Wyndham Hotels & Resorts, Inc. (WH) Earnings Call Transcript & Summary

Mark, great job. You want to tee up the next panel?

Yes. We're ready to rock and roll. We've got a really interesting group here, Hunter. I have been looking forward to this conversation. The 4 leaders that we have in this next panel have all been a part of industries who've been dramatically affected by this -- by the pandemic. Scott, in -- yes, Scott in the hotel business; Rafael, in live entertainment; Susan in university world; and Wayne in health care. It's remarkable what these 4 people have been through, and I'm really looking forward to what they have to say.

Excellent, take it away.

You bet. All right. So we've got with us today, Susan Malisch from Loyola University; Scott Strickland from Wyndham Hotels; Rafael Sanchez from Feld Entertainment; and Wayne Bulmahn, Unite Here Health. Thank you all for joining us today. We really appreciate you guys taking the time to invest in the conversation.

Pleasure to be here.

Thank you for having us.

You bet. Listen, I think to get the conversation going, we're talking today about leading digital and security innovation in a highly distributed environment. And I'd like to start, Scott, with you and just dive into this question, what innovations did you and your team deliver during the crisis? And how did this impact the business?

Wow, Mark, we'll dive right in. Thank you very much. So hospitality was at the front end of the crisis. As you can imagine, we'll hear a little bit later from some of my peers here. But as soon as the COVID lockdowns occurred in March, people stopped traveling. So what we had to do immediately was pivot some of the projects that we had in flight, the things that were really going to make a difference for our guests or for our franchisee. So as you can imagine, contactless became very, very big very quickly. People didn't want to contact a front desk agent when they were still checking in. So we delivered our mobile app basically 6 months ahead of when we originally had planned to, which is pretty incredible. And we brought mobile check-in and check-out capabilities to the economy segment for the first time. So the mobile app was set up and delivered for 6,000 hotels, about 6 months ahead of time, so very excited about that. The other big innovation that we delivered for our franchisees because we're a franchisee group with roughly 9,000 franchisees worldwide was a way for them to get more folks into their hotels. The people who were still traveling were those first responders, those truckers, the firemen. Those were the people that were still on the road. So how can we appeal to that type of guest in this environment? And we delivered 2 or 3 different type of basically direct billing solutions that allowed them to stay at these places and then be billed back to their hospital, for example, or their fire unit without having to have a corporate card. We also, in turn, allowed a business loyalty program for the first time that rewarded paramedics for staying at one of our hotels. So it was pretty exciting as we looked and we pivoted during the crisis and said, what could we deliver in a different way for our 2 key customer groups, the guests and the franchisee.

Well, that's remarkable, Scott, that you guys did it in such a short amount of time. I can only imagine the dip in revenue that the company experienced at the beginning of this. And as you have gone through this change and implemented these, how has it impacted the business and even on the revenue side?

At the beginning of the crisis, we were 90-plus percent down on revenue. Well, this was in March and April. And like many in the hospitality business, we had to pull on our revolver, basically a multibillion-dollar revolver. And then in turn, we issued public debt. Now since then, we've come out and of the C corp hotels, we like to joke that we're doing the best because of that everyday business traveler and people, as they travel, they're driving, they're not flying. So we are at that highway exit. So it's been really interesting just to see from the trough at minus 90%, now we're back into the minus 40%, minus 30%, which feels good. But it shouldn't. Being down 40% or 30% is still horrific and not something anybody could have planned for 18 months ago.

Scott, what do you anticipate? I mean, my sense as we come out of this is that there's going to be an onslaught. I mean I know how travel-starved I am. I'm looking forward to getting out. And I sense that many people are looking forward to getting out as well. What do you guys anticipate in the second half of '21?

Absolutely. We think the dam will break. The proverbial dam will just burst open, Mark, especially during the summer season. As people get vaccinated and have a comfort level, we believe that hotel travel will just take off. And what we're trying to do right now is make those technology investments so that we can be at the front of realizing the benefits.

