recognized by Wyndham Destinations or its stockholders, except, in the case of Wyndham Destinations stockholders, for cash received in lieu of fractional shares, which opinions were delivered on the closing date of the spin-off. The opinions of the spin-off tax

advisors are not binding on the Internal Revenue Service (“IRS”) or a court, and there can be no assurance that the IRS will not challenge the validity of the spin-off and such related transactions as a reorganization for U.S. federal income tax purposes under Sections 368(a)(1)(D) and 355 of the Code eligible for tax-free treatment, or that any such challenge ultimately will not prevail.

In addition, Wyndham Destinations received certain rulings from the IRS regarding certain U.S. federal income tax aspects of transactions related to the spin-off. Although the IRS Ruling generally is binding on the IRS, the continued validity of the IRS Ruling is based upon and subject to the continuing accuracy of factual statements and representations made to the IRS by Wyndham Destinations.

If the spin-off does not qualify as a tax-free transaction for any reason, including as a result of a breach of a representation or covenant with respect to such tax opinions or the IRS Ruling, Wyndham Destinations would recognize a substantial gain attributable to our hotel business for U.S. federal income tax purposes. In such case, under U.S. Treasury regulations, each member of the Wyndham Destinations consolidated group at the time of the spin-off, including us and certain of our subsidiaries, would be jointly and severally liable for the entire resulting amount of any U.S. federal income tax liability.

**Our ability to engage in acquisitions and other strategic transactions is subject to limitations because we have agreed to certain restrictions intended to support the tax-free nature of the distribution.**

The U.S. federal income tax laws that apply to transactions like the spin-off generally create a presumption that the distribution would be taxable to Wyndham Destinations but not to Wyndham Destinations stockholders if we engage in, or enter into an agreement to engage in, a transaction that would result in a 50% or greater change by vote or by value in our stock ownership during the four-year period beginning two years before the distribution date, unless it is established that the transaction is not pursuant to a plan or series or transactions related to the distribution. U.S. Treasury regulations currently in effect generally provide that whether an acquisition transaction and a distribution are part of a plan is determined based on all of the facts and circumstances, including specific factors listed in the Treasury regulations. In addition, these Treasury regulations provide several "safe harbors" for acquisition transactions that are not considered to be part of a plan that includes a distribution.

We have entered into a Tax Matters Agreement with Wyndham Destinations under which we have allocated, between Wyndham Destinations and ourselves, responsibility for U.S. federal, state and local and non-U.S. income and other taxes relating to taxable periods before and after the spin-off and provided for computing and apportioning tax liabilities and tax benefits between the parties. In the Tax Matters Agreement, we have agreed that we may not take, or fail to take, certain actions following the spin-off if such action, or failure to act, would be inconsistent with or prohibit the spin-off and certain related transactions from qualifying as a tax-free reorganization under Sections 368(a)(1)(D) and 355 and related provisions of the Code (including the limitations on certain changes in stock ownership described above).

These restrictions could limit our strategic and operational flexibility, including our ability to finance our operations by issuing equity securities, make acquisitions using equity securities, repurchase our equity securities, or raise money by selling assets or enter into business combination transactions. We have also agreed to indemnify Wyndham Destinations for certain tax liabilities resulting from any such transactions. Further, our stockholders may consider these covenants and indemnity obligations unfavorable as they might discourage, delay or prevent a change of control.

### Risks Relating to Our Common Stock

### The market price of our common stock may fluctuate.

The market price of our common stock may fluctuate, depending upon many factors, some of which may be beyond our control, including our ability to achieve growth and performance objectives, the success or failure of our business strategy, general economic conditions, our quarterly or annual earnings and those of other companies in our industry, changes in financial estimates and recommendations by securities analysts, changes in laws and regulations, increased competition and changes affecting the travel industry and other events impacting our business. The stock market in general has experienced volatility that has often been unrelated to the operating performance of a particular company. These market fluctuations may adversely affect the trading price of our common stock.

**Provisions in our corporate governance documents and Delaware law may prevent or delay an acquisition of our business, which could decrease the market price of our common stock.**

Our corporate governance documents and Delaware law contain provisions that are intended to deter or delay coercive takeover practices and inadequate takeover bids, including requiring advance notice for stockholder proposals, placing limitations on convening stockholder meetings, authorizing our Board to issue one or more series of preferred stock, a supermajority (80% of outstanding shares) vote requirement to amend our by-laws and certain provisions of our charter, and providing for the classification of our Board until the third annual meeting of stockholders following the spin-off. Additionally, Delaware law also imposes some restrictions on mergers and other business combinations between us and any holder of 15% or more of our outstanding common stock. These provisions may prevent or delay an acquisition that some stockholders may consider beneficial, which could decrease the market price of our common stock.

**Our amended and restated by-laws designate the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our Directors or employees.**

Our amended and restated by-laws provide that, subject to limited exceptions, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for derivative actions; claims related to a breach of a fiduciary duty, corporate law, our certificate of incorporation or our bylaws; or under the internal affairs doctrine. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our Directors or employees, which may discourage such lawsuits. Alternatively, if a court were to find this provision of our amended and restated by-laws inapplicable or unenforceable with respect to one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could materially and adversely affect our business, financial condition and results of operations and result in a diversion of the time and resources of our management and Board.

**We may not pay dividends on our common stock, and the terms our indebtedness could limit our ability to pay dividends on our common stock.**

The declaration and payment of dividends are at the sole discretion of our Board and will depend on, among other things, our results of operations, cash requirements, financial condition, contractual restrictions under our indebtedness and other factors that our Board may deem relevant. Though we expect to make regular dividends, there can be no assurance that a payment of a dividend will occur in the future.

