UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2018

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-38432

Wyndham Hotels & Resorts, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	82-3356232
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
22 Sylvan Way	07054
Parsippany, New Jersey	(Zip Code)
(Address of Principal Executive Offices)

(973) 753-6000

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each Class	Name of each exchange on which registered
Common Stock, Par Value $0.01 per share	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

None

(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o      No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes oNo þ

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes þ      No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ     No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	þ	Smaller reporting company	o
		Emerging growth company	o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes oNo þ

The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant as of June 30, 2018, was $5,789,872,286. All executive officers and directors of the registrant have been deemed, solely for the purpose of the foregoing calculation, to be “affiliates” of the registrant.

As of January 31, 2019, the registrant had outstanding 97,888,796 shares of common stock.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement prepared for the 2019 Annual Meeting of Shareholders are incorporated by reference into Part III of this report.

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TABLE OF CONTENTS

		Page
	PART I
Item 1.	Business	2
Item 1A.	Risk Factors	17
Item 1B.	Unresolved Staff Comments	29
Item 2.	Properties	29
Item 3.	Legal Proceedings	29
Item 4.	Mine Safety Disclosures	29
	PART II
Item 5.	Market for Registrant’s Common Equity	30
Item 6.	Selected Financial Data	31
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	35
Item 7A.	Quantitative and Qualitative Disclosures About Market Risks	47
Item 8.	Financial Statements and Supplementary Data	48
Item 9.	Changes in and Disagreements with Accountants	48
Item 9A.	Controls and Procedures	48
Item 9B.	Other Information	49
	PART III
Item 10.	Directors, Executive Officers and Corporate Governance	50
Item 11.	Executive Compensation	51
Item 12.	Security Ownership of Certain Beneficial Owners	51
Item 13.	Certain Relationships and Related Transactions	51
Item 14.	Principal Accounting Fees and Services	51
	PART IV
Item 15.	Exhibits and Financial Statements Schedules	52
Item 16.	Form 10-K Summary	52
	Signatures	53

PART I

Forward-Looking Statements

This report contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. These statements include, but are not limited to, statements related to our expectations regarding our strategy and the performance of our business, our financial results, our liquidity and capital resources and other non-historical statements. Forward-looking statements include those that convey management’s expectations as to the future based on plans, estimates and projections and may be identified by words such as “will,” “expect,” “believe,” “plan,” “anticipate,” “intend,” “goal,” “future,” “outlook,” “guidance,” “target,” “objective,” “estimate” and similar words or expressions, including the negative version of such words and expressions. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of Wyndham Hotels to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.

You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. Factors that could cause actual results to differ materially from those in the forward-looking statements include without limitation general economic conditions, the performance of the financial and credit markets, the economic environment for the hospitality industry, operating risks associated with the hotel franchising and management businesses, the impact of war, terrorist activity or political strife, risks related to our spin-off as a newly independent company and risks related to our ability to obtain financing as well as the risks described under Part I, Item 1A - Risk Factors. Except as required by law, Wyndham Hotels undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, subsequent events or otherwise.

Where You Can Find More Information

We file annual, quarterly and current reports, proxy statements, reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and other information with the Securities Exchange Commission (“SEC”). Our SEC filings are available free of charge to the public over the Internet at the SEC’s website at https://www.sec.gov. Our SEC filings are also available on our website at https://www.wyndhamhotels.com as soon as reasonably practicable after they are filed with or furnished to the SEC. We maintain an internet site at https://www.wyndhamhotels.com. Our website and the information contained on or connected to that site are not incorporated into this Annual Report.

Item 1. Business.

OUR BUSINESS

Wyndham Hotels & Resorts, Inc. (“Wyndham Hotels”, the “Company”, or “we”) is the world’s largest hotel franchisor, with nearly 9,200 affiliated hotels located in over 80 countries. We license our 20 renowned hotel brands to franchisees, who pay us royalty and other fees to use our brands and services. We are the leader in the economy and midscale segments and have a growing presence in the upscale segment of the global hotel industry. We have grown our franchised hotel portfolio over time both organically and through acquisitions, and we have a robust pipeline of hotel owners and developers who have executed franchise agreements for our brands. Wyndham Hotels became an independent public company in May 2018 when it was spun-off from Wyndham Worldwide Corporation (“former Parent”). In 2018, Wyndham Hotels generated revenues of $1,868 million, net income of $162 million and Adjusted EBITDA of $507 million. (See Item 6. Selected Financial Data for our definition of Adjusted EBITDA and the reconciliation of Net Income to Adjusted EBITDA.)

We enable our franchisees, who range from sole proprietors to public real estate investment trusts, to optimize their return on investment. We drive guest reservations to our franchisees’ properties through strong brand awareness among consumers and businesses, our global reservation system, our award-winning Wyndham Rewards loyalty program and our national, local and global marketing campaigns. We establish brand standards, provide our franchisees with property-based operational training and turn-key technology solutions, and help reduce their costs by leveraging our scale. These capabilities enhance returns for our franchisees and therefore help us to attract and retain franchisees. With over 5,900 franchisees, we have built the largest network of franchisees of any global hotel company.

Our portfolio of global brands enables us to franchise hotels in virtually any market at a range of price points, catering to both our guests’ and franchisees’ preferences. We welcome over 150 million guests annually worldwide. We primarily target economy and midscale guests, as they represent the largest demographic in the United States and around the world. We have

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the leading position in the economy and midscale segments of the hotel industry, where our hotel brands represent approximately two of every five branded rooms in the United States. Approximately 70% of the hotels affiliated with our brands are located in the United States and approximately 30% are located internationally. The following table summarizes our brand portfolio as of December 31, 2018:

Our business model is asset-light, as we generally receive a percentage of each franchised hotel’s room revenues but do not own the underlying properties. Our business is adaptable to changing economic environments due to a low operating cost structure, which, together with our recurring fee streams and limited capital expenditures, yields attractive margins and predictable cash flows. Our franchise agreements are typically 10 to 20 years in length, providing significant visibility into future cash flows. Under these agreements, our franchisees pay us royalty fees and marketing and reservation fees, which are based on a percentage of their gross room revenues. We are required to spend marketing and reservation fees on marketing and reservation activities, enabling us to predictably match these expenses with an offsetting revenue stream on an annual basis. We also license the “Wyndham” trademark and certain other trademarks and intellectual property to Wyndham Destinations, Inc. (formerly known as Wyndham Worldwide Corporation) through a long-term license agreement under which we receive royalty fees. In addition to hotel franchising, we are a leading hotel management company. Our portfolio of managed hotels includes 438 third-party-owned properties and two owned properties. Virtually all of the hotels in our system are franchised to third parties, and substantially all of our Adjusted EBITDA is generated by our Hotel Franchising segment.

We pursue multiple avenues of growth to generate returns for our stockholders. We use our scale, brands, guest loyalty, franchisee network and sales capabilities to add new hotels to our system. Our long-established franchising experience and ability to innovate, together with favorable macroeconomic and lodging industry fundamentals, continue to support our organic growth around the world. Additionally, we intend to use our cash flow to continue to return capital to stockholders and to invest in the business and pursue external growth opportunities.

Our Competitive Strengths

We believe our success has been and will be driven by significant competitive strengths that we have developed over time:

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Industry-leading footprint in the hotel industry

Wyndham Hotels is the world’s largest hotel franchisor, with nearly 9,200 affiliated hotels in over 80 countries as of December 31, 2018. Our brands have substantial presence, welcoming over 150 million guests annually worldwide. The following chart presents the number of branded hotels associated with each of the six largest hotel companies:

Global Hotel Companies by Number of Branded Hotels as of September 30, 2018

* As of June 30, 2018.

Source: Companies’ public disclosures.

Our scale enhances brand awareness among consumers and businesses and provides numerous benefits to franchisees. Our global reservation system, extensive distribution network and award-winning Wyndham Rewards program drive over 65 million guest reservations annually to our franchisees. We also help our franchisees reduce overall costs through our marketing campaigns, technology solutions and purchasing programs with third-party suppliers. Our ability to provide these benefits helps us to attract and retain franchisees.

Strong portfolio of well-known brands

We have assembled a portfolio of 20 well-known hotel brands, from leading economy and midscale brands such as Super 8, Days Inn and La Quinta to upscale brands such as Wyndham and Dolce. Our Super 8 brand, with over 2,800 affiliated hotels, has more hotel properties than any other hotel brand in the world. Our brands are located in primary, secondary and tertiary cities and are among the most recognized in the industry. Over 80% of the U.S. population lives within ten miles of one or more of our affiliated hotels. Furthermore, with the addition of the “by Wyndham” endorser, our brands now enjoy even higher awareness.

Our brands offer a breadth of options for franchisees and a wide range of price points and experiences for our guests, including members of our award-winning Wyndham Rewards loyalty program. Our brands have also won numerous industry awards, both for guest satisfaction and as franchise opportunities for entrepreneurs. With many of our affiliated hotels located along major highways, our brands not only drive online and telephone reservations to hotels, they also help attract guests on a “walk-in” or direct-to-hotel basis.

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Global leader in the economy and midscale segments

We have built a leading position in the economy and midscale segments of the hotel industry, with our brands representing approximately 40% of both U.S. economy and U.S. midscale hotel inventory. Our central reservation channels generate nearly half of our franchisees’ occupied room-nights annually and over 60% of guests at our franchised hotels in the United States. In addition, we have substantial experience in property design, hotel management training, establishing brand standards, advertising, structuring promotional offerings and online marketing for economy and midscale brands. Our economy and midscale brands are consistently highly ranked in J.D. Power’s North American Hotel Guest Satisfaction Index Study for those segments.

