Dany Asad: Got it. Okay. And then just as a follow-up, maybe a little bit higher level, just looking at your unit growth, it’s accelerated over the years quite nicely. We’re right in that 3% to 4% rooms growth range we have — you’ve guided to. But when we parse out where you’re growing domestically, it looks like a lot of that incremental growth is coming from your higher-end chain scales. And at the same time, we go back to what your footprint looked like in 2018, 2019, and you have about 12% or 13% less economy rooms than you did back then. So, can you maybe just help us understand what’s driving this dynamic and whether you’d consider this from a strategy perspective, whether this is Wyndham actively pushing into higher chain scales? Thank you.
Geoff Ballotti: Yeah. Dany, I would say actively we are certainly pushing into higher chain scales, as I said on the previous question. But we are — we will always be looking to lead in the economy segment. Now, to your first part of your question in terms of why the economy declined, I would say that despite the limited new supply coming into the economy segment, where one-third of the exits from our economy system are for non-hotel use. And the second part of that question, why are they leaving? That majority were older, lower quality units. We still experience this quarter the highest economy add rate since back in 2017, to your point before we went public. Our owner-first value proposition is certainly resonating with franchisees.
We had gross additions in the economy space at 3%. And our retention rate, I think, the STR economy retention rate was several hundred basis points lower than our over 95% retention rate in economy. So we are pleased that our economy retention rate continues to improve. We are pleased with the transaction volumes that we have been seeing. Certainly the economy potential will increase for us with ECHO. And, yes, we are really pleased domestically with the 3% net room growth in the mid-scale and the above segments, which to your question will continue to focus on.
Dany Asad: Got it. Thank you very much.
Operator: Thank you. We go next now to Michael Bellisario of Baird.
Michael Bellisario: Thanks. Good morning, everyone.
Geoff Ballotti: Good morning, Michael.
Michael Bellisario: Just my first question, I want to go back to net unit growth, but focus on key money in the development advance notes. Maybe help us understand what are the returns you’re targeting on those investments. And then secondarily, we can see the dollars going out the door in the cash flow statement, but maybe help us understand what percentage of deals that are either signed or opening are you actually putting money into?
Michele Allen: Good morning. From a return perspective, we are always targeting hurdle rates that are well in excess of our cost of capital and that is part of our underwriting process. Geoff just talked about moving into the higher RevPAR chain scales and over 75% of the deals that we funded in the quarter were in this category. And then, of course, we also are starting to see some of our ECHO funding go out the door as well. So we’re thrilled with the progress that we’ve made and the strategy of using key money to penetrate into those upper chain scale and higher RevPAR markets is working. And I’d say the amount of key money isn’t necessarily tied to a specific percentage of deals. We’re happy to participate in opportunities when they present themselves. Was there a second part to that question? I think I might have missed it.
Michael Bellisario: Yeah. Just the percentage of deals either signed or opening that you’re putting money into. I guess maybe the better question is, how much has it stepped up versus prior years or maybe it hasn’t?
Michele Allen: No. I think it actually has as a greater portion of our openings and additions into the system are coming in that higher — those higher RevPAR chain scales and higher RevPAR markets. We are able to participate and willing to participate more in those fields because they represent better returns from an underwriting perspective.
Michael Bellisario: Got it. Understood. And then my follow-up is on the buyback, but along the same lines on the spending. What are the sources or what is the source of capital for that incremental buyback? Is it really just line of credit borrowings or are there other sources of capital that you could use to fund those buybacks to manage the interest expense better? Thanks.
Michele Allen: No. I think most of it will come through leverage capacity this year.
Operator: Thank you. We go next now to Patrick Scholes of Truist.
Patrick Scholes: Hi. Good morning, Geoff and Michele.
Michele Allen: Good morning.
Patrick Scholes: My first question is, when I look at where the stock is trading, I look on the valuation multiple, it looks to be about as cheap as it’s ever been and certainly the spread on the valuation multiple between yourselves and most of the C-Corps is about as wide as it’s ever been. What do you think investors are missing here? I’d like to hear your thoughts on that. Thank you.
Geoff Ballotti: Yeah. It’s a great question, Patrick, and it’s a question we ask ourselves every day. I mean, we’re really excited with what’s happened to us since we went public six years ago. I think in terms of looking at us versus everyone else out there, we are a completely now pure play. We’ve sold our own hotels as investors wanted to see us do. We’ve sold our managed hotels. We’ve exited all of the HMA guarantee deals that we’ve had and we’re now — we’re growing the way investors have wanted to see us do. So I think investors want to see us continue to deliver as we’ve been doing. We’ve grown the pipeline since we went public, 40% to, as you see in the pipeline deck, nearly 2,000 hotels and we need to continue to deliver.
It’s been 13 consecutive quarters beating consensus EPS and adjusted EBITDA and we’ve got an industry-leading EBITDA margin out there. So we need to continue to tell our story about shareholder return. We’ve returned $2 billion of capital to our shareholders and continue to execute. We opened more hotels last year, I believe, than in any other public company with over 500 openings and 66,000 rooms. And while there might be concern out there and we hear that every day in terms of the macro RevPAR environment, which is certainly weighing on us, we believe we just need to continue to keep doing what we’re doing and we’re really happy with everything that we’re doing on the retention side, on growing our business, on continuing to add to the pipeline revenue accretive rooms and continuing to improve our retention rates.