## Properties

As filed, 1,081 characters.

Our corporate headquarters is located in a leased office at 22 Sylvan Way, Parsippany, New Jersey, with the lease expiring in 2029. We also lease space for our reservation center and data warehouse in Saint John, New Brunswick, Canada pursuant to a lease that expires in 2029. In addition, we have an additional 12 leases for office space in 11 countries outside the United States and an additional four leases within the United States with expiration dates ranging between 2020 and 2029. We will evaluate the need to renew each lease on a case-by-case basis prior to its expiration.

Our owned hotel portfolio, which is part of our Hotel Management segment, currently consists of (i) the Wyndham Grand Rio Mar Beach Resort and Spa in Puerto Rico, located in Rio Grande, Puerto Rico, and (ii) the Wyndham Grand Orlando Bonnet Creek, located in Orlando, Florida. Aside from these hotels, we do not own any of the nearly 9,300 properties within our franchised and managed portfolio.

We believe our current leased and owned properties are adequate to support our existing operations.

## Legal proceedings

As filed, 458 characters.

We are involved in various claims, legal and regulatory proceedings arising in the ordinary course of business, none of which, in the opinion of management, is expected to have a material adverse effect on our financial condition. See Note 13 - Commitments and Contingencies to the Consolidated and Combined Financial Statements contained in Part IV of this report for a description of claims and legal actions arising in the ordinary course of our business.

## Management's discussion and analysis

As filed, 47,426 characters.

### (Unless otherwise noted, all amounts are in millions, except share and per share amounts)

References herein to “Wyndham Hotels,” the “Company,” “we,” “our” and “us” refer to both (i) Wyndham Hotels & Resorts, Inc. and its consolidated subsidiaries for time periods following the consummation of the spin-off and (ii) the Wyndham Hotels & Resorts businesses for time periods prior to the consummation of our spin-off from Wyndham Worldwide. Unless the context otherwise suggests, references herein to “Wyndham Worldwide,” “Wyndham Destinations” and “former Parent” refer to Wyndham Worldwide Corporation 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 approximately 90 countries around the world.

Wyndham Hotels operates 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 Wyndham Hotels.

The Consolidated and Combined Financial Statements presented herein have been prepared on a stand-alone basis and prior to May 31, 2018 are derived from the consolidated financial statements and accounting records of Wyndham Worldwide. The Consolidated and Combined Financial Statements include Wyndham Hotels’ assets, liabilities, revenues, expenses and cash flows and all entities in which Wyndham Hotels has a controlling financial interest.

### 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. Beginning with the third quarter of 2018, our calculation of adjusted EBITDA excludes the currency effects of highly inflationary countries. Adjusted EBITDA is defined as net income excluding interest expense, depreciation and amortization, 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 and income taxes. We believe that adjusted EBITDA is a useful measure of performance for our segments and, when considered with U.S. GAAP measures, gives a more complete understanding of our operating performance. We use these measures 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.

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. We completed our acquisition of La Quinta Holdings, Inc. in May 2018, and, as a result certain comparisons of operating and financial metrics for the years ended December 31, 2019 and 2018 to the respective prior periods include significant acquisition impacts.

### OPERATING STATISTICS - 2019 VS. 2018

The table below presents our operating statistics for the years ended December 31, 2019 and 2018. “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 the room rental revenues generated by our franchisees divided by the number of available room-nights in the period. 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.

| Rooms | Year Ended December 31, 2019 | 2018 | % Change |
| --- | ---: | ---: | ---: |
| United States | 510,200 | 506,100 | 1% |
| International | 320,800 | 303,800 | 6% |
| Total rooms | 831,000 | 809,900 | 3% |
| **RevPAR (a)** |  |  |  |
| United States | $46.39 | $45.30 | 2% |
| International (b) | 31.85 | 33.31 | (4%) |
| Total RevPAR (b) | 40.92 | 40.80 | 0% |

(a) Includes the impact of acquisition and disposition from their respective dates forward.

(b) Excluding currency effects, international RevPAR increased 1% and total RevPAR increased 2%.

### YEAR ENDED DECEMBER 31, 2019 VS. YEAR ENDED DECEMBER 31, 2018

|  | Year Ended December 31, 2019 | 2018 | % Change |
| --- | ---: | ---: | ---: |
| Net revenues | $2,053 | $1,868 | 10% |
| Expenses | 1,746 | 1,585 | 10% |
| Operating income | 307 | 283 | 8% |
| Interest expense, net | 100 | 60 | 67% |
| Income before income taxes | 207 | 223 | (7%) |
| Provision for income taxes | 50 | 61 | (18%) |
| Net income | $157 | $162 | (3%) |

During 2019, net revenues increased 10% compared with the prior-year, which included $267 million of incremental revenues from La Quinta (acquired in May 2018) of which $152 million reflected cost reimbursement revenues. Excluding the incremental impact from the La Quinta acquisition and a $5 million unfavorable impact from currency translation, net revenues decreased 4% primarily reflecting:

- lower cost-reimbursement revenues due to a change in our responsibility from being the principal for certain property-related activities to being an agent, and therefore, these costs are no longer reflected in our Consolidated and Combined Statements of Income and property terminations; and
- a $20 million fee credit for past services with a customer, which is reflected as a reduction to hotel-management revenues.

Such decreases were partially offset by higher license and other fees, an increase in marketing, reservation and loyalty fees and an increase in owned-hotel revenues.

During 2019, total expenses increased 10%, which included an estimated $204 million of incremental expenses associated with the La Quinta acquisition and a $45 million non-cash impairment charge and $42 million of contract termination costs, both associated with the termination of unprofitable hotel-management guarantee arrangements. The increases were partially offset by $55 million of lower separation-related costs year-over-year.

