We see there’s a huge amount of new business coming in 50 million to 100 million room nights over the next decade that really are going to feed the extended stay profile and having WoodSpring brand and building out the Everhome brand, we’re well positioned to capture that demand.
Meredith Jensen: Great. Thanks. Super helpful.
Operator: Thank you. Next question will be from Patrick Scholes at Truist Securities. Please go ahead.
Patrick Scholes: Hi. Good morning.
Patrick Pacious: Good morning.
Patrick Scholes: Good morning. Have you bought any shares already to establish the position in the event of a proxy battle and/or to lower your basis in the deal if you do see this through its fruition?
Patrick Pacious: Yes, Patrick. Thanks for the question. We are a nominal shareholder of the Wyndham at this point.
Patrick Scholes: Okay. I wanted to move on just to actually a question on the guidance here. It looks like you took your RevPAR down slightly, but adjusted EBITDA up slightly. What’s driving the EBITDA raise? It sounds like something in the – is it the cost items, is that going to be the owned hotel cost or SG&A coming down a little bit versus prior expectations? And then I have one more follow-up question. Thank you.
Scott Oaksmith: It’s really the combination of things. As you mentioned, we did pull down our RevPAR guidance slightly. If you think about our approximately 2% RevPAR guidance, usually, there’s a range and that represented a performance that was towards the high end of our range of a potential outcome. So moving our guidance to approximately 1%, just represents the lower end of the range of where we are. But if you think about our RevPAR, really it’s a factor that we were so much farther ahead of recovery on the pandemic in some of our competitors. The first one is to get back to 2019 levels and exceed 2019 levels. So our full year RevPAR is still expected to be 13% above 2019 levels. In terms of the other puts and takes, we’ve been very pleased with the performance of our platform revenues and our international business, which has been higher than what was expected which is offset towards that lower range on the RevPAR.
And then we’ve done a really great job on cost containment, so are coming in better than expected there. So with all that, we took the low end of our range up from $530 million to $535 million, and which then brought up the midpoint to $537.5 million. So really those puts and takes are what gave us confidence to raise the midpoint of our guidance.
Patrick Scholes: Okay. And then just a last question. You’re actually kind of swinging back to the – related to the potential acquisition and trying to compare things apples-to-apples. Every company talks about strength in their guest loyalty program. I’m wondering how much occupancy does your Choice Privileges, I think it’s 60 million, 63 million members contribute to your typical hotel? Thank you.
Patrick Pacious: Yes. I think, Patrick, the way to think about it is each segment is a little bit different. So as you move up the chain scales, the loyalty contribution generally becomes sort of a higher contributor to contribution and to occupancy. I mean, when we look across our system size, and we’ve talked about this before, effectively $4 out of every $10 that’s coming into a hotel is coming from the loyalty program. That number has been increasing as we’ve added more feature functionality to the loyalty program. I think what’s interesting, too, is you look at the co-brand credit card opportunity, it’s really an opportunity to keep your brand relevant and in front of consumers, even when they are not traveling. And so the rewards program not only can deliver heads and beds and bring higher-rated customers and a lower customer acquisition cost, but it also provides an overall brand halo for the business.
So the strength of that rewards program not only delivers direct business to the hotels, but also supports the overall brand equity in the entire system.
Patrick Scholes: Okay. Thank you.
Operator: Thank you. Next question will be from Joe Greff at JPMorgan. Please go ahead.
Joe Greff: Good morning, guys. One thing that was noticeable to us in the third quarter was a nice reduction in adjusted SG&A, both year-over-year and sequentially. Can you talk about what’s embedded in the fourth quarter? And then with respect to your $580 million, $590 million of ’24 EBITDA guidance, what’s contemplated as an adjusted SG&A number there? And then I have a follow-up.
Scott Oaksmith: Yes. So, we’re currently working through our 2024 budget, but we feel very confident on the 10% EBITDA. In terms of during the quarter, our SG&A did decline, adjusted about $3.3 million. And really, it was marginally around a couple of things. One, just the timing of some incentive compensation that was recognized in Q3 of the prior year as well as some as we started to step down and realize the synergies on the Radisson. So if you think about Radisson, it’s about $19 million of total SG&A for the year, and we expect to eliminate about $13 million of that for a $6 million run rate. So when you look at Q4, I would think about that to be kind of similar reduction against Q4 of last year when you’re modeling that out. And then going forward, you would expect us to be able to kind of maintain SG&A growth rate in that low single digit year-over-year.
Joe Greff: Perfect. And then going back to the fund with Wyndham, I believe you mentioned or maybe it came from them in the conversations – previous conversations with you, that you were talking about pro forma free cash flow, about $1 billion a year. Can you maybe refine that a little bit and talk about the pieces that get you there if I’m correct in that $1 billion pro forma free cash flow that I’m presuming includes a fully synergized EBITDA level in there? And that’s all for me. Thanks.
Scott Oaksmith: Yes. So that $1 billion is really representative of what we had available to service debt. So that was before interest expense. So if you think about kind of a synergized EBITDA multiple, EBITDA of around $1.4 billion of the two companies and you take out taxes, CapEx and the dividend, that gets you right around that $1 billion of available cash flow to service debt and then you would have, obviously, interest expense and then the remaining ability to delever. So that’s where that $1 billion came from.
Joe Greff: Got it. And so we have interest expense standalone for two companies and then pro forma for the deal, that net stands to about $500 million of pro forma free cash flow? Okay, that’s all. Thanks.
Scott Oaksmith: I would say it’s a little bit north of that based on what we’re modeling, probably closer to the $700 million.
Patrick Pacious: We’re thinking we’re going to have interest coverage of well over 3 times, would you think about the pro forma business.
Joe Greff: Thank you.
Operator: Thank you. Next question will be from Dan Wasiolek at Morningstar. Please go ahead.
Dan Wasiolek: Hi, good morning, guys. Two, if I may. So going back just to RevPAR guidance, I know slight revision downward. Anything in the environment that you would call out that’s maybe changed over the last few months? And then, I guess, the second question, in your conversations with third-party owners looking to convert or sign into your umbrella, is there any conversations of those owners looking to pause until there’s some resolution with the Wyndham deal? Thank you.