Our strength in the economy and midscale segments is attractive to potential franchisees and positions us well to benefit from favorable demographic and consumer demand trends. According to the Brookings Institution, just over 50 percent of the world’s population, or some 3.8 billion people, is considered part of the global middle class. As this population increasingly participates in the global travel and leisure industry, we expect the economy and midscale segments will be a natural entry point.

Award-winning loyalty program

Wyndham Rewards, our award-winning loyalty program, is a key component of our ongoing efforts to build consumer and franchisee engagement while driving more guest reservations directly to our affiliated hotels. Approximately 61 million people have enrolled in Wyndham Rewards since its inception, and substantially all 9,157 hotels affiliated with our hotel brands participate in the program. In addition, over 25,000 vacation ownership and rental properties participate in the program. Wyndham Rewards generates significant repeat business by rewarding frequent stays with points. Since being redesigned in 2015, 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 60 awards, 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 the #1 ranking on WalletHub’s list of “Best Hotel Rewards Programs” in 2018 for the fourth consecutive year.

Wyndham Rewards loyalty program members now account for approximately one-third of occupancy at our affiliated hotels. Total membership has been growing by over 10% annually for the past six years. Our franchisees benefit from the program through increased guest loyalty and the more than one million room-nights for which award points were redeemed for each of the past two years. These members are an important driver of our growth, as they spend nearly twice as much as non-members, on average.

Proven ability to create value through acquisitions

We have built our portfolio of renowned hotel brands primarily through acquisitions, beginning with the Howard Johnson brand and the U.S. franchise rights for the Ramada brand in 1990. Since then, we have acquired 16 economy, midscale, upscale and extended-stay brands, enabling us to meet travelers’ leisure and business travel needs across a wide range of price points, experiences and geographies. We have established an extensive track record of successfully integrating franchise systems and enhancing the performance of brands post-acquisition by leveraging our operating best practices, significant economies of scale, award-winning Wyndham Rewards loyalty program and access to global distribution networks, while producing significant cost synergies for us and our franchisees. We intend to build upon our past success as we continue to opportunistically acquire and integrate brands into our franchising platform.

In addition, we have grown many of the franchise systems we have acquired to be significantly larger than at acquisition. For example, after acquiring the economy-focused Baymont Inn portfolio in 2006, we re-positioned the brand within the midscale segment as Baymont Inn & Suites by Wyndham and have more than tripled its size from 115 hotels to 513 hotels in North and Latin America. Similarly, we have doubled the size of our flagship Wyndham brand since we acquired it in 2005. We believe these capabilities, combined with our scale, enable us to be highly competitive for acquisition opportunities.

Strong and experienced management team

Our executive management team is focused on building upon Wyndham Hotels’ past success and track record of growth through its deep industry experience and leadership continuity. We benefit significantly from the experience of our executive officers, who have an average of 19 years of experience in the travel and hospitality industries. Our chief executive officer, Geoffrey Ballotti, spent 20 years with Starwood Hotels & Resorts before joining Wyndham Worldwide in 2008 and has been instrumental in transforming our business over the past several years through acquisitions and technology-related initiatives.

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Our non-executive chairman, Stephen Holmes, has 28 years of experience in the hospitality industry and served as Wyndham Worldwide’s chief executive officer from 2006 to 2018. Our chief financial officer, David Wyshner, has 19 years of experience in the travel industry and previously served as president and chief financial officer of Avis Budget Group. As a group, our executive officers have extensive experience with leading global hospitality and consumer-brand companies.

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 goals by focusing on the following core strategic initiatives:

Attract, retain and develop franchisees

We intend to attract and retain franchisees and grow our system size by maintaining and increasing the value we provide to franchisees. With more than 5,900 franchisees, we have built the largest network of franchisees of any global hotel company. These hotel owners and developers provide the engine and platform for future growth. In order to attract, retain and serve franchisees, we plan to:

• continually enhance the competitive position and awareness of our brands;

• provide cost-effective new-construction and renovation prototypes to enhance owners’ returns;

• offer best-in-class, cost-effective technology solutions; and

• drive reservations to our franchisees through our proprietary booking and third-party distribution channels.

We are focused on building brand awareness, brand preference and reservations by presenting the value propositions of each of our hotel brands in all relevant channels to consumers who are likely to have the greatest propensity to stay with us. We provide value-engineered hotel designs and prototypes to property owners and developers to help them boost the returns they generate from their investments. We also provide our franchisees with fully integrated, turn-key property management, reservations and revenue management systems that have capabilities that were not previously affordable to hotels in the economy and midscale sectors.

We continuously innovate in our e-commerce channels, including websites and mobile applications for our brands, to enhance the consumer experience and drive reservations to our franchisees. We also operate telephone reservation and customer service centers around the world, and provide easy access to third-party distribution channels for our franchisees. Finally, we develop strong, consultative relationships with our franchisees, beginning with the sales process, where we work with hotel owners to determine how our brands will optimize their investment. We nurture this relationship throughout the life of the contract, continually assessing our franchisees’ needs, providing solutions to meet those needs and partnering with them to grow their business. These efforts help us to retain approximately 94% of our total properties each year and to welcome an average of approximately two new hotels into our system every day.

Elevate the economy and midscale guest experience

We believe every type of traveler should have a great travel experience, regardless of price point. We are building on our leading positions in the economy and midscale hotel segments to reshape and elevate the economy and midscale hotel experience. This process starts with our iconic economy brands – Days Inn, Super 8, Howard Johnson and Travelodge – which we have redefined through new brand standards to offer a meaningfully enhanced guest experience. These changes enable our franchisees to create an upscale guest experience at an economy price point.

Our brands are among the most respected in the industry and have won numerous awards for the quality and consistency of service they provide. We intend to continue to drive favorable consumer perception of our brands through our brand standards, hotel management training, quality assurance, marketing and franchisee relations. As a result, we believe our reshaped and elevated economy and midscale brands will be a natural entry point for millennials and other price-conscious travelers, who are looking for quality branded experiences at an affordable price point.

Grow our footprint in new and existing international markets

With a diverse, global network of brands already represented in more than 80 countries, we intend to expand in new and existing international markets. Over the past five years, our international portfolio has grown at a compound annual rate of 9%, to nearly 2,800 hotels, and now represents approximately 30% of the hotels in our system.

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We have built a strong, flexible international franchise sales platform, with more than 100 sales professionals in key locations around the world, including in Europe, Latin America, India, China, Singapore and the Middle East. We typically focus on rapidly developing countries that are under-served by the hotel industry. We also look for flagship opportunities in higher-traffic markets throughout the world to aid international brand awareness and loyalty. We believe our flexibility as a sales organization and our diverse portfolio of brands enable us to effectively adapt our sales strategies in response to franchisees’ and hotel developers’ needs, and to changes in global supply and demand.

Currently, our pipeline of executed franchise contracts and applications consists of over 1,400 hotels with nearly 180,000 rooms, of which more than half are international. As we grow internationally, we are particularly focused on brand quality and property design, with approximately 90% of our existing international pipeline being new-construction projects.

Use cash flow to create value for stockholders

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/or share repurchases. We expect to pay a regular dividend and use excess cash to repurchase shares.

Recent Developments

Our Spin-off

On May 31, 2018, Wyndham Hotels became an independent, public company when it was spun-off from Wyndham Worldwide Corporation, its former parent, which is now known as Wyndham Destinations. Wyndham Hotels’ common stock trades on the New York Stock Exchange under the ticker “WH”.

In conjunction with the spin-off, we entered into agreements with Wyndham Destinations governing the terms of our separation, providing for certain transition services to be provided by each company to the other, and granting a 100-year license to Wyndham Destinations for the use of the “Wyndham” trademark in exchange for license fees payable to Wyndham Hotels. Wyndham Destinations is the world’s largest vacation ownership and exchange company with 220 vacation ownership resorts and over 4,300 affiliated exchange properties. (See “Relationship with Wyndham Destinations.”)

The La Quinta Acquisition

On May 30, 2018, we completed the previously announced acquisition of La Quinta Holdings Inc.’s hotel franchising and hotel management business (“La Quinta”) for $1.95 billion in cash.

In addition to adding over 900 hotels to the world’s largest hotel network, the acquisition of La Quinta strengthened our position in the midscale and upper midscale segments of the hotel industry, which has been and continues to be one of our strategic priorities. Following the La Quinta acquisition, Wyndham Hotels franchises the largest number of midscale and economy hotels in the industry. In addition, for the first time in La Quinta's history, Smith Travel Research (“STR”) has moved the brand to their upper midscale from midscale segment of the industry. We expect to leverage our sales and development capabilities to further grow the La Quinta brand in the United States and across Latin America. The acquisition has expanded our managed hotel network by almost 280%, from 116 hotels just prior to the acquisition to 440 properties, making us the sixth-largest hotel manager in the United States. Hotel management represents an attractive expansion opportunity to grow our asset-light business and further penetrate the midscale and higher segments.

The La Quinta Returns loyalty program, with over 8 million enrolled members, will be combined with the award-winning Wyndham Rewards loyalty program, with approximately 61 million enrolled members, in 2019.

We expect to generate substantial synergies when integrating La Quinta into our existing business by eliminating redundant public company expenses and reducing operating costs associated with technology, distribution and marketing as we leverage our scale and existing infrastructure. We anticipate that additional revenue benefits will come from incremental domestic and international expansion as well as RevPAR growth from a broader distribution platform.