Excluding cost reimbursement revenues and the incremental impact from the La Quinta acquisition, during 2019:

- Marketing, reservation and loyalty expenses increased to 39.6% of revenues from 37.9% during 2018, primarily due to higher marketing spend to support our “by Wyndham” campaign and the relaunch of the Wyndham Rewards program with La Quinta integrated, as well as a change in classification of certain costs from operating expenses, partially offset by higher net revenues;
- Operating expenses decreased to 12.3% of revenues from 14.3% during 2018, primarily due to a change in classification of certain costs to our marketing, reservation and loyalty funds; and
- General and administrative expenses were 9.2% of revenues during 2019 and 2018.

During 2019, net interest expense increased $40 million primarily due to the borrowings made by us in the second quarter of 2018 to fund the La Quinta acquisition.

Our effective tax rates were 24.2% and 27.4% for 2019 and 2018, respectively. The decrease was primarily due to one-time state tax benefits resulting from a settlement with state taxing authorities and from a change in our state income tax filing position due to our spin-off from Wyndham Worldwide. This was partially offset by higher foreign taxes on the Company’s international operations in 2019 and the absence of a net tax benefit in 2019 from the impact of U.S. tax reform.

As a result of these items, net income decreased $5 million compared with 2018.

A reconciliation of net income to adjusted EBITDA is represented below:

|  | Year Ended December 31, 2019 | 2018 |
| --- | ---: | ---: |
| Net income | $157 | $162 |
| Provision for income taxes | 50 | 61 |
| Depreciation and amortization | 109 | 99 |
| Interest expense, net | 100 | 60 |
| Stock-based compensation expense | 15 | 9 |
| Impairment, net | 45 | — |
| Contract termination costs | 42 | — |
| Transaction-related expenses, net | 40 | 36 |
| Separation-related expenses | 22 | 77 |
| Transaction-related item | 20 | — |
| Restructuring costs | 8 | — |
| Foreign currency impact of highly inflationary countries | 5 | 3 |
| Adjusted EBITDA | $613 | $507 |

Following is a discussion of the results of each of our segments and Corporate and Other for 2019 compared to 2018:

|  | Net Revenues 2019 | 2018 | % Change | Adjusted EBITDA 2019 | 2018 | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Hotel Franchising | $1,279 | $1,135 | 13% | $622 | $515 | 21% |
| Hotel Management | 768 | 726 | 6% | 66 | 47 | 40% |
| Corporate and Other | 6 | 7 | NM | (75) | (55) | NM |
| Total Company | $2,053 | $1,868 | 10% | $613 | $507 | 21% |

29

### Hotel Franchising

| Rooms | Year Ended December 31, 2019 | 2018 | % Change |
| --- | ---: | ---: | ---: |
| United States | 464,600 | 453,900 | 2% |
| International | 305,600 | 288,900 | 6% |
| Total rooms | 770,200 | 742,800 | 4% |
| **RevPAR (a)** |  |  |  |
| United States | $44.09 | $43.04 | 2% |
| International (b) | 30.80 | 32.09 | (4%) |
| Total RevPAR (b) | 38.91 | 38.86 | 0% |

(a) Includes the impact of acquisition and disposition from their respective dates forward.

(b) Excluding currency effects, international RevPAR increased 1% and total RevPAR increased 2%.

Net revenues increased 13% during 2019, which included $97 million of incremental revenues from La Quinta (acquired in May 2018) and a $5 million unfavorable impact from foreign currency translation. Excluding such items, net revenues increased 5%, primarily due to higher license and other fee revenues and an increase in marketing, reservation and loyalty fees.

Adjusted EBITDA increased 21% during 2019 which included an estimated incremental impact from the acquisition and integration of La Quinta of $50 million and a $4 million unfavorable impact from foreign currency. Excluding such items, adjusted EBITDA grew 13%, reflecting the growth in revenues and lower general and administrative spend, partially offset by higher net marketing, reservation and loyalty expenses, which reduced adjusted EBITDA by $19 million. Excluding the incremental impact from the acquisition of La Quinta, during 2019:

- Marketing, reservation and loyalty expenses increased to 42.3% of revenues from 41.2% during the prior year primarily due to marketing spend to support our “by Wyndham” campaign and the relaunch of the Wyndham Rewards program with La Quinta integrated, as well as a change in classification of certain costs from operating expenses, partially offset by higher net revenues;
- Operating expenses decreased to 6.7% of revenue compared to 9.6% during the prior year primarily due to a change in classification of certain costs to our marketing, reservation and loyalty funds; and
- General and administrative expenses decreased to 2.3% of revenues from 3.6% during the prior year, primarily due to the impact of reorganizing certain functions into our Corporate and Other segment as a result of our spin-off to a stand-alone public company.

### Hotel Management

| Rooms | Year Ended December 31, 2019 | 2018 | % Change |
| --- | ---: | ---: | ---: |
| United States | 45,600 | 52,200 | (13%) |
| International | 15,200 | 14,900 | 2% |
| Total rooms | 60,800 | 67,100 | (9%) |
| **RevPAR (a)** |  |  |  |
| United States | $67.32 | $72.76 | (7%) |
| International (b) | 52.69 | 57.84 | (9%) |
| Total RevPAR (b) | 64.01 | 68.72 | (7%) |

(a) Includes the impact of acquisition and disposition from their respective dates forward.

(b) Excluding currency effects, international RevPAR decreased 1% and total RevPAR decreased 5%.