Yes. Fantastic, Scott. It's remarkable how you guys have responded under the stress. I'm -- dropping 90% in revenue overnight is just a shock to the system. But it's remarkable how you guys recovered. We'll come back to Scott in a bit with some more. Susan, a question for you. How is the -- you and I have had the conversation, the opportunity to talk several times recently about just how dramatic the impact has been on the university world and particularly on Loyola. How has the pandemic impacted innovation or changed your approach to innovation through this whole cycle?

Yes. That's a great question. And I know we have talked a little bit about this. So just to put it in context, because I'm pretty sure most everyone on the phone has likely had a college experience some years ago yourself or you have students and kids at home who are college age, so you can imagine, it's a highly interactive and engaging student experience and not just an online experience. So what we've been able to do with innovation, I think, is I think we've helped our community understand that we can embrace change a lot faster than we thought we could. We've accelerated some of the plans that we already had. And to underscore one of the points that Mark has made in one of the earlier panels, I think the value of pilots and proof of concepts in this kind of environment is really key. Getting something out quickly that people can react to, set the expectation and the business is comfortable that it may not be perfection, but it gets us going, and then you can build from there. I mean that has proved to be a real asset for us. Conditioning our constituent groups and our customers that we all have to be flexible. I mean, we've had to exercise flexibility in our personal lives as well as our work lives as we get up every day and the landscape has changed, and we have to adapt. So setting that expectation upfront has been tremendously helpful in terms of how people adopt change and we're able to innovate. I think this environment has accelerated our technology strategy that we already had in place in parallel. We have a technology strategy called Loyola Digital Experience, and I'll underline 3 times that digital experience part of that and how we've been able to move that forward. I was so impressed with our ITS team at Loyola. I think all of us, by virtue of being in IT, problem-solving gives people in IT energy. And a lot of what we've had to tackle has given us meaning and purpose, and there's a sense of urgency around making a difference. So the way people have come together to rally around the challenge of the changes that we have to make, it's really been a team effort, and that's happening from the top, from our leadership team all the way to the direct technology team that I have. So I think those are some of the ways that we've seen innovation change during this COVID time.

Susan, you also walked a high wire. Your constituent base, and obviously, there were several different components of your constituent base that had very conflicting needs and, frankly, opinions about what you should do and how the university should act during this window of time. How did you lead your team through this? And how did you balance all of those competing interests?

Yes. Well, I think -- if I understand your question, Mark, I think there's a broad spectrum of how people are reacting to the pandemic, and we all know the adoption of the social distancing practices and things like that and trying to encourage those behaviors in a younger population sometimes that believe that they're invincible. But I think you'd be surprised across many institutions, the willingness to participate and the belonging that you have in the community that you're in at the institution really helps reinforce those behaviors. But I will also say from a leadership standpoint, I think in times like this, you can't underestimate the importance of communication, and it's really hard to overcommunicate. So helping people understand what's going on and tell them why. That Simon -- Simon Sinek's book start with why, again, really important in these times because it really helps build a shared understanding of the goals, the objectives and how we need to all participate in this solutioning.

Yes. Thanks, Susan. I think it's remarkable, what you've done and your team -- and honestly, the whole leadership team at Loyola, how they've navigated their way through the crisis. It's been remarkable. I know there's still more left to come but remarkable what you guys have done so far. Thank you. Let's go to Rafael. Rafael, it's -- in the live entertainment business, probably very much like Scott experienced, an immediate drop-off in revenues, you guys came into it. So what additional areas of focus have you addressed to ensure secure access? I mean, because suddenly, you had teams scattered every -- I'm sure everyone working remotely all of a sudden, what have you addressed to ensure secure access in this new age of remote and distributed work, and particularly with regard to your industry?