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Adding “By Wyndham” to Brands

In April 2018, Wyndham Hotels announced that it would be adding the “by Wyndham” hallmark to twelve of its brands: Super 8, Days Inn, Howard Johnson, Travelodge, AmericInn, Baymont, Ramada, Ramada Encore, Dolce, Dazzler, Esplendor and Trademark. Updated brand names and logos began appearing in April 2018. Additionally, in October 2018, we announced that we would be adding the “by Wyndham” hallmark to the La Quinta brand. We believe that the addition of “by Wyndham” cross-branding is boosting our, and our franchisees’, RevPAR performance and overall strength of our brands.

THE HOTEL INDUSTRY

Companies in the hotel industry typically operate through a combination of one or more of the following business models.

Franchise – Under the franchise model, a company typically grants the use of a brand name to a hotel owner in exchange for royalty fees, which are typically a percentage of gross room revenues, and provides marketing and reservation services for a fee, which is calculated similarly. Since the royalty fees are a recurring revenue stream and the related cost structure is relatively low, the franchise model often yields attractive margins and steady, predictable cash flows. Franchisors generally do not directly participate in the daily management or operation of franchised hotels.

Management – Under the management model, a company provides professional oversight and comprehensive operations support to hotel owners in exchange for base management fees, which are typically a percentage of total hotel revenue. A company can also earn incentive management fees which are tied to the financial performance of the hotel. In addition to management and incentive fees, typical management agreements include a provision that hotel owners will pay ongoing marketing and reservation fees, which are based on a percentage of gross room sales.

Ownership – Under the ownership model, a company owns a hotel and bears all financial risks and rewards relating to the hotel, including appreciation and depreciation in the value of the property. Ownership requires a substantial capital commitment and typically has a high fixed-cost structure.

The hotel industry, and hotel ownership in particular, is cyclical in nature. Companies operating under the franchise model are largely insulated from this risk when compared with the other two business models since they do not own the hotels and have limited operating costs. Therefore, a company’s strategic positioning and presence within these business models can influence overall profitability, particularly in a volatile economy.

According to STR, as of December 31, 2018, the global hotel market consisted of approximately 191,000 hotels with combined annual revenues of $540 billion. This represents over 17.6 million rooms, of which 54% are affiliated with a brand. The industry is geographically concentrated with the top 20 countries accounting for over 80% of total rooms. The United States has the largest presence in the global hotel industry with 5.2 million rooms, representing approximately 30% of the global market. China is the next largest concentration with 2.5 million rooms, representing approximately 14% of the global market. The geographical distribution as of December 31, 2018 was as follows:

Region	Hotels	Room Supply (millions)	Revenues (billions)		Brand Affiliation
United States/Canada	61,602	5.7	$	177	70	%
Europe	69,870	4.8	168		40	%
Asia Pacific	40,090	5.0	130		54	%
Latin America/Middle East	19,470	2.1	65		43	%

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Performance in the U.S. lodging industry is evaluated based upon chain scale segments, which are generally defined as follows:

Chain Scale	% of U.S. Market	Typical Amenities
Economy	12%	Basic amenities
Midscale	9%	Limited breakfast, selected business services
Upper Midscale	11%	Restaurants, vending, selected business services and some recreational facilities
Upscale	16%	Full range of on-property amenities and services, including restaurants, recreational facilities and business centers
Upper Upscale	13%	Full range of on-property amenities and services
Luxury	11%	Luxury accommodations and extensive range of on-property amenities and services
Brand Affiliated	72%
Independents	28%
Total	100%

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.

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Our System

With nearly 9,200 affiliated hotels in our brand portfolio, our global footprint is substantially greater than that of any other hotel company in the world. Our brands can be found in over 80 countries, with the heaviest geographic concentration in the United States and Greater China:

	# of Properties		% of System
United States		6,358		70	%
Asia Pacific		1,615		18	%
Canada		490		5	%
Europe/Middle East/Africa		479		5	%
Latin America		215		2	%
Global		9,157		100	%

We welcome over 150 million guests annually worldwide. While our portfolio spans a wide array of hotel brand offerings, we are the leader in the economy and midscale segments of the hotel industry.

	# of Properties		% of System
Economy		5,733		62	%
Midscale		2,814		31	%
Lifestyle		255		3	%
Upscale		245		3	%
Extended Stay		110		1	%
		9,157		100	%

Our portfolio of brands appeals to a broad range of consumers. With diverse offerings across chain scales, geographies and price points, and a particular focus on economy and midscale hotels, we seek to address the travel needs of the over three billion people in the expanding global middle class. Our brands combine innovative design, quality and affordability that attracts today’s value-conscious consumer. While our typical guest is a leisure traveler, our industry-leading scale and presence in major, secondary and tertiary cities also attract business travelers. Many hotels affiliated with our brands are located on interstate and highway roadsides, catering to value-oriented guests seeking quality accommodations in convenient locations. We also seek to appeal to the growing millennial generation through our investment in consumer-facing technology, online and social media marketing, innovative new-construction prototypes and redesigned rooms and lobbies.

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

	As of December 31,
	2018		2017		2016
	Properties	Rooms	Properties	Rooms	Properties	Rooms
Beginning balance	8,422	728,200	8,035	697,600	7,812	678,000
Additions	1,512	145,800	811	72,200	627	58,700
Deletions	(777)	(64,100)	(424)	(41,600)	(404)	(39,100)
Ending balance	9,157	809,900	8,422	728,200	8,035	697,600

In addition to our existing franchisees, we have a development pipeline of over 1,400 hotels, representing nearly 180,000 rooms as of December 31, 2018. Typically, about 80% of executions open within the following 24 months. While there can be no assurance that any particular property in our pipeline will eventually become franchised by us, our pipeline is typically only a subset of our development activity in any given period. Approximately half of our annual hotel additions are executed and opened in less than 90 days and therefore may never appear in our pipeline.

Our Brands

Through our diverse portfolio of well-recognized hotel brands, we offer consumers hotel options in markets throughout the world with a wide range of amenities and at a variety of price points.

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As of December 31, 2018, our brand portfolio consisted of the following:

				North America		Asia Pacific		Europe,
	Global RevPAR			U.S.	Canada	Greater China	Rest of Asia	Middle East and Africa	Latin America	Total
Economy
Super 8	$	28.01	Properties	1,590	126	1,168	—	4	1	2,889
			Rooms	95,955	8,050	73,355	—	618	50	178,028
Days Inn	$	36.21	Properties	1,456	113	75	15	63	6	1,728
			Rooms	109,366	8,908	12,766	2,218	3,984	436	137,678
Travelodge	$	38.98	Properties	337	98	—	—	—	—	435
			Rooms	22,413	8,592	—	—	—	—	31,005
Microtel	$	43.00	Properties	306	17	—	14	—	6	343
			Rooms	21,713	1,482	—	1,037	—	715	24,947
Howard Johnson	$	31.58	Properties	188	28	65	3	5	49	338
			Rooms	15,112	1,887	20,577	1,107	500	2,998	42,181
Midscale
La Quinta	$	64.05	Properties	898	2	—	—	—	14	914
			Rooms	87,386	133	—	—	—	1,937	89,456
Ramada	$	39.65	Properties	335	81	96	70	203	26	811
			Rooms	40,149	7,834	21,318	12,530	29,409	3,374	114,614
Baymont	$	39.64	Properties	509	3	—	—	—	1	513
			Rooms	40,073	350	—	—	—	118	40,541
AmericInn	$	51.62	Properties	204	—	—	—	—	—	204
			Rooms	12,072	—	—	—	—	—	12,072
Wingate	$	55.28	Properties	154	8	1	—	—	1	164
			Rooms	13,707	787	188	—	—	176	14,858
Wyndham Garden	$	50.92	Properties	71	3	2	3	17	23	119
			Rooms	11,690	479	403	374	2,765	3,122	18,833
Ramada Encore	$	29.26	Properties	—	—	18	12	20	10	60
			Rooms	—	—	3,287	3,071	2,458	1,355	10,171
Extended Stay
Hawthorn	$	55.18	Properties	103	—	—	—	7	—	110
				9,929	—	—	—	704	—	10,633
Lifestyle
Trademark	$	70.28	Properties	27	5	—	—	52	—	84
			Rooms	4,949	497	—	—	8,620	—	14,066
TRYP	$	56.38	Properties	9	—	1	3	78	19	110
			Rooms	1,062	—	95	316	11,099	2,947	15,519
Dazzler	$	60.77	Properties	—	—	—	—	—	12	12
			Rooms	—	—	—	—	—	1,551	1,551
Esplendor	$	50.58	Properties	—	—	—	—	—	10	10
			Rooms	—	—	—	—	—	958	958
Upscale
Wyndham	$	62.51	Properties	40	—	28	13	15	36	132
			Rooms	11,455	—	8,479	2,180	3,095	8,394	33,603
Wyndham Grand	$	72.51	Properties	12	—	16	1	8	—	37
			Rooms	3,389	—	5,713	194	2,057	—	11,353
Dolce	$	86.71	Properties	10	3	—	—	7	—	20
			Rooms	2,202	276	—	—	1,546	—	4,024
Total (a)	$	40.80	Properties	6,358	490	1,470	145	479	215	9,157
			Rooms	506,068	39,590	146,181	23,074	66,855	28,165	809,933

______________________

(a) Total includes 3,446 rooms (109 properties) in the United States, 315 rooms (3 properties) in Canada, 47 rooms (11 properties) in Rest of Asia and 34 rooms (1 property) in the Latin America under affiliation arrangements with Wyndham Destinations.