Net revenues increased $42 million or 6% during 2019, reflecting $170 million of incremental revenues from the La Quinta acquisition which included $152 million of cost reimbursement revenues. Excluding the incremental impact from the acquisition of La Quinta, net revenues decreased $128 million primarily due to lower cost-reimbursement revenues as discussed above, which have no impact on adjusted EBITDA and a $20 million fee credit for past services with a customer, which is reflected as a reduction to hotel-management revenues. Such decreases were partially offset by higher termination fees and an increase in owned hotel revenues.

Adjusted EBITDA increased $19 million or 40% in 2019, primarily reflecting an estimated $13 million of incremental adjusted EBITDA from La Quinta.

### Corporate and Other

Corporate and Other revenues were $6 million and $7 million during 2019 and 2018, respectively, which represents fees earned under a transition services agreement with our former Parent.

Adjusted EBITDA decreased $20 million during 2019 compared to the prior year, primarily due to a reorganization of certain functions into our Corporate and Other segment in connection with our spin-off to a stand-alone public company.

### OPERATING STATISTICS - 2018 VS. 2017

The table below presents our operating statistics for the years ended December 31, 2018 and 2017. “Rooms” represent the number of hotel rooms in our brand systems as of the last date of the period. “RevPAR” represents the room rental revenues generated by our franchisees divided by the number of available room-nights in the period. 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.

| Rooms (a) | Year Ended December 31, 2018 | 2017 | % Change |
| --- | ---: | ---: | ---: |
| United States | 506,100 | 440,100 | 15% |
| International | 303,800 | 288,100 | 5% |
| Total rooms | 809,900 | 728,200 | 11% |
| **RevPAR (a)** |  |  |  |
| United States | $45.30 | $41.04 | 10% |
| International (b) | 33.31 | 32.27 | 3% |
| Total RevPAR (b) | 40.80 | 37.63 | 8% |

(a) Includes the impact of acquisitions and disposition from their respective dates forward.

(b) Excluding currency effects, international RevPAR increased 4% and total RevPAR increased 9%.

### YEAR ENDED DECEMBER 31, 2018 VS. YEAR ENDED DECEMBER 31, 2017

|  | Year Ended December 31, 2018 | 2017 | % Change |
| --- | ---: | ---: | ---: |
| Net revenues | $1,868 | $1,280 | 46% |
| Expenses | 1,585 | 1,031 | 54% |
| Operating income | 283 | 249 | 14% |
| Interest expense, net | 60 | 6 | NM |
| Income before income taxes | 223 | 243 | (8%) |
| Provision for income taxes | 61 | 13 | 369% |
| Net income | $162 | $230 | (30%) |

During 2018, net revenues increased 46% compared with the prior-year, which was driven by $513 million of revenues from the La Quinta acquisition, which included $324 million of cost reimbursement revenues. Excluding the La Quinta acquisition, net revenues increased 6% primarily due to higher license and other fees and higher royalties.

During 2018, total expenses increased 54%, which included $443 million of expenses associated with the La Quinta acquisition, $77 million of separation-related costs and $36 million of net transaction-related costs that were primarily associated with the La Quinta acquisition. Excluding cost reimbursement revenues and the acquisition of La Quinta, during 2018:

- Marketing, reservation and loyalty expenses increased to 37.0% of revenues from 36.7% during 2017, primarily due to higher marketing, reservation and loyalty expenses resulting from the increase in marketing and reservation fee revenues from franchisees;
- Operating expenses decreased to 16.2% of revenues from 17.9% during 2017, primarily as a result of reduced expenses at our owned hotel in Puerto Rico resulting from insurance recoveries received in 2018 related to hurricanes that occurred in 2017; and
- General and administrative expenses increased to 9.6% of revenues from 8.7% during 2017, primarily due to higher employee-related and information technology costs, principally related to operating as a stand-alone public company.

During 2018, net interest expense increased $54 million primarily due to the borrowings used to fund the La Quinta acquisition.

Our effective tax rates were 27.4% and 5.3% for 2018 and 2017, respectively. The increase was principally due to the net tax benefit of $85 million recorded from the enactment of the U.S. Tax Cuts and Jobs Act in 2017.

As a result of these items, principally driven by the net income tax benefit in 2017, separation-related and transaction-related expenses in 2018 and higher interest expense in 2018, net income decreased $68 million compared with 2017.

A reconciliation of net income to adjusted EBITDA is represented below:

|  | Year Ended December 31, 2018 | 2017 |
| --- | ---: | ---: |
| Net income | $162 | $230 |
| Provision for income taxes | 61 | 13 |
| Depreciation and amortization | 99 | 75 |
| Interest expense, net | 60 | 6 |
| Stock-based compensation expense | 9 | 11 |
| Separation-related expenses | 77 | 3 |
| Transaction-related expenses, net | 36 | 3 |
| Foreign currency impact of highly inflationary countries | 3 | — |
| Impairment, net | — | 41 |
| Restructuring costs | — | 1 |
| Adjusted EBITDA | $507 | $383 |

Following is a discussion of the results of each of our segments and Corporate and Other for 2018 compared to 2017:

|  | Net Revenues 2018 | 2017 | % Change | Adjusted EBITDA 2018 | 2017 | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Hotel Franchising | $1,135 | $897 | 27% | $515 | $402 | 28% |
| Hotel Management | 726 | 383 | 90% | 47 | 21 | 124% |
| Corporate and Other | 7 | — | NM | (55) | (40) | NM |
| Total Company | $1,868 | $1,280 | 46% | $507 | $383 | 32% |

32

### Hotel Franchising

| Rooms (a) | Year Ended December 31, 2018 | 2017 | % Change |
| --- | ---: | ---: | ---: |
| United States | 453,900 | 427,500 | 6% |
| International | 288,900 | 275,400 | 5% |
| Total rooms | 742,800 | 702,900 | 6% |
| **RevPAR (a)** |  |  |  |
| United States | $43.04 | $39.35 | 9% |
| International (b) | 32.09 | 31.14 | 3% |
| Total RevPAR (b) | 38.86 | 36.18 | 7% |

(a) Includes the impact of acquisitions and disposition from their respective dates forward.

