Michele Allen: Thanks Geoff and good morning everyone. I’ll begin my remarks today with a detailed review of our fourth quarter and full year results. I’ll then review our cash flows and balance sheet, followed by our longer term growth prospects, and finally, our 2024 outlook. As Geoff mentioned, we were delighted with our operational progress in 2023. At the same time, we’re pleased to put the tough year-over-year financial reporting comparisons behind us since 2023 was our first year of reporting without the inclusion of the lower-margin select service managed business and owned hotels and was also impacted by lapping the revenge travel that occurred in 2022 following COVID. In the fourth quarter, we generated $320 million of fee-related and other revenues and $154 million of adjusted EBITDA.
Fee-related and other revenues increased 3% year-over-year, reflecting global net room growth as well as higher license and ancillary fees, partially offset by a year-over-year RevPAR decline. Adjusted EBITDA increased $28 million, including a favorable marketing fund timing impact of $21 million as expected. On a comparable basis, adjusted EBITDA grew 6%, primarily reflecting our revenue growth. Fourth quarter adjusted diluted EPS was $0.91, reflecting the adjusted EBITDA growth as well as benefits from our share repurchase activity, which were partially offset by higher interest expense. For the full year, we generated $1.38 billion of fee-related and other revenues, in line with our expectations compared to $1.35 billion last year, which included $50 million from the sold, managed and owned businesses.
On a comparable basis, fee-related and other revenues increased 6% year-over-year, reflecting global RevPAR and net room growth as well as higher license and ancillary fees. Adjusted EBITDA was also in line with our expectations at $659 million in full year 2023 compared to $650 million last year, which included an $18 million contribution from the sold, managed, and owned businesses. The year-over-year change was further impacted by $11 million of unfavorable marketing fund variability. On a comparable basis, adjusted EBITDA increased 6% year-over-year, primarily reflecting our revenue growth and our adjusted EBITDA margin remained consistent at 80%. Full year adjusted diluted EPS increased 8% on a comparable basis to $4.01, reflecting our adjusted EBITDA growth as well as benefits from our share repurchase activity which were partially offset by higher interest expense.
We generated $114 million of free cash flow in the fourth quarter and $339 million for the full year. Importantly, in line with our target, we converted 51% of our adjusted EBITDA to free cash flow, which is the adjusted net income line translated to nearly 100%. We returned $515 million to our shareholders in 2023, representing 8% of our market cap through $397 million of share repurchases and $118 million of common stock dividends. We ended the year with approximately $650 million in total liquidity, and our net leverage ratio of 3.2 times within the lower half of our target range. Amidst the prevailing higher interest rate environment, we continue to limit our exposure with only about 25% of our long-term gross debt at variable rates. We now have our variable rate debt locked in at an effective interest rate of approximately 5.6% through 2027.
As Geoff mentioned, our ongoing strategic initiatives will continue to provide a significant runway for accelerated earnings growth over the next several years. In October, we shared with you our expectation that our strategic plan will result in an adjusted EBITDA CAGR of 7% to 10%, which translates to $150 million to $210 million of incremental adjusted EBITDA between 2024 and 2026. This plan assumes 2% to 3% RevPAR growth and 3% to 5% annual net room growth over the planned period. These numbers should sound familiar to you. The RevPAR assumption in the US is anchored to current industry outlook for our chain scales and consistent with long-term hospitality sector performance. The net room growth assumption reflects the 75 Echo hotels we expect to have opened by 2026, along with continued improvement in our direct franchising retention rate.
On top, with 70% of our pipeline now in the higher RevPAR, midscale and above categories, these properties will come into the system with higher fee PAR. Combined, we expect these drivers to contribute over $100 million or over half of the incremental EBITDA during the planned period. The remainder will come from our other growth initiatives. As you know, Wyndham is uniquely positioned to benefit from the increased government spending tied to the infrastructure and CHIPS Act. No hotel company has more select service hotels located in the states where infrastructure spending will be concentrated. Over the estimated eight-year spend period, we expect that capturing just our fair share of this spend will generate $150 million of incremental royalties for Wyndham shareholders, about $30 million of which will contribute to the planned 7% to 10% EBITDA CAGR over the next three years.