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Wyndham Rewards

Wyndham Rewards is our award-winning guest loyalty program that supports our brand portfolio and entire system of affiliated hotels. The program generates substantial repeat business for our franchisees by rewarding frequent stays with points that can be redeemed for free nights or other rewards, such as airline tickets and gift cards. Based on the principles of being a generous and simple program, loyalty members earn a minimum number of points for every qualified stay and are able to redeem a free night at any of our affiliated hotels for a fixed number of points. In addition to the 9,157 hotels in our system, Wyndham Rewards members are able to redeem points in over 20,000 vacation ownership and rentals properties pursuant to agreements with Wyndham Destinations and affiliates of Wyndham Vacation Rentals Europe.

Since inception, approximately 61 million people have enrolled in Wyndham Rewards. Wyndham Rewards members generated over 30% of our franchisees’ room-nights in 2018.

We license the Wyndham Rewards name to Visa in a co-branded credit card arrangement. Wyndham Rewards members who have the Wyndham Rewards Visa credit card benefit by earning points for purchases that can be used to redeem stays at any of our affiliated hotels, as well as certain other rewards. We generate revenue primarily by cardholder spending activity and the enrollment of new cardholders. Our Wyndham Rewards Visa credit card program has been growing rapidly, with cardholder spend activity up approximately 84% from 2014.

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Our Hotel Franchising Business

We primarily license our brand names and associated trademarks to hotel owners under long-term franchise agreements. Our franchise agreements are typically 10 to 20 years in length and generally include a royalty fee of approximately 4% to 5% of gross room revenue and a marketing and reservation fee of approximately 3% to 5% of gross room revenue. Once a franchise agreement is executed, we will receive this cash flow stream throughout the term of the agreement. Our franchise business is adaptable to changing economic environments due to low operating cost structures and our ability to add affiliated hotels with little to no upfront capital investment by us. This, in addition to the recurring fee streams provided by royalty fees, results in a resilient business model that yields attractive margins and predictable cash flows and enables us to successfully manage industry fluctuations.

Early in our international development efforts, we entered new markets through master franchise agreements, whereby we licensed our hotel brands and our associated trademarks to third parties that assumed the principal role of franchisor. Since we provide limited services to master franchisors, the fees we receive in connection with these agreements are typically lower than the fees we receive under a direct franchising model. As our international presence expanded, our need to enter into master franchise agreements decreased, enabling us to transition to a more traditional direct franchise relationship.

Our franchise sales team consists of over 100 sales professionals serving customers 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. Our franchise sales teams are generally responsible for selling all brands within a specified region and promoting the specific brand that is best suited for the specific property and location. In addition to a regional presence in the United States, we currently have development teams located in London, Istanbul, Dubai, Shanghai, Singapore, Canada, Delhi, 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 throughout the world as they emerge. We occasionally provide financial support in the form of loans or development advances to help generate new business. In 2018, of the more than 1,000 new and renewal franchise agreements we executed, only 6% received financial support from us, totaling $27 million.

Our typical franchisee is a first-time hotelier and single property owner. Frequently, the hotel is our franchisee’s primary source of income. We offer these small business owners a variety of services, including (i) education and training on best practices in hotel operations, (ii) distribution, (iii) marketing and loyalty initiatives, (iv) low-cost procurement and (v) expansion and growth strategies, which help to drive return on their investment. We believe our ability to fulfill the needs of our franchisees is reflected in our franchisee retention, which is consistently high. We retain approximately 94% of our total properties each year.

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.

Our reservation system is designed so that our franchisees have easy and fast access to incremental distribution channels. Using our fully automated and extensive partner network, we distribute rates and inventory through thousands of offline and online channels and connect to all major global distribution systems and online travel agencies, enabling our franchisees to leverage our scale to drive incremental bookings. We also offer around-the-clock handling of direct-to-property reservation calls for our franchisees. Our call center agents book reservations at a meaningful ADR premium as compared to direct-to-property reservation calls, enabling our franchisees to optimize revenue while reducing staffing costs.

As of December 31, 2018, our franchising portfolio, excluding managed properties, consisted of 8,717 hotels representing 742,800 rooms, which comprised 92% of our total system.

During 2018, we generated $1,135 million of revenue from franchising activities, which represented approximately 89% of our total revenue (excluding cost reimbursements). Our franchise fees include (i) ongoing royalties that are generally calculated as a percentage of gross room revenue and permit the hotel owners and operators to use certain of the trademarks associated with our brand names, (ii) initial franchise fees, which relate to services provided to assist a franchised hotel to open under one of our brands, (iii) other franchise fees, which include franchise renewal fees, transfer fees and early termination fees, (iv) marketing, loyalty and reservation fees, which are intended to reimburse us for marketing and

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reservation activities, as well as loyalty member redemptions and program administration and (v) royalties derived from licensing our “Wyndham” trademark and certain other trademarks and intellectual property to Wyndham Destinations.

Other revenues generated from franchising activities include licensing fees, credit card program revenue and procurement services. We earn revenue from a license, development and noncompetition agreement with Wyndham Destinations primarily for the use by Wyndham Destinations of our “Wyndham” trademark and certain other trademarks and intellectual property, for which Wyndham Destinations will pay us certain royalties and other fees. The term of the license agreement is 100 years. (See “Relationship with Wyndham Destinations.”) We earn revenue from our co-branded Wyndham Rewards Visa credit card program, which is primarily generated by cardholder spending activity and the enrollment of new cardholders. We also earn procurement services revenue from qualified vendors which is generated based on the level of goods and services purchased by franchisees and hotel guests from these qualified vendors.

Our Hotel Management Business

By providing management services, we are able to appeal to hotel owners who may lack hotel operating capabilities and want a single-source solution for brand and management. We make decisions to manage hotels based on the strategic value that doing so would add to our hotel brands, concentrating on brand and market location and the operating experience of the hotel owner. Internationally, particularly in developing markets, offering management services to hotel owners and developers is a prerequisite to successfully expand our presence in a region. 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. For the majority of hotels that we manage, we are responsible for the hiring, training and supervision of all hotel associates.

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. As of December 31, 2018, we had 438 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 manage hotels primarily under the Wyndham, Wyndham Grand, La Quinta, Dolce, TRYP, Hawthorn, Wingate, Ramada, Esplendor and Dazzler brands in major markets and resort destinations globally.

Our development team is focused on growing our presence in top U.S. markets with properties and hotel owners who will raise the profile and performance of our hotel brands, which will better position us to win future franchise and management contracts under our hotel brands. Our international development efforts are focused on building scale in key cities and markets, improving our hotel brand recognition and broadening our appeal to domestic and international guests.

During 2018, we generated $140 million of revenue from our hotel management business excluding $586 million of cost reimbursements, which is 11% of our total revenue (excluding such cost reimbursements). Hotel management revenues are comprised of (i) base fees, which are typically a percentage of the total hotel revenues, (ii) incentive fees, which are typically a percentage of hotel profitability, and (iii) for our two owned hotels, gross room revenue, food and beverage services revenue and other amenity service revenue, such as from spa, casino and golf offerings. Other revenue sources generated from hotel management activities include service fees, which include fees derived from accounting, design, construction and purchasing services and technical assistance provided to managed hotels. We also record revenue for cost reimbursements. These are reimbursable payroll-related costs for operational employees and other reimbursable costs at certain of our managed hotels. These costs are funded by hotel owners but the accounting rules require us to report these fees on a gross basis as both revenue and expense. We do not mark up these costs, and as such, the revenue and related expense have no impact on our operating income or net income.

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 5,900 franchisees, which reduces our exposure to any one franchisee. One master franchisor in China accounts for 13% of our hotels. Apart from this relationship, no one franchisee accounts for more than 4% of our hotels.

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Relationship with Wyndham Destinations

We maintain a significant relationship with Wyndham Destinations, which operates the world’s largest vacation ownership and vacation exchange businesses. Wyndham Hotels continues to own the trademarks and other intellectual property rights related to our hotel brands, including the “Wyndham” trademark, and collects a royalty from Wyndham Destinations for use of the “Wyndham” trademark, “The Registry Collection” trademark and certain other trademarks and intellectual property, under a long-term license, development and noncompetition agreement. Under a Transition Services Agreement, Wyndham Destinations and Wyndham Hotels provide transitional services to each other for, among other things, finance, information technology, human resources, payroll, tax and other services for a limited time to help ensure an orderly transition following our spin-off. Under a Marketing Services Agreement, Wyndham Hotels provides certain marketing-related services to Wyndham Destinations, including sharing certain post-stay reservation data and Wyndham Rewards loyalty program data for marketing purposes and providing telephone and email marketing support services. Additionally, Wyndham Hotels and Wyndham Destinations entered into agreements relating to participation in the Wyndham Rewards loyalty program and the co-branded Wyndham Rewards Visa credit card program.

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. The seasonality of our business may cause fluctuations in our quarterly operating results, earnings and profit margins. 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.