(b) Excluding currency effects, international RevPAR increased 4% and total RevPAR increased 8%.

Net revenues increased 27% during 2018 primarily due to the acquisition of La Quinta, which contributed to 6% total hotel franchising system growth and 7% higher RevPAR. Excluding the La Quinta acquisition, net revenues increased 8% primarily due to higher license fees, an increase in marketing, reservation and loyalty fees and higher royalties and franchise fees.

Adjusted EBITDA increased 28% during 2018 primarily due to higher revenues. Excluding the La Quinta acquisition, Adjusted EBITDA increased 9% primarily due to higher revenues. Excluding the La Quinta acquisition, during 2018:

- Marketing, reservation and loyalty expenses were 40.5% of revenues during 2018 and 40.6% during 2017;
- Operating expenses were 10.8% of revenues during 2018 and 10.4% during 2017; and
- General and administrative expenses decreased to 3.4% of revenues from 4.2% during the prior year, primarily due to lower employee-related expenses coupled with higher net revenues.

### Hotel Management

| Rooms (a) | Year Ended December 31, 2018 | 2017 | % Change |
| --- | ---: | ---: | ---: |
| United States | 52,200 | 12,600 | 314% |
| International | 14,900 | 12,700 | 17% |
| Total rooms | 67,100 | 25,300 | 165% |
| **RevPAR (a)** |  |  |  |
| United States | $72.76 | $97.08 | (25%) |
| International (b) | 57.84 | 58.18 | (1%) |
| Total RevPAR (b) | 68.72 | 78.59 | (13%) |

(a) Includes the impact of acquisitions and disposition from their respective dates forward.

(b) Excluding currency effects, international RevPAR increased 5% and total RevPAR decreased 11%.

Net revenues increased 90% during 2018 primarily due to $351 million of revenues from the La Quinta acquisition (including $324 million of cost reimbursement revenues). Excluding La Quinta, net revenues decreased 2% due primarily to certain management contracts being transferred to our former Parent upon our spin-off.

Adjusted EBITDA increased 124% in 2018 including approximately $14 million of adjusted EBITDA from La Quinta. Excluding La Quinta, adjusted EBITDA increased 57% due to reduced expenses at our owned hotel in Puerto Rico due to insurance recoveries in 2018 related to hurricanes that occurred in 2017.

### Corporate and Other

Corporate and Other revenues increased $7 million during 2018, which represents fees earned under a transition services agreement with our former Parent.

Adjusted EBITDA decreased $15 million during 2018 compared to the prior year, primarily due to an increase in general overhead expenses in connection with operating as a stand-alone public company, partially offset by higher revenues.

### FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

### Financial condition

|  | Year Ended December 31, 2019 | 2018 | Change |
| --- | ---: | ---: | ---: |
| Total assets | $4,533 | $4,976 | $(443) |
| Total liabilities | 3,321 | 3,558 | (237) |
| Total stockholders’ equity | 1,212 | 1,418 | (206) |

Total assets decreased $443 million from December 31, 2018 to December 31, 2019 primarily due to a reduction in cash reflecting payments for taxes assumed with the La Quinta acquisition, as well as stock repurchases and dividends. Total liabilities decreased $237 million from December 31, 2018 to December 31, 2019 primarily due to the payment of the aforementioned tax liability assumed with the La Quinta acquisition. Total equity decreased $206 million from December 31, 2018 to December 31, 2019 primarily due to stock repurchases and dividends partially offset by our net income for the year.

### Liquidity and capital resources

We intend to use the cash flow generated by our operations to create value for stockholders. Our asset-light business model, with low fixed costs and stable, recurring franchise fee revenue, generates attractive margins and cash flow. In addition to investments in the business, including acquisitions of brands and businesses that would expand our presence and capabilities in the lodging industry, we expect to return capital to our stockholders through dividends and share repurchases. In 2020, we expect to pay a regular dividend and, absent any accretive and strategically-enhancing acquisition, use our cash on hand and cash provided by operating activities to repurchase shares.

As of December 31, 2019, 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 an aggregate principal amount of $750 million, all of which was undrawn. 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%. The 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 leverage ratio of the Company and its restricted subsidiaries.

As of December 31, 2019, we hedged a portion of our $1.6 billion term loan with pay-fixed/receive-variable interest rate swaps hedging $1.1 billion of our term loan interest rate exposure. The aggregate fair value of these interest rate swaps was a $34 million liability as of December 31, 2019.

The Federal Reserve has established the Alternative Reference Rates Committee to identify alternative reference rates in the event that LIBOR ceases to exist after 2021. Our credit facility, which includes its revolving credit facility and term loan, gives 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 rejection of the majority of the lenders. The International Swaps and Derivatives Association is expected to issue protocols to allow swap parties to amend their existing contracts.