Well, I mean [ since we ] faced a lot of the same issues that Scott mentioned, the whole contactless is a top of mind for us as we are basically [ in ] 75 countries around the world. From a remote security, and we look at security as layers. So we continue to emphasize user awareness. But very specifically as to what are the new challenges that are [ in front of us ], meaning that working from home and working remotely. We also have to address a very specialized set of users, which are [ creator ] users. I mean as we do video, we do [ creative ], the way to connect those people is a little different. So we created -- we got very, very creative and created a number of different VPNs. Obviously, I'm not going to go into a lot of details. I don't want to divulge our secret sauce. But so we have to pivot very, very quickly. Also, Susan mentioned a number of things that are very, very key, which is we accelerated initiatives. The time to market for a viable product or minimum viable product, I mean, it just went from weeks to days, if not hours. The sensitivity and the flexibility of the organization and the agility of the entire organization to [ worldwide ], people that will run 7 races back-to-back in Salt Lake City with no [indiscernible] started in May. So we have to pay double. We basically created something that have never been created before. From a [ sports ] perspective, we're like a [indiscernible] we run superclass and most [ energy ] supergroups . So we went week to week to different venues [ townhall experience ] around the country. With the pandemic, what we did is we created an approach that will run 7 races over a period of like 8 weeks. And we were probably one of the first live entertainment [ resource ] that was live at the time. So when we had to pay that, I mean, we went back to the remote. It's a lot -- the [indiscernible] one is awareness because when we're talking about remote security, it's all about the individuals, the apps and devices. We implemented a number of additional tools in terms of remote management tools. We strengthened our bring your own device policies and we're kind of thinking about this all this time. And we're very effective in timing, in terms of going to market with these new solutions.

Rafael, it's amazing what you guys have done to adjust to the world, to the new world as it is today, and great to see that you're already getting back out into the field with new programs and generating new revenue. I'm sure the entire company is thrilled to see that happen. We'll come back to you with some more here in just a few minutes. I'd like to step over to Wayne now. Wayne, you guys have -- are in the area of, I guess, health care with casino workers, what is it, the hospitality, service industry, et cetera. So you guys are going to have to go through quite a bit of innovation in this window of time. What additional improvements are you focusing on now to survive the crisis and allow your organization to scale rapidly once the pandemic is in check?

Thanks, Mark. Just a little additional background, as the other panelists have talked about, we've obviously been really impacted. But to give you a little background on Unite Here Health. We're in the hospitality industry, but we are particularly focused on being a health plan of choice for our participants, are -- and in support of the union we support as well as the larger employers. And it's hospitality really broken out in 3 areas. So it's around the gaming industry, as Mark had talked about. It's around hotel industry in general and then also with the focus really on trying to help the food services industries. And the challenge for us as much and probably even more so than maybe some of my fellow panelists is our organization really had a crisis that when this hit, we went from high-growth mode to suddenly, we had 95% of our participants were unemployed. So it was really a survival mode for us on how do we innovate, change quickly, pivot and keep -- deliver health care services but also keep our organization and our funding afloat. So really, the key innovations that we've kind of focused on really -- and maybe lessons learned in what we need to keep doing, really comes around a couple of key things. So no surprise to folks, but we were really highlighted by the fact that we really need to focus on keeping things simple. I mean, nothing really hones the mind a little bit more when you're under straight duress and keeping things open, getting services moving and you start to uncover all the not only complexity in your organization, but also the challenges around trying to put something in new and trying to overengineer it. So for us, it's really keeping things simple, and that really dovetails into the next part around how do we improve the processes in our organization. So there's a really big push on continuing to review and measure, retool our processes, really focus on taking that then and automating. Some of the other innovations as we're looking is how do we really increase the value of our hidden assets with the primary one being the data we collect. So a big focus on better leveraging our data across the enterprise, using that data to forecast quicker and better and also finding ways that come here that how do we enable getting that data out to our -- not -- I shouldn't say our participants, but really our frontline workers so that they can make decisions faster or our frontline managers. So I think one of the other big innovations for us is -- and we also operate health centers across the country is the importance -- and it seems kind of funny now that you would think about it of telehealth. It seems so obvious now that this is such a critical tool in what we need to do to leverage that going forward. But before the health crisis, there was a lot of resistance on many levels for how that was getting leveraged. So that's a big push for us in transforming our health centers and how do we deliver services, not only faster, but also more economically so that we can spread those dollars and resources out more broadly.