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In addition, our business operations in countries outside the United States are subject to a number of laws and regulations, including restrictions imposed by the Foreign Corrupt Practices Act, as well as trade sanctions administered by the Office of Foreign Assets Control. The Foreign Corrupt Practices Act is intended to prohibit bribery of foreign officials and requires us to keep books and records that accurately and fairly reflect our transactions. The Office of Foreign Assets Control administers and enforces economic and trade sanctions based on U.S. foreign policy and national security goals against targeted foreign states, organizations and individuals. In addition, some of our operations may be subject to additional laws and regulations of non-U.S. jurisdictions, including the U.K.’s Bribery Act 2010, which contains significant prohibitions on bribery and other corrupt business activities, and other local anti-corruption laws in the countries and territories in which we conduct operations.

Employees

As of December 31, 2018, we had approximately 16,200 employees, including approximately 1,200 employees outside of the United States. Approximately 7% of our employees are subject to collective bargaining agreements governing their employment with our Company.

Legal Proceedings

We are involved in various claims and lawsuits 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 results of operations or financial condition. See Note 13 - Commitments and Contingencies to our audited Consolidated and Combined Financial Statements for a description of claims and legal actions arising in the ordinary course of our business.

Item 1A. Risk Factors.

RISK FACTORS 

You should carefully consider each of the following risk factors and all of the other information set forth in this report. The risk factors generally have been separated into three groups: risks relating to our business and industry, risks relating to the spin-off and risks relating to our common stock. Based on the information currently known to us, we believe that the following information identifies the most significant risk factors affecting our Company in each of these categories of risks. 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 hotel industry is highly competitive and we are subject to risks related to competition that may adversely affect our performance and growth.

We will be adversely impacted if we cannot compete effectively in the highly competitive hotel industry. 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. Competition in the hotel industry is based primarily on brand name recognition and reputation, as well as location, room rates, property size and availability of rooms and conference space, quality of the accommodations, guest satisfaction, amenities and the ability to earn and redeem loyalty program points. 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, which may adversely impact our profits. New competition or existing competition that employs a business model that is different from our business model may require us to change our model so that we can remain competitive.

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

A significant portion of our revenue is derived from fees based on room revenues at hotels franchised under our hotel 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 franchisees and hotel management contracts;

• the number, occupancy and room rates of hotels operating under our franchise and management agreements;

• the delay of hotel openings in our pipeline;

• 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;

• competition from other franchised hotel brands, which may require us to offer terms to prospective franchisees and hotel owners less favorable to us than current franchise agreements;

• our franchisees’ pricing decisions, which may indirectly affect our revenues;

• the quality of the services provided by franchisees, which may adversely affect our image, reputation and brand value for both prospective guests and prospective franchisees and hotel owners;

• our ability to successfully market our rewards program and the level of participation in the program by our franchisees and guests;

• the bankruptcy or insolvency of a significant number of our franchised or managed hotels, which could impair our ability to collect outstanding fees or other amounts due or otherwise exercise our contractual rights and result in the early termination of our contracts;

• the availability of financing to allow prospective franchisees to build new hotels;

• financial difficulties of franchisees, owners or other developers that have development advance notes with us or who have received loans or other financial incentives from us;

• disputes with franchisees, which may result in litigation and the loss of management contracts;

• the failure of our franchisees to make investments necessary to maintain or improve their properties;

• adverse events occurring at one of our franchisees’ locations, such as personal injuries, food tampering, contamination or the spread of illness;

• negative publicity from online social media postings and related media reports, which could damage our hotel brands;

• our ability to successfully market our hotel brands, programs or service or pilot new initiatives;

• our management contract with CorePoint Lodging, Inc. (“CorePoint”), which in aggregate owns approximately 71% of our managed hotels;

• the laws, regulations and legislation internationally and domestically, and on a federal, state or local level, concerning the franchise or hotel industry, which may make franchising or managing hotels more onerous, more expensive or less profitable;

• our failure to adequately protect and maintain our trademarks and other intellectual property rights;

• competition from short-term online rental properties and agencies;

• 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 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;

• our ability to keep pace with technological developments, which could impair our competitive position;

• disruptions, including non-renewal or termination of agreements, in relationships with third parties; including marketing alliances and affiliations with e-commerce channels; and

• disputes concerning our operations, including consumer disputes, organized labor activities, class actions and associated litigation.

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, such as those caused by economic conditions, terrorism, political strife, pandemics or threats of pandemics, acts of God and war, may adversely affect us.

Declines in or disruptions to the travel and hotel industries may adversely impact us. Risks affecting the travel and hotel industries 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

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earthquakes, hurricanes, fires, floods, volcanoes and other natural disasters; war; concerns with or threats of pandemics, contagious diseases or health epidemics; 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 disruptions to the travel or hotel industries may adversely affect our franchised hotels, the operations of current and potential franchisees, developers and owners of hotels with which we have hotel management contracts.

Third-party Internet reservation systems, peer-to-peer online networks and alternative lodging channels may adversely impact us.

Consumers increasingly use third-party Internet travel intermediaries 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. As the use of these third-party reservation channels and peer-to-peer online networks increases, consumers may rely on these channels, adversely impacting our hotel brands, reservations and rates. In addition, 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.

In addition to competing with traditional hotels and lodging facilities, our franchisees 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 materially adversely affect the occupancy and/or average rates at franchised hotels and our revenues.

We may be unable to enter into new, or renew existing, hotel management arrangements on favorable terms or at all, and certain of our management agreements require that we fund shortfalls, any of which could reduce our revenue and the growth of our hotel management business.

We provide hotel management services to certain of our hotel owners. Our current and future management arrangements may not continue and we may not be able to enter into new management arrangements in the future on favorable terms. Some of our management contracts with hotel owners require that we compensate the hotel owners for any shortfalls over the life of the management agreement up to a specified aggregate amount if the hotels do not attain specified levels of operating profit or owners do not receive a guaranteed minimum income. We may not be able to recover any funding of such performance guarantees. Any such factors could reduce our revenue and the growth of our hotel management business.

The anticipated benefits of the acquisition of La Quinta’s hotel franchising and management businesses may not be realized fully and may take longer to realize than expected.

The acquisition of La Quinta’s hotel franchising and management businesses involves the integration of two companies that have previously operated independently. The integration of the two companies may not result in the realization of the full benefits of synergies, cost savings, innovation and operational efficiencies that we expect to realize or these benefits may not be achieved within a reasonable period of time.

The difficulties of integration include: integrating the acquired hotel franchising and management businesses of La Quinta into Wyndham Hotels; implementing our business plan for the combined company; integrating information, communications and other systems and internal controls over accounting and financial reporting; consolidating corporate and administrative functions; conforming standards, controls, procedures and policies, business cultures and compensation structures between Wyndham Hotels and La Quinta’s hotel franchising and management businesses; retaining franchisees; establishing a mutually beneficial relationship with CorePoint; and retaining key personnel. 

Our ability to achieve the anticipated benefits of the La Quinta acquisition will depend in part on our relationship with CorePoint.

In connection with the La Quinta acquisition, we have entered into agreements with CorePoint that will govern the ongoing relationships between CorePoint and us. These agreements, among other things, include arrangements with respect to employee matters, tax matters, transitional services and hotel management and franchise matters, as well as the allocations of assets and liabilities, rights and indemnification and other obligations between us and CorePoint. Our success will depend, in part, on the maintenance of these relationships with CorePoint and its performance of its obligations under these agreements. If we are unable to maintain a good relationship with CorePoint, if it does not perform its obligations under these agreements or does not renew such agreements following their expiration, or if the CorePoint spin-off exposes us to liabilities and legal proceedings, our profitability and revenues could decrease, we may not realize the anticipated benefits of the La Quinta acquisition and our growth potential may be adversely affected.

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Our success depends in part on Wyndham Destinations’ sales of vacation membership interests and our ongoing relationship with 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. Wyndham Destinations competes with other vacation ownership companies for sales of vacation ownership interests based on resort locations, quality of accommodations and service, price, financing availability, ability to exchange for time at other resorts, and brand name recognition and reputation. If Wyndham Destinations is unable to compete effectively for sales of vacation ownership interests, our royalty fees under the license, development and non-competition 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 China and other geopolitical risks; threats or acts of terrorism; the effect of disruptions caused by severe weather, natural disasters, outbreak of disease 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 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.

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

As of December 31, 2018, we had aggregate outstanding debt of $2,141 million. Since the consummation of the spin-off, we have been responsible for servicing our own debt and obtaining and maintaining sufficient working capital and other funds to satisfy our cash requirements. Our debt instruments contain restrictions, covenants and events of default that, among other things, could limit our ability to respond to market conditions, provide for capital investment needs or take advantage of business opportunities by restricting our ability to incur or guarantee additional debt or requiring us to offer to repurchase our debt in the event of a change of control or a change of control triggering event; 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. We may also incur substantial additional indebtedness in the future. If we incur additional debt, the risks related to our debt may intensify.

We extend credit when we provide development advance notes and mezzanine or other forms of subordinated financing to assist franchisees and hotel owners in converting to or building a new hotel under one of our hotel brands. We may use financial instruments to reduce or hedge our financial exposure to the effects of currency and interest rate fluctuations. In connection with our debt obligations, hedging transactions, the cost and availability of capital and the extension of credit by us, we are subject to numerous risks including:

• our cash flows from operations or available lines of credit may be insufficient to meet required payments of principal and interest, which could result in a default and acceleration of the underlying debt and under other debt instruments that contain cross-default provisions;

• we may be unable to comply with the terms of the financial covenants under our debt instruments which could result in a default and acceleration of the underlying debt and under other debt instruments that contain cross-default provisions;

• our leverage may adversely affect our ability to obtain additional financing on favorable terms or at all;

• our leverage may require the dedication of a significant portion of our cash flows to the payment of principal and interest, thus reducing the availability of cash flows to fund working capital, capital expenditures, dividends, share repurchases and other operating needs;

• increases in interest rates may adversely affect our financing costs and result in increases in our hedging costs;

• rating agency downgrades of our debt could increase our borrowing costs and prevent us from obtaining additional financing on favorable terms or at all;

• failure or non-performance of counterparties to foreign exchange and interest rate hedging transactions could result in losses; and

• the inability of franchisees that have received mezzanine and other loans from us to pay back such loans.