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 years ended December 31, 2019, 2018 and 2017:

| Cash provided by/(used in) | Year Ended December 31, 2019 | 2018 | 2017 |
| --- | ---: | ---: | ---: |
| Operating activities | $100 | $231 | $278 |
| Investing activities | (53) | (1,728) | (197) |
| Financing activities | (320) | 1,808 | (51) |
| Effects of changes in exchange rates on cash, cash equivalents and restricted cash | 1 | (4) | (1) |
| Net change in cash, cash equivalents and restricted cash | $(272) | $307 | $29 |

During 2019, net cash provided by operating activities decreased $131 million compared to the prior year primarily due to the incremental payment of tax liabilities assumed in the La Quinta acquisition in 2018, partially offset by a decrease in cash used for separation and transaction-related costs. 2019 net cash provided by operating activities included a $195 million payment of tax liabilities assumed in the La Quinta acquisition, $78 million of separation and transaction related costs and $35 million of contract termination costs. 2018 net cash provided by operating activities included a $35 million payment of tax liabilities assumed in the La Quinta acquisition and $98 million of separation and transaction related costs. Net cash used in investing activities decreased $1.7 billion compared to the prior year, primarily due to the purchase price for our acquisition of La Quinta in 2018. Net cash used in financing activities increased $2.1 billion compared to the prior year, primarily due to the absence of the proceeds from borrowings used to fund the La Quinta acquisition in 2018.

During 2018, net cash provided by operating activities decreased $47 million compared to the prior year primarily due to lower net income resulting from separation-related and transaction-related costs and the tax payments assumed with the La Quinta acquisition as noted above. Net cash used in investing activities increased $1.5 billion compared to the prior year, primarily due to the purchase price for our acquisition of La Quinta. Net cash provided by financing activities increased $1.9 billion compared to the prior year, primarily reflecting the proceeds from the borrowings used to fund the La Quinta acquisition.

### Capital deployment

We expect to maintain discipline in our capital allocation approach. We expect to maintain a regular dividend payment, invest in select technology improvements across our business that further our strategic objectives and deploy capital on a selective basis to obtain hotel franchise agreements and hotel-management contracts. The remaining capital we have available will be used for either acquisitions that are accretive and strategically enhancing to our business or stock repurchases, with the amount going to each depending largely on the opportunities that are available.

During 2019, we spent $50 million on capital expenditures, primarily related to information technology and the integration of La Quinta. During 2020, we anticipate spending approximately $45 to $50 million on capital expenditures and approximately $25 to $30 million on development advances.

In addition, during 2019, we spent $17 million, net of repayments, on development advance notes to acquire new hotel franchise agreements and hotel-management contracts. In an effort to support growth in our business, we intend to continue to provide development advance notes, which may include agreements with multi-unit owners, from time to time. We may also continue to provide other forms of financial support.

We also expect to pay less than $50 million of previously incurred separation, transaction and contract termination costs in 2020.

We expect all our cash needs to be funded from cash on hand, cash generated through operations, and/or availability under our revolving credit facility.

### Stock repurchase program

In May 2018, our Board of Directors ("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.

Under our current stock repurchase program, we repurchased approximately 4.5 million shares at an average price of $54.25 for a cost of $244 million during 2019. Since inception, we repurchased approximately 6.8 million shares at an average price of $53.67 per share for a cost of $364 million. As of December 31, 2019, we had $237 million of remaining availability under our program.

### Dividend policy

During 2019, we declared quarterly cash dividends of $0.29 per share ($113 million in aggregate for the year). The declaration and payment of future dividends to holders of our common stock are at the discretion of our Board and depend upon many factors, including 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. Though we intend to continue paying a regular dividend, there is no assurance that a payment of a dividend will occur in the future.

In February 2020, our Board authorized a 10% increase in the quarterly cash dividend to $0.32 per share, beginning with the dividend that is expected to be declared in the first quarter of 2020.

### Foreign earnings

Although the one-time mandatory deemed repatriation tax during 2017 and the territorial tax system created as a result of U.S. tax reform generally eliminate U.S. federal income taxes on dividends from foreign subsidiaries, we continue to assert that all of our undistributed foreign earnings of $55 million will be reinvested indefinitely as of December 31, 2019. In the event we determine not to continue to assert that all or part of our undistributed foreign earnings are permanently reinvested, such a determination in the future could result in the accrual and payment of additional foreign withholding taxes and U.S. taxes on currency transaction gains and losses, the determination of which is not practicable.

### 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 trailing four-fiscal-quarter basis preceding the measurement date. As of December 31, 2019, our first-lien leverage ratio was 2.4 times.

The indenture under which the senior notes due 2026 were issued contains covenants that limit, among other things, Wyndham Hotels & Resorts, Inc.’s ability and that of certain of its 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 Wyndham Hotels & Resorts, Inc.’s assets. These covenants are subject to a number of important exceptions and qualifications.

As of December 31, 2019, 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 than in the second half of the year. The seasonality of our business may cause fluctuations in our quarterly operating results, earnings, profit margins and cash flows. As we expand into new markets and geographical locations, we may experience increased or different seasonality dynamics that create fluctuations in operating results different from the fluctuations we have experienced in the past.

### 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 December 31, 2019, the potential exposure resulting from adverse outcomes of such legal proceedings could, in the aggregate, range up to approximately $10 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 13 - Commitments and Contingencies to the Consolidated and Combined Financial Statements contained in Part IV of this report.

### CONTRACTUAL OBLIGATIONS

The following table summarizes our future contractual obligations for the years set forth below:

|  | 2020 | 2021 | 2022 | 2023 | 2024 | Thereafter | Total |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Long-term debt | $21 | $21 | $21 | $21 | $22 | $2,016 | $2,122 |
| Interest on debt (a) | 95 | 92 | 87 | 85 | 82 | 70 | 511 |
| Operating leases | 6 | 5 | 4 | 3 | 3 | 14 | 35 |
| Purchase commitments | 46 | 24 | 24 | 20 | 18 | 37 | 169 |
| Total (b) (c) | $168 | $142 | $136 | $129 | $125 | $2,137 | $2,837 |

(a) Includes interest on long-term debt; estimated using the stated interest rates on our senior notes and the swapped interest rates on our term loan.