Additionally, ancillary revenue streams provide multiple opportunities for incremental growth to supplement our core business model. These areas include our suite of co-branded credit cards, marketing partnerships and other monetization opportunities, which we expect to contribute approximately $40 million of incremental EBITDA over the planned period. Finally, as Geoff mentioned, our business model generates strong free cash flow, and we have significant leverage capacity, which provide additional capital to drive incremental growth opportunities over and above our 7% to 10% EBITDA CAGR for the three years ending 2026. Turning now to 2024 outlook. We expect our direct franchising business will grow global net room growth 3% to 4%, including 20 to 30 basis points of expected improvement in our retention rate.
We are projecting global RevPAR growth of 2% to 3%. RevPAR growth is expected to be at its lowest quarterly level in Q1 as we lapped the toughest comp period in 2023, specifically, the first half of the quarter, which is already behind us, where global RevPAR trailed 2023 by about 3 points in January, but is expected to improve as we enter March and the spring break leisure travel season. Year-over-year comps become progressively easier throughout the remaining quarters. Fee-related and other revenues are expected to be $1.43 billion to $1.46 billion. You’ll recall that in 2023, we hosted our Global Franchisee Conference, which generated EBITDA-neutral marketing revenue of $18 million. Since the conference is held every 18 months, these revenues will not repeat in 2024 and therefore, negatively impact our year-over-year growth rate by about 2 points.
Adjusted EBITDA is expected to be between $690 million and $700 million, consistent with our October outlook and reflecting comparable basis growth of approximately 6% to 8% based on our 2023 actual results. Adjusted net income is projected to be $341 million to $351 million, and adjusted diluted EPS is projected at $4.11 to $4.23 based on a diluted share count of $83 million, which as usual, excludes any future potential share repurchases. Free cash flow conversion before development advances is expected to approximate 60%. 2024 development advance spend is expected to increase to $90 million from $72 million in 2023. This increase primarily reflects the ramping of development efforts for our Echo brand as expected. Given the challenging macro backdrop this past year, we had an opportunity to attract more owners and higher chain scales and accretive RevPAR market by using key money as a tool to alleviate some of their debt burden.
This is a trend we expect to continue throughout 2024. We also use more key money to navigate the uncertainty and disruptions created by Choice and we anticipate continuing this approach while the current situation persists. Today’s outlook excludes the $75 million of currently anticipated costs related to Choice’s hostile offer. In addition to the cash we generate from operations, we also have the benefit of a strong balance sheet. Holding leverage flat to the 3.2 times we ended 2023 with will provide another $150 million of available capital in 2024 to either invest in the business or to return to shareholders. Levering to 3.5 times just the midpoint of our stated target range would provide $330 million, and levering to the high end of 4 times will provide $675 million of capital to deploy.
Finally, while we expect our marketing funds to break even on a full year basis, we will continue to see timing differences in the quarterly results as we deploy incremental spend to capture building leisure demand for the spring break season ahead. For Q1, we expect the funds to overspend $10 million to $15 million. And like last year, we expect Q2 will also overspend and then those amounts will reverse in the back half of this year. In closing, we are extremely proud of our 2023 performance. We successfully executed on our key business objectives, achieved a host of record-breaking performance metrics, grew adjusted EBITDA 6% and generated significant capital return for our shareholders. Looking ahead, we approached 2024 with a compelling strategy poised to accelerate our growth and enhance returns for our shareholders.
With that, Geoff and I would be happy to take your questions. Operator?
Operator: Thank you. The floor is now open for questions. [Operator Instructions] And speakers at this time, we currently are waiting for Mr. Ballotti to dial back in. We are trying to reconnect him. We’ll pause just a moment. We now have Mr. Ballotti back in conference. [Operator Instructions] We’ll go first to Joe Greff with JPMorgan. Please go ahead.
Joe Greff: Good morning everybody. Geoff, just trying to get a sense of maybe how disruptive the Choice offer is in the developer community. Obviously, not an issue in the fourth quarter with pipeline and actual room openings. But here in the fourth quarter, are you seeing an impact in either elongated construction time lines or interest in partnering with you, particularly maybe with the Echo brand? Maybe asked differently, would your net rooms growth be higher were it not for maybe this perceived distraction on the part of developers with this Choice offer? And would — how much of the $90 million in development advances is a function of you’re having to do that to grow because of maybe a distraction with Choice and maybe that impact there? Any color would be helpful. Thank you.