Our access to credit and capital also depends in large measure on market liquidity factors, which we do not control. Our ability to access the credit and capital markets may be restricted at times when we require or want access, which could impact our business plans and operating model. Uncertainty or volatility in the equity and credit markets may also negatively affect our ability to access short-term and long-term financing on reasonable terms or at all, which would negatively impact our liquidity and financial condition. In addition, if one or more of the financial institutions that support our credit facilities fail, we may not be able to find a replacement, which would negatively impact our ability to borrow under the credit facilities. Disruptions in the financial markets may adversely affect our credit rating and the market value of our common stock. 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, negatively impacting our results of operations and stockholders’ equity.

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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 claims and legal proceedings and the risk of future litigation as described in this report. We cannot predict with certainty the ultimate outcome and related liability and costs of litigation and other proceedings filed by or against us. Unfavorable rulings or outcomes in litigation and other proceedings may materially harm our business.

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 revenues, cause our expenses to increase 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 (including the General Data Protection Regulation), credit card security standards, marketing, sales, consumer protection and advertising, unfair and deceptive trade practices, fraud, bribery and corruption, telemarketing (including do-not-call and call-recording regulations), 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 Asset 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.

While we continue to monitor all such laws and regulations, the cost of compliance with such laws and regulations impacts our operating costs. Future 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, 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, including the personal information of guests, stockholders and employees, 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, any of which 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 regulatory actions and fines, litigation, losses, third-party damages and other liabilities. Such a breach or a breakdown could also materially increase our costs to protect such information and to protect against such risks.

Additionally, the legal and regulatory environment surrounding information security and privacy in the U.S. and international jurisdictions is constantly evolving. Should we violate or not comply with any of these laws or regulations,

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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, it 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.

Our information technology infrastructure, including but not limited to our, and our third-party service providers’, information systems and legacy proprietary online reservation and management systems, 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.

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 and uninterrupted operations of service facilities, including those used for reservation systems, hotel/property management, communications, procurement, call centers, operation of our loyalty programs and administrative systems. We also maintain physical facilities to support these systems and related services. Any natural disaster, disruption or other impairment in our technology capabilities and service facilities or those of our vendors could harm our business. Any failure of our ability to provide our reservation systems may deter prospective franchisees or hotel owners from entering into agreements with us, and may expose us to liability from existing franchisees or other parties with whom we have contracted to provide reservation services. As we transition from our legacy systems to new, cloud-based technologies, we may face start-up issues that may negatively impact guests. 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 terms and conditions or the amounts of coverage of our insurance may not at all times 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 substantial, which 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.

Many factors influence our reputation and the value of our hotel brands including the perception held by guests, our franchisees, our other key stakeholders and the communities in which we do business. Our business faces increasing 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, modern slavery, diversity, human rights, philanthropy and support for local communities.

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Risks Relating to the Spin-Off 

We may be unable to achieve some or all of the benefits that we expect to achieve 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 benefits that we expect to achieve as an independent company, or do not achieve them in the time we expect, our results of operations and financial condition could be materially 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, 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. Prior to the spin-off, we shared with Wyndham Destinations economies of scope and scale in costs, employees, vendor relationships and relationships with our guests. Although we entered into transition agreements and licensing, marketing and other agreements that govern certain commercial and other relationships between us and Wyndham Destinations, 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.

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.

The loss of the benefits from being a part of Wyndham Destinations could have an adverse effect on our business, results of operations and financial condition. Other significant changes may occur in our cost structure, management, financing and business operations as a result of our operating as a company separate from Wyndham Destinations.

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 and the price of our common stock.

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. Effective internal and disclosure controls are necessary for us to provide reliable financial reports and effectively prevent fraud and to operate successfully as a public company. 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. Ineffective internal and disclosure controls could also cause investors to lose confidence in our reported financial information, which would likely have a negative effect on the per share trading price of our common stock.

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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.

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. 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.

In May 2018, Wyndham Destination Network, LLC, a subsidiary of Wyndham Destinations, Inc., completed the sale of Wyndham Destinations’ European vacation rentals business. In connection with the sale of the European vacation rentals business, we provided certain post-closing credit support in the form of guarantees, which as of December 31, 2018 were approximately $130 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 Separation and Distribution Agreement that was entered into in connection with the spin-off, 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 or received by Wyndham Destinations or us in respect of any indemnification claims made in connection with the sale of the European vacation rentals business.

The contingent liabilities we assumed in connection with the spin-off and Wyndham Destinations’ sale of its European vacation rental business could adversely affect our results of operations and financial condition.

The contingent liabilities we assumed in connection with the spin-off and Wyndham Destinations’ sale of its European vacation rental business could adversely affect our results of operations and financial condition. Pursuant to the Separation and Distribution Agreement, 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. Similarly, in connection with the sale of Wyndham Destinations’ European vacation rental business, Wyndham Hotels assumed one-third and Wyndham Destinations assumed two-thirds of certain shared contingent liabilities and certain shared contingent assets. Such shared contingent assets and shared contingent liabilities include: any amounts paid or received by Wyndham Destinations or us in respect of any indemnification claims made in connection with such sale, any losses actually incurred by Wyndham Destinations or us in connection with the provision of post-closing credit support to the European vacation rental business to ensure that the European vacation rental business meets the requirements of certain service providers and regulatory authorities and any tax assets or liabilities related to such sale. The realization of any of these potential liabilities could have an adverse effect on our business or results of operations.

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 agree with such a plaintiff, then such court could void the spin-off as a fraudulent transfer and 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

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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 of directors. This could create, or appear to create, potential conflicts of interest when our or Wyndham Destinations’ management and directors face decisions that could have different implications for us and Wyndham Destinations, including the resolution of any dispute regarding the terms of the agreements governing the spin-off and the relationship between us and Wyndham Destinations, any commercial agreements entered into in the future between us and Wyndham Destinations and the allocation of such directors’ time between us and Wyndham Destinations.

Because of their current or former positions with Wyndham Destinations, some of our executive officers and non-employee Directors own shares of Wyndham Destinations common stock. The continued ownership of Wyndham Destinations common stock by our Directors and executive officers creates or may create the appearance of conflicts of interest when these Directors and executive officers are faced with 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 including as a result of indemnification under the Tax Matters Agreement.

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 its spin-off tax advisors were based on, among other things, certain assumptions as well as on the continuing accuracy of certain factual representations and statements that we and Wyndham Destinations made to the spin-off tax advisors. In rendering their opinion, the spin-off tax advisors also relied on certain covenants that we and Wyndham Destinations entered into, including the adherence by Wyndham Destinations and us to certain restrictions on our future actions contained in the Tax Matters Agreement. If any of the representations or statements that we or Wyndham Destinations made were or were to become inaccurate or incomplete, or if we or Wyndham Destinations breach any of our covenants, the spin-off and such related transactions might not qualify for such tax treatment. 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 (the “IRS Ruling”) 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. The IRS Ruling is limited to specified aspects of the spin-off under Section 361 of the Code and does not represent a determination by the IRS that all of the requirements necessary to obtain tax-free treatment to holders of Wyndham Destinations common stock and to Wyndham Destinations were satisfied.

We are not aware of any facts or circumstances that would cause any such factual statements or representations in the opinions of Wyndham Destinations’ spin-off tax advisers or the IRS Ruling to be incomplete or untrue or cause the facts on which the opinions or the IRS Ruling are based to be materially different from the facts at the time of the spin-off.

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, 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. Additionally, if the distribution of our common stock does not qualify as tax-free under Section 355 of the Code, Wyndham Destinations stockholders will be treated as having received a taxable distribution equal to the value of our stock distributed, treated as a taxable dividend to the extent of

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Wyndham Destinations’ current and accumulated earnings and profits, and then would have a tax-free basis recovery up to the amount of their tax basis in their shares, and then would have taxable gain from the sale or exchange of the shares to the extent of any excess.

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.

There are other restrictions imposed on us under current U.S. federal income tax laws with which we will need to comply in order for the spin-off and certain related transactions to qualify as a transaction that is tax-free under Sections 368(a)(1)(D) and 355 of the Code. For example, we are generally required to continue to own and manage our hotel business, and there are limitations on issuances, redemptions and sales of our stock for cash or other property following the distribution, except in connection with certain stock-for-stock acquisitions and other permitted transactions. If these restrictions are not followed, the spin-off could be taxable to Wyndham Destinations and Wyndham Destinations stockholders.

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, among other things, we may not take, or fail to take, any action following the spin-off if such action, or failure to act: would be inconsistent with or prohibit the spin-off and certain restructuring transactions related to 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 to Wyndham Destinations and Wyndham Destinations stockholders except with respect to the receipt of cash in lieu of fractional shares of our stock; or would be inconsistent with, or cause to be untrue, any representation, statement, information or covenant made in connection with the IRS Ruling, the tax opinions provided by Wyndham Destinations’ spin-off tax advisors or the Tax Matters Agreement relating to the qualification of the spin-off and certain related transactions as a tax-free transaction under Sections 368(a)(1)(D) and 355 and related provisions of the Code.