(b) Excludes a $13 million liability for unrecognized tax benefits associated with the accounting guidance for uncertainty in income taxes since it is not reasonably estimable to determine the periods in which such liability would be settled with the respective tax authorities.

### CRITICAL ACCOUNTING ESTIMATES AND 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 and combined 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. Presented below are those accounting policies that we believe require subjective and complex judgments that could potentially affect reported results. However, the majority of our business activities are in environments where we are paid a fee for a service performed, and therefore the results of the majority of our recurring operations are recorded in our financial statements using accounting policies that are not particularly subjective, nor complex.

### Impairment of long-lived assets

Goodwill and other indefinite-lived intangible assets that were recorded in connection with business combinations, are reviewed annually (during the fourth quarter of each year subsequent to completing our annual forecasting process), or more frequently if circumstances indicate that the value of goodwill may be impaired, to the reporting units’ carrying values as required by the guidance. This is done either by performing a qualitative assessment or utilizing the two-step process, with an impairment being recognized only where the fair value is less than carrying value. In any given year, we can elect to perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is in excess of its carrying value. If it is not more likely than not that the fair value is in excess of the carrying value, or we elect to bypass the qualitative assessment, we would use the two-step process. The qualitative factors evaluated include macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, our historical share price as well as other industry-specific considerations. We performed a quantitative assessment for impairment on each reporting unit’s goodwill for 2019. Based on the results of our quantitative assessments performed during the fourth quarter of 2019, we determined that no impairment existed, nor do we believe there is a material risk of it being impaired in the near term at our (i) hotel franchising, (ii) hotel management and (iii) owned hotel reporting units. To the extent estimated market-based valuation multiples and/or discounted cash flows are revised downward, we may be required to write-down all or a portion of goodwill, which would adversely impact earnings.

We also determine whether the carrying values of other indefinite-lived intangible assets are impaired on an annual basis or more frequently if indicators of potential impairment exist. Application of the other indefinite-lived intangible assets impairment test requires judgment in the assumptions underlying the approach used to determine fair value. The fair value of each other indefinite-lived intangible asset is estimated using a discounted cash flow methodology. This analysis requires significant judgments, including anticipated market conditions, operating expense trends, estimation of future cash flows, which are dependent on internal forecasts, discount rates and estimation of long-term rates of growth. The estimates used to calculate the fair value of other indefinite-lived intangible assets change from year to year based on operating results and market conditions. Changes in these estimates and assumptions could materially affect the determination of fair value and the other indefinite-lived intangible assets’ impairment.

We also evaluate the recoverability of our other long-lived assets, including property and equipment and amortizable intangible assets, if circumstances indicate impairment may have occurred, pursuant to guidance for impairment or disposal of long-lived assets. This analysis is performed by comparing the respective carrying values of the assets to the current and expected future cash flows, on an undiscounted basis, to be generated from such assets. Property and equipment is evaluated separately within each segment. If such analysis indicates that the carrying value of these assets is not recoverable, the carrying value of such assets is reduced to fair value.

### Business combinations

A component of our growth strategy has been to acquire and integrate businesses that complement our existing operations. We account for business combinations in accordance with the guidance for business combinations and related literature. Accordingly, we allocate the purchase price of acquired companies to the tangible and intangible assets acquired and liabilities assumed based upon their estimated fair values at the date of purchase. The difference between the purchase price and the fair value of the net assets acquired is recorded as goodwill.

In determining the fair values of assets acquired and liabilities assumed in a business combination, we use various recognized valuation methods including present value modeling and referenced market values, where available. Further, we make assumptions within certain valuation techniques including discount rates and timing of future cash flows. Valuations are performed by management or external valuation specialists under management’s supervision, where appropriate. We believe that the estimated fair values assigned to the assets acquired and liabilities assumed are based on reasonable assumptions that marketplace participants would use. However, such assumptions are inherently uncertain and actual results could differ from those estimates.

### Loyalty program

Wyndham Hotels operates the Wyndham Rewards loyalty program. Wyndham Rewards members primarily accumulate points by staying in hotels operated under one of our brands. Wyndham Rewards members may also accumulate points by purchasing everyday services and products with their co-branded credit card.

Wyndham Hotels earns revenue from these programs (i) when a member stays at a participating hotel, club resort or vacation rental from a fee charged by us to the franchisee, which is based upon a percentage of room revenues generated from such stay which we recognize, net of redemptions, over time based upon loyalty point redemption patterns, including an estimate of loyalty points that will expire or will never be redeemed, and (ii) based upon a percentage of the member’s spending on the co-branded credit cards for which revenues are paid to us by third-party issuing banks which we primarily recognize over time based upon the redemption patterns of the loyalty points earned under the program, including an estimate of loyalty points that will expire or will never be redeemed.

As members earn points through the Wyndham Rewards loyalty program, we record a liability for the estimated future redemption costs, which is calculated based on (i) an estimated cost per point and (ii) an estimated redemption rate of the overall points earned, which is determined with the assistance of a third-party actuarial firm through historical experience, current trends and the use of an actuarial analysis.