Wayne, I tell you a couple of things you said in there are really, I think, notable one. It sounds like you're really working to eliminate friction in the end user engagement. Just trying to -- through your process, all the things that you mentioned, process, process, process, making it simple. And the elimination of friction seems like a real focus for you guys.

It is. And I'd love to say we were -- we're already fully engaged in practicing it. We thought we were, but we really learned here, again, under that kind of need to of focusing on how do we move as fast as we can. And what are some of the things that we thought were sacred cows in our organization. And suddenly, when we had to really peel back that onion layer and look underneath and see that do we really need to keep doing it this way? Isn't there a simpler way? It just gained a lot of importance. So I think that whole KISS principle really just kind of resonated with all of us.

Mark, if I can add something to what Wayne said. How many times do you get to punch your operations and redesign processes? I mean, we have [indiscernible]. We do implement the new idea in [indiscernible] is a lot of effort. So when you have them in all parts, we can take a white piece of paper, redefine rules, redefine tools, redefine processes and not only running a couple of tools, but now we're running with [indiscernible]. So we have kind of the embedded pilot process without impacting the business.

Yes. Very much so. Thanks, Rafael. And Wayne, there's something else I wanted to touch on before we walked off -- left. You mentioned about telehealth. And clearly, it has been, I guess, my observation, slowly adopted over time. Talk about something that advance 5 or 10 years in this window that we've been through with COVID, how is it going to change things for you and for the organization going forward?

Well, as an example, at our Las Vegas Health Center, we focused all of our efforts on how did we best manage our participants, the moment they walked in the door. How did we guide them through the health center, and we were a rather extensive health center in Las Vegas. How did we make sure they were taken care of, how did we follow up with them appropriately? But there was really a focus on physically touching them and reaching out. Suddenly, we were experimenting and looking at telehealth, but like many organizations, not an extensive level. Suddenly, it was a force to have happened. And fortunately, like I'm sure some of my peers in the panel can talk about, we had some key sorts of technologies already in place that enabled this. But it was really a focus on how did we fundamentally change the nature of the relationship with our participants or our patients. And fortunately, we had a great staff at the health center really willing to do whatever it took to try to help the patients. And we aggressively moved on a kind of a quick down and dirty telehealth presence and evolved it over time. And now really, we're completely changing how our health center works going forward where, before, it was all about scheduling patients, trying to get them in over a period of time, and we had a backlog. Now with the use of telehealth, even during the outage, and we're just getting ready to reopen our health center, we've seen those backlogs drop off dramatically, and we're anticipating that instead of waiting weeks for an appointment coming in that we'll be able to do a lot of triage and upfront work with the patients through the telehealth presence to the point where we can have folks come in and get an appointment either same-day or the next day. So it's really kind of transformed how we're looking at operating our health centers.

Curious, one of our earlier guests talked about the physical footprint change, the different requirements. Is telehealth going to change the footprint -- the physical footprint requirement of your facilities?

I could see if -- we're not an extensive hospital network. So we don't have an extensive number of facilities. What it may help us to do is we can manage growth better. So I don't see us condensing our facilities. But what I see us being able to do now is to have more flexibility in how we use space or as we, knock on wood, start to come out of this in a couple of years, at least that's from our perspective, it will probably take us a couple of years to get back to year to 2 years to get back to our previous numbers. We're hoping that we'll be able to grow much more effectively and not have to leverage continuing expansion of facilities.