In addition, we have agreed that we may not, among other things, during the two-year period following the spin-off, except under certain specified circumstances, issue, sell or redeem our stock or other securities or those of certain of our subsidiaries; liquidate, merge or consolidate with another person; sell or dispose of assets outside the ordinary course of business or materially change the manner of operating our business; or enter into any agreement, understanding or arrangement, or engage in any substantial negotiations with respect to any transaction or series of transactions which would cause us to undergo a specified percentage or greater change in our stock ownership by value or voting power. 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 trading market price of shares of our common stock may fluctuate widely.

The market price of our common stock may fluctuate widely, depending upon many factors, some of which may be beyond our control, including:

• success or failure of our business strategies; 

• failure to achieve our growth and performance objectives; 

• our quarterly or annual earnings, or those of other companies in our industry; 

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• our ability to obtain financing as needed; 

• a shift in our investor base; 

• changes in laws and regulations affecting our business; 

• changes in accounting standards, policies, guidance, interpretations or principles; 

• announcements by us or our competitors of significant acquisitions or dispositions; 

• negative views about our stock or our business expressed by securities analysts; 

• changes in earnings estimates by securities analysts or our ability to meet those estimates; 

• the operating and stock price performance of other comparable companies; 

• overall market fluctuations; 

• actual or anticipated fluctuations in our operating results due to the seasonality of our business and other factors related to our business; and 

• general economic conditions.

These factors may result in short-term or long-term negative pressure on the value of our common stock. Stock markets in general have experienced volatility that has often been unrelated to the operating performance of a particular company. These broad market fluctuations may adversely affect the trading price of our common stock.

Your percentage ownership in Wyndham Hotels may be diluted in the future.

Your percentage ownership in Wyndham Hotels may be diluted in the future because of equity awards that we have and expect will be issued to our Directors and employees and any potential future issuances of stock by us to raise capital or in connection with an acquisition.

Provisions in our amended and restated certificate of incorporation, amended and restated by-laws and Delaware law may prevent or delay an acquisition of Wyndham Hotels, which could decrease the trading price of our common stock.

Our amended and restated certificate of incorporation, amended and restated by-laws and Delaware corporate law contain provisions that are intended to deter or delay coercive takeover practices and inadequate takeover bids. For example, our amended and restated certificate of incorporation and/or amended and restated by-laws will require advance notice for stockholder proposals, place limitations on convening stockholder meetings, authorize our Board to issue one or more series of preferred stock and provide for the classification of our Board of Directors until the third annual meeting of stockholders following the spin-off.

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. We believe these provisions protect our stockholders from coercive or otherwise unfair takeover tactics by requiring potential acquirers to negotiate with our Board of Directors and by providing our Board of Directors with more time to assess any acquisition proposal. These provisions are not intended to make us immune from takeovers. However, these provisions apply even if the offer may be considered beneficial by some stockholders and could delay or prevent an acquisition that our Board of Directors determines is not in the best interests of our company and our stockholders.

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 against us and our Directors and employees.

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.

Any decision to declare and pay dividends will be made at the sole discretion of our Board of Directors 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 of Directors may deem relevant. There can be no assurance that a payment of a dividend will occur in the future.

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Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

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 2020. In addition, we have an additional 14 leases for office space in 11 countries outside the United States and an additional three leases within the United States with expiration dates ranging between 2019 and 2022. 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 at Rio Mar Boulevard, Rio Grande, Puerto Rico, and (ii) the Wyndham Grand Orlando Bonnet Creek, located at Chelonia Parkway, Orlando, Florida. Aside from these hotels, we do not own any of the nearly 9,200 properties within our franchised and managed portfolio.

Item 3. Legal Proceedings.

We are involved in various claims and lawsuits 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 results of operations or financial condition. See Note 13 - Commitments and Contingencies to the Consolidated and Combined Financial Statements for a description of claims and legal actions arising in the ordinary course of our business.

Item 4. Mine Safety Disclosures.

Not applicable.

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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market Price of Common Stock

Our common stock is listed on the New York Stock Exchange (“NYSE”) under the symbol “WH”. As of January 31, 2019, the number of stockholders of record was 4,954.

Dividend Policy

Starting in the second quarter of 2018, we declared a quarterly dividend of $0.25 per share of common stock issued and outstanding on the record date for the applicable dividend ($75 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. There can be no assurance that a payment of a dividend will occur in the future.

Issuer Purchases of Equity Securities

On May 9, 2018, our Board of Directors authorized a stock repurchase program that enables us to repurchase up to $300 million of our common stock. Below is a summary of our common stock repurchases by month for the quarter ended December 31, 2018:

Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plan	Approximate Dollar Value of Shares that May Yet Be Purchased Under Plan
October 2018	308,921	$	49.95	308,921	$	225,374,504
November 2018	435,811	48.18		435,811	204,375,095
December 2018 (a)	500,965	46.96		500,965	180,851,596
Total	1,245,697	$	48.13	1,245,697	$	180,851,596

__________________________

^(a) Includes 56,246 shares purchased for which the trade date occurred during December 2018 while settlement occurred during January 2019.

Stock Performance Graph

The following graph compares the cumulative total stockholder return of our common stock against the S&P 500 Index and the S&P Hotels, Resorts & Cruise Lines Index (consisting of Carnival Corporation, Marriott International Inc., Norwegian Cruise Line Holdings Ltd., Royal Caribbean Cruises Ltd. and Hilton Worldwide Holdings Inc.) for the period from June 1, 2018 to December 31, 2018. The graph assumes that $100 was invested on June 1, 2018 (the first day of regular-way trading) and all dividends and other distributions were reinvested. The Stock Performance Graph is not deemed filed with the SEC and shall not be deemed incorporated by reference into any of our prior or future filings made with the SEC.

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Cumulative Total Return

	June 1,  2018	December 31, 2018
Wyndham Hotels & Resorts, Inc.	100.00	74.91
S&P 500	100.00	93.72
S&P Hotels, Resorts & Cruise Lines	100.00	84.58

Item 6. Selected Financial Data.

The following selected historical consolidated and combined statement of income data for the years ended December 31, 2018, 2017 and 2016 and the selected historical consolidated and combined balance sheet data as of December 31, 2018 and 2017 are derived from the audited Consolidated and Combined Financial Statements of Wyndham Hotels & Resorts included elsewhere in this report. The selected historical combined statement of income data for the years ended December 31, 2015 and 2014 and the selected historical combined balance sheet data as of December 31, 2016, 2015 and 2014 are derived from unaudited combined financial statements of Wyndham Hotels & Resorts businesses that are not included in this report. We have prepared our unaudited combined financial statements on the same basis as our audited Consolidated and Combined Financial Statements and, in our opinion, have included all adjustments, which include only normal recurring adjustments, necessary to present fairly in all material respects our financial position and results of operations.

The selected historical combined financial data below should be read together with the audited Consolidated and Combined Financial Statements of the Wyndham Hotels & Resorts, including the notes thereto and the other financial information included elsewhere in this report.

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	As of or For the Year Ended December 31,
($ in millions, except per share amounts and RevPAR)	2018			2017			2016			2015 (a)			2014 (a)
Statement of Income Data:
Net revenues	$	1,868		$	1,280		$	1,269		$	1,301		$	1,103
Total expenses		1,585			1,031			974			1,051			867
Operating income		283			249			295			250			236
Interest expense, net		60			6			1			1			(1	)
Income before income taxes		223			243			294			249			237
Provision for income taxes		61			13			118			100			85
Net income		162			230			176			149			152
Per Share Data:
Diluted earnings per share	$	1.62		$	2.31		$	1.76		$	1.49		$	1.52
Cash dividends declared per share		0.75			—			—			—			—
Balance Sheet Data:
Cash	$	366		$	57		$	28		$	38		$	25
Total assets (b)		4,976			2,137			1,998			1,959			1,891
Total debt (b)		2,141			184			174			95			105
Total liabilities (b)		3,558			875			913			780			702
Total stockholders’ / invested equity (c)		1,418			1,262			1,086			1,179			1,189
Other Financial Data
Royalties and franchise fees	$	441		$	364		$	354		$	347		$	332
License and other fees		111			75			65			64			47
Adjusted EBITDA (d)
Hotel Franchising segment	$	515		$	402		$	400		$	366		$	340
Hotel Management segment		47			21			26			28			13
Corporate and other (e)		(55	)		(40	)		(38	)		(41	)		(39	)
Total Adjusted EBITDA (f)	$	507		$	383		$	388		$	353		$	314
Operating Statistics:
Total Company
Number of properties (g)		9,157			8,422			8,035			7,812			7,645
Number of rooms (h)		809,900			728,200			697,600			678,000			660,800
RevPAR (i)	$	40.80		$	37.63		$	36.67		$	37.26		$	37.57
Average royalty rate (j)		3.78	%		3.66	%		3.65	%		3.68	%		3.64	%
United States
Number of properties (g)		6,358			5,726			5,525			5,582			5,646
Number of rooms (h)		506,100			440,100			429,000			435,300			440,200
RevPAR (i)	$	45.30		$	41.04		$	39.77		$	39.13		$	37.27
Average royalty rate (j)		4.53	%		4.45	%		4.35	%		4.37	%		4.31	%

______________________

(a) As described in Note 2 - Summary of Significant Accounting Polices to the Consolidated and Combined Financial Statements contained in Part II, Item 8 of this report, we adopted the new accounting standard related to revenue recognition utilizing the full retrospective transition method on January 1, 2018. However, amounts have not been restated for the years 2015 and 2014 for this standard.