### Income taxes

Prior to our spin-off, current and deferred income taxes and related tax expense have been determined based on Wyndham Hotels’ stand-alone results by applying a separate return methodology, as if the Wyndham Hotels’ entities were separate taxpayers in the respective jurisdictions. We recognize deferred tax assets and liabilities based on the differences between the financial statement carrying amounts and the tax basis of assets and liabilities using currently enacted tax rates. We regularly review our deferred tax assets to assess their potential realization and establish a valuation allowance for portions of such assets that we believe will not be ultimately realized. In performing this review, we make estimates and assumptions regarding projected future taxable income, the expected timing of the reversals of existing temporary differences and the implementation of tax planning strategies. A change in these assumptions may increase or decrease our valuation allowance resulting in an increase or decrease in our effective tax rate, which could materially impact our results of operations.

For tax positions we have taken or expect to take in our tax return, we apply a more likely than not threshold, under which we must conclude a tax position is more likely than not to be sustained, assuming that the position will be examined by the appropriate taxing authority that has full knowledge of all relevant information, in order to recognize or continue to recognize the benefit. In determining our provision for income taxes, we use judgment, reflecting our estimates and assumptions, in applying the more likely than not threshold.

### RECENTLY ADOPTED AND NEW ACCOUNTING PRONOUNCEMENTS

For a detailed description of recently adopted and new accounting pronouncements see Note 2 - Summary of Significant Accounting Policies to the Consolidated and Combined Financial Statements contained in Part IV of this report.

### OFF-BALANCE SHEET ARRANGEMENTS

There were no off-balance sheet transactions, arrangements or other relationships with unconsolidated entities or other persons in 2019, 2018 and 2017 that have, or are reasonably likely to have, a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

## Market risk

As filed, 4,161 characters.

We use various financial instruments, including interest swap contracts, to reduce the interest rate risk related to our debt. We also use foreign currency forwards to manage and reduce the foreign currency exchange rate risk associated with our foreign currency denominated receivables and payables, forecasted royalties, forecasted earnings and cash flows of foreign subsidiaries and other transactions.

We are exclusively an end user of these instruments, which are commonly referred to as derivatives. We do not engage in trading, market making or other speculative activities in the derivatives markets. More detailed information about these financial instruments is provided in Note 12 - Fair Value to the Consolidated and Combined Financial Statements contained in Part IV of this report. Our principal market exposures are interest and currency exchange rate risks.

We assess our exposures to changes in interest rates utilizing a sensitivity analysis. The sensitivity analysis measures the potential impact in earnings, fair values and cash flows based on a hypothetical 10% change (increase and decrease) in interest rates. Our variable-rate borrowings, which include our Term Loan, a portion of which has been swapped to a fixed interest rate, and any borrowings we make under our revolving credit facility, expose us to risks caused by fluctuations in the applicable interest rates. The total outstanding balance of such variable-rate borrowings, net of swaps, was $484 million as of December 31, 2019. A hypothetical 10% change in our effective weighted average interest rate on our variable-rate borrowings would result in approximately $1 million increase or decrease to our annual long-term debt interest expense, and a one-point change in the underlying interest rates would result in approximately a $5 million increase or decrease in our annual interest expense.

The fair values of cash and cash equivalents, trade receivables, accounts payable and accrued expenses and other current liabilities approximate their carrying values due to the short-term nature of these assets and liabilities.

We have foreign currency rate exposure to exchange rate fluctuations worldwide, particularly with respect to the Canadian Dollar, the Chinese Yuan, the Euro, the British Pound and the Argentine Peso. We anticipate that such foreign currency exchange rate risk will remain a market risk exposure for the foreseeable future.

We use a current market pricing model to assess the changes in the value of our foreign currency derivatives used by us to hedge underlying exposure that primarily consists of our non-functional-currency current assets and liabilities. The primary assumption used in these models is a hypothetical 10% weakening or strengthening of the U.S. dollar against all our currency exposures as of December 31, 2019. The gains and losses on the hedging instruments are largely offset by the gains and losses on the underlying assets, liabilities or expected cash flows. As of December 31, 2019, the absolute notional amount of our outstanding foreign exchange hedging instruments was $55 million. We have determined through such analyses, that a hypothetical 10% change in foreign currency exchange rates would have resulted in approximately a $5 million increase or decrease to the fair value of our outstanding forward foreign currency exchange contracts, which would generally be offset by an opposite effect on the underlying exposure being economically hedged.

Argentina is considered to be a highly inflationary economy. As of December 31, 2019, we had total net assets of $9 million in Argentina.

Our total market risk is influenced by a wide variety of factors including the volatility present within the markets and the liquidity of the markets. There are certain limitations inherent in the sensitivity analyses presented. While probably the most meaningful analysis, these “shock tests” are constrained by several factors, including the necessity to conduct the analysis based on a single point in time and the inability to include the complex market reactions that normally would arise from the market shifts modeled.

## Controls and procedures

As filed, 2,339 characters.

*Disclosure Controls and Procedures.* Our management, with the participation of our principal executive and principal financial officers, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on such evaluation, our principal executive and principal financial officers have concluded that, as of the end of such period, our disclosure controls and procedures were effective and operating to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and to provide reasonable assurance that such information is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure.

*Management’s Report on Internal Control Over Financial Reporting.* Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) under the Exchange Act. Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2019. In making this assessment, management used the criteria established in *Internal Control - Integrated Framework (2013)* issued by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission. Based on this assessment, our management believes that, as of December 31, 2019, our internal control over financial reporting is effective. Our independent registered public accounting firm has issued an attestation report on the effectiveness of our internal control over financial reporting, which is included within their audit opinion on page F-2.

There have been no changes in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) during the most recent fiscal quarter to which this report relates that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

Filed Feb 13, 2020.
Source: SEC EDGAR, the filing index for accession 0001722684-20-000007. Last ingested by Listed: Nov 4, 2026, 16:44 ET. No prices; not investment advice.