Understood. It's going to have an impact. It sounds like, for sure. Thanks, Wayne. We've got just a bit more time for 1 or 2 more questions. I'd like to go to Scott. Scott, how has the culture changed in this highly distributed environment? And are the changes going to be permanent?

Recently dramatically. I think as Rafael was indicating nothing like a good crisis to get you focused. And what we've done is 3 things. One, we've sped up. Our CEO calls a daily meeting now 8 am with all the directs, and we sit there and we talk about what's going on in the business. I then come out of that meeting and have a meeting with my direct. So we're really cascading and sharing that information a lot faster than we ever have before. Secondly, we have a higher tolerance for risk. Our MVP type product that we're distributing is an MVP that we might have waited and let bake a little longer than we ever had before. And we said, no, it's more important to get this into the marketplace and help our guests and franchisees. And then thirdly, we're more focused on our team than we've ever been. We've implemented employee appreciation days. So once a month, everybody has the Friday off across the organization. And that's the day where you can have your doctor's appointment, you can spend time with the family. You don't have to feel like you're waiting for the next Zoom call because people are feeling chained to their computers across the entire enterprise. And it's made us realize just how very important family and work balance is.

Scott, I think [indiscernible] yesterday on that subject of the impact culturally and as we shift to more remote working, it's really going to have an enormous impact. And I tell you what, I really respect the leadership you guys took on that and giving your people time, dedicated time to go take care of all the other things that need to be taken care of because it's quite easy when you're working from home to work all the time, isn't it?

And just leave them be and then they pile up and you're doing them on Saturday and Sunday. Absolutely.

Yes. Great stuff, great stuff.

I will probably add one adjunct to what Scott had just brought up and also kind of innovation. It touched on something where he was talking about how we're trying to empower our staff more. I think one of the things when you couple that with speed has really also been the need to rethink how do we empower our employees and give them the authority and accountability to move faster. So it's moving from less and less of that command and control to more of how do we push that down and make sure we have the rapid communications to adjust quickly.

Boy, that really drives it home, Wayne. This distributed world -- distributed has -- not just distributing this physically, but from an operational standpoint, decision-making standpoint and our ability to respond that also has got to be distributed. Great stuff. Well, I'm going to wrap with one final question to Susan. Susan, what significant lessons have you learned, are you taking away from this distributed environment?

Great question, and I'll share 2 quickly. One is the -- the first one is the exciting one. So it is, as others have said, a perfect time for us as business technology leaders. And I really believe a digital strategy plays a big role in our overall engagement strategy. So at the most basic level, and we've touched on it a little bit already, you want the online experience to be frictionless, easy. You want people to be able to do business with you as simply as possible. If you want to mature that a little bit, you want it to be relevant and personalized. So we want to know our employees. We want to know our students. We want to know our prospects. You want to know your customers. And then if you want to do an extraordinary job, then you want to have that experience create a sense of belonging to a community, create affinity for your product, your service, whatever it is, loyalty. And at the end of the day, if you're wildly successful, they'll become promoters. And that's what, I mean, for all of us, I think that's what we really want. So that's the exciting piece of, I think, a takeaway of our shared experience here. The reality is the more real one is the bad guys don't rest. So we're doing all this in an environment where there's just so many more information security concerns and being attentive to your information security levels, layers that you can control, but then also how do you create awareness and suspicion and all those good characteristics that you want your employees and your customers to have so that when they're working at home, working on some other WiFi network or not your network, that you are sufficiently protecting your assets.

Great insight, Susan. And honestly, great insights from the entire team. So thank you, Susan. Thank you, Scott, Rafael and Wayne. I appreciate your time this afternoon and looking forward to the rest of the day and seeing you all a little further down the road. Hunter, back to you.

Excellent. Great job, guys. Thanks so much.

Thanks.

Thank you.

Great.

Thanks, Mark.