(b) Reflects the impact of the adoption of the new accounting standards related to the balance sheet classification of deferred taxes and the presentation of debt issuance costs during 2016.

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(c) Represents Wyndham Hotels & Resorts stand-alone stockholders’ equity since May 31, 2018 and Wyndham Worldwide net investment (capital contributions and earnings from operations less dividends) in Wyndham Hotels & Resorts and accumulated other comprehensive income for 2014 through May 31, 2018, the date of our spin-off.

(d) “Adjusted EBITDA” is defined as net income excluding interest expense, depreciation and amortization, impairment charges, restructuring and related charges, contract termination costs, transaction-related expenses (acquisition-, disposition- or separation-related), foreign currency impacts of highly inflationary countries, stock-based compensation expense, early extinguishment of debt costs and income taxes. Beginning with the third quarter of 2018, Wyndham Hotels’ calculation of Adjusted EBITDA excludes the currency effects of highly inflationary countries. Wyndham Hotels believes that Adjusted EBITDA is a useful measure of performance for its segments which, when considered with U.S. Generally Accepted Accounting Principles (“GAAP”) measures, allows a more complete understanding of its operating performance. Wyndham Hotels’ presentation of Adjusted EBITDA may not be comparable to similarly-titled measures used by other companies.

(e) Corporate and other reflects unallocated corporate costs that are not attributable to an operating segment.

(f) The reconciliation of Net Income to Adjusted EBITDA is as follows:

	Year Ended December 31,
(in millions)	2018		2017		2016		2015		2014
Net income	$	162	$	230	$	176	$	149	$	152
Provision for income taxes	61		13		118		100		85
Depreciation and amortization	99		75		73		67		60
Interest expense, net	60		6		1		1		(1		)
Stock-based compensation	9		11		10		9		9
Separation-related expenses	77		3		—		—		—
Transaction-related expenses, net	36		3		1		3		—
Foreign currency impact of highly inflationary countries	3		—		—		—		—
Impairment expense	—		41		—		7		8
Restructuring costs	—		1		2		3		1
Contract termination costs	—		—		7		14		—
Adjusted EBITDA	$	507	$	383	$	388	$	353	$	314

(g) Represents the number of hotels at the end of the period.

(h) Represents the number of rooms in hotel properties at the end of the period that are under franchise and/or management agreements, or are Company-owned.

(i) Represents revenue per available room and is calculated by multiplying the average occupancy rate by the average daily rate.

(j) Represents royalties divided by the gross room revenues of our franchisees.

In presenting the financial data above in conformity with U.S. GAAP, we are required to make estimates and assumptions that affect the amounts reported. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations–Financial Condition, Liquidity and Capital Resources–Critical Accounting Policies,” for a detailed discussion of the accounting policies that we believe require subjective and complex judgments that could potentially affect reported results.

Acquisitions

Between January 1, 2014 and December 31, 2018, we completed the following acquisitions:

• In May 2018, we acquired La Quinta Holdings Inc.’s hotel franchising and hotel management business (“La Quinta”) and its portfolio of over 900 hotels;

• In October 2017, we acquired the AmericInn hotel brand and its portfolio of approximately 200 franchised hotels in the United States;

• In November 2016, we acquired Fen Hotels, adding the Dazzler and Esplendor Boutique brands to our portfolio, as well as a Latin America-based hotel management company; and

• In January 2015, we acquired Dolce Hotels and Resorts, a franchisor and manager of properties focused on group accommodations in Europe and North America.

The results of operations and financial position of these acquisitions have been included beginning from the respective acquisition dates. See Note 5 - Acquisitions to our audited Consolidated and Combined Financial Statements included herein for a discussion of acquisitions completed during 2018, 2017 and 2016.

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Separation-Related and Transaction-Related Costs, Impairment, Restructuring and Other Charges

During 2018, we incurred $77 million of separation-related costs associated with our spin-off from Wyndham Worldwide. These costs primarily consist of severance, stock-based compensation and other employee-related costs. Additionally, during 2018, we incurred $36 million of transaction-related costs consisting of $59 million primarily related to our acquisition of La Quinta partially offset by a $23 million gain on the sale of its Knights Inn brand in May 2018. This sale was not material to our results of operations or financial position.

During 2017, we recorded $1 million of charges related to restructuring initiatives, primarily focused on realigning our brand operations. Additionally, in 2017, we recorded $41 million of non-cash impairment charges, of which $25 million was for a write-down of a guarantee asset and a development advance note receivable related to a hotel management agreement and $16 million was primarily related to a partial write-down of management agreement assets.

During 2016, we recorded $2 million of charges related to restructuring initiatives, which were primarily focused on enhancing organizational efficiency. Additionally, in 2016, we recorded a $7 million charge related to the termination of a management contract.

During 2015, we recorded $3 million of restructuring costs resulting from a realignment of brand services and call center operations. Additionally, in 2015, we recorded a $7 million non-cash impairment charge related to the write-down of terminated in-process technology projects resulting from our decision to outsource our reservation system to a third-party partner and a $14 million charge associated with the anticipated termination of a management contract within our hotel management business.

During 2014, we recorded $6 million of restructuring and related costs associated with the departure of an executive, as well as initiatives targeted at improving the alignment of the organizational structure of our business with our strategic objectives. In addition, we reversed $1 million of previously recorded contract termination costs related to our 2013 organizational realignment initiative. Additionally, in 2014 we recorded an $8 million non-cash impairment charge related to the write-down of an investment in a joint venture.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

(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 more than 80 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 expenses (acquisition-, disposition- or separation-related), foreign currency impacts of highly inflationary countries, stock-based compensation expense, early extinguishment of debt costs 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. 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.

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.

35

	Year Ended December 31,
	2018		2017		% Change
Rooms(a)
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 dispositions from their respective dates forward.

(b) Excluding currency effects for the year ended December 31, 2018, 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 incremental 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 incremental 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. During 2018:

• Marketing, reservation and loyalty expenses decreased to 26.0% of revenues from 29.1% during 2017, primarily due to higher cost reimbursement revenues. Excluding La Quinta, marketing, reservation and loyalty expenses increased to 29.9% of revenues from 29.1% 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 9.7% of revenues from 14.3% during 2017, primarily as a result of the increase in cost reimbursement revenues and 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 decreased to 6.4% of revenues from 6.9% during 2017, primarily due to higher cost reimbursement revenues, partially offset by higher employee-related and information technology costs, principally related to operating as a stand-alone public company.

Marketing, reservation and loyalty revenues exceeded marketing, reservation and loyalty expenses by $5 million. Excluding La Quinta, marketing, reservation and loyalty expenses exceeded marketing, reservation and loyalty revenues by $9 million. Marketing, reservation and loyalty expenses exceeded marketing, reservation and loyalty revenues by $2 million during 2017.

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.

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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.

Reconciliation of Net Income to Adjusted EBITDA

	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	9		11
Separation-related expenses	77		3
Transaction-related expenses, net	36		3
Foreign currency impact of highly inflationary countries	3		—
Impairment expense	—		41
Restructuring costs	—		1
Adjusted EBITDA	$	507	$	383

For 2018, we reported net income of $162 million, which included after-tax charges of $58 million related to our separation from Wyndham Destinations, $29 million for net transaction-related costs primarily related to acquisitions and dispositions and $3 million related to the foreign currency impact of the highly inflationary economy in Argentina. For 2017, we reported net income of $230 million, which included after-tax charges of $25 million for impairments, $4 million for separation- and transaction-related costs and $1 million for restructuring activities.

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

	Net Revenues						Adjusted EBITDA
	2018		2017		% Change		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	%

Hotel Franchising

	Year Ended December 31,
	2018		2017		% Change
Rooms(a)
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 dispositions from the acquisition and disposition 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.

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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. During 2018:

• Marketing, reservation and loyalty expenses increased to 41.2% of revenues from 40.6% during the prior year primarily due to the La Quinta acquisition;

• Operating expenses decreased to 9.6% of revenue compared to 10.4% during the prior year primarily due to the La Quinta acquisition; and

• General and administrative expenses decreased to 3.8% of revenues from 4.2% during the prior year, primarily due to lower employee-related expenses coupled with higher net revenues.

Marketing, reservation and loyalty revenues exceeded marketing, reservation and loyalty expenses by $21 million and $6 million during 2018 and 2017, respectively. Excluding La Quinta, marketing, reservation and loyalty expenses exceeded marketing, reservation and loyalty revenues by $1 million during 2018.

Hotel Management

	Year Ended December 31,
	2018		2017		% Change
Rooms(a)
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 incremental 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.

Cost reimbursement revenue was equal to reimbursable expenses in both 2018 and 2017. Marketing, reservation and loyalty expenses exceeded marketing, reservation and loyalty revenues by $16 million ($9 million excluding La Quinta) in 2018 and by $7 million in 2017.

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.

OPERATING STATISTICS - 2017 VS. 2016

The table below presents our operating statistics for the years ended December 31, 2017 and 2016. “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.

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	Year Ended December 31,
	2017		2016			% Change
Rooms(a)
United States	440,100		429,000			3	%
International	288,100		268,600			7	%
Total rooms	728,200		697,600			4	%
RevPAR(a)
United States	$	41.04	$	39.77		3	%
International(b)	32.27		31.32			3	%
Total RevPAR(b)	37.63		36.67		<