So, we feel confident that we’re going to continue to be able to improve retention. Yet we’re only assuming another 0.5 point of net room growth at the midpoint of the cable, right? So, net room growth in 2023 was 3.5%. And in the 7% to 10%, CAGR is moving to 4% at the midpoint, right? It’s a 3% to 5%. So, that’s a pretty conservative estimate given the multiple avenues of growth I just laid out there. On the RevPAR side, our assumption is 2% to 3% growth over the planned period. That’s consistent with industry projections and with historical performance. But that growth might not be linear over the years. It will — we are expecting it would average out over the planned period. And then there’s additional opportunity when you put that assumption into the context of 9 points of occupancy still to be recovered versus pre-COVID levels.
The fact that ADR in our segments lagged the rate of inflation, the fact that our segments have limited new supply coming in, and that generally favors the pricing power. And then at the 2% to 3% assumption, you can see that not all of that upside is reflected. Again, a pretty conservative approach that builds in cushion. And then we’ve remixed our pipeline to concentrate more heavily on the higher chain scale, so those properties are coming in at higher RevPAR, both in the US and internationally. And then third, apart from the standard drivers, there’s upside from royalty rate expansion, and that’s going to come from Echo, from the pipeline we just talked about. It’s going to come from scaling our footprint internationally, including some COVID fee discounts for onboarded properties back in the thick of the pandemic that start to expire last year.
And you can already see some of that in the 30 basis point improvement we’re seeing internationally in 2023 in the royalty rate. And we’ve also made large investments that Geoff mentioned, to capture the infrastructure opportunity that we’re already seeing benefits from with that category up double-digits. On the ancillary side of the house, we’re coming into the plan, having grown those fee streams 6% in 2023. There is not too much of a stretch here to get to the 8% we’re expecting in the plan, and there are multiple opportunities there as well. All of these initiatives are already underway. So, we have a good line of sight into each of them. And because there are so many levers we’re really not dependent on any one single opportunity. And therefore, we have a high degree of confidence that enough will align with our predictions and so that the midpoint is not beyond our reach even if a few don’t work out as expected.
Dany Asad: Super helpful. Thank you so much.
Michele Allen: Thank you.
Operator: Thank you. Our next question comes from Ian Zaffino with Oppenheimer. Please go ahead.
Ian Zaffino: Hi, thank you. I picked up a lot of the comments on the infrastructure bill. Can you maybe tell us how that plays out? Have you started to see anything yet? What areas? Is it mainly extended? Is it select? Where are you seeing that? And then are you also may be seeing some trends in leisure related to that as well? Or is it pretty predominantly midweek?
Geoff Ballotti: It is predominantly midweek. And, Ian, we’re absolutely seeing benefit. And it’s not only extended, it’s also transient. I mean that is — when you look at the top six states of where this infrastructure spending will be spent, and you think about a state like Texas where we have 700 hotels, I mean, those are our Days Inns, those are our Super 8s, those are our La Quintas that are really beginning to benefit and gain share. When you look at some of the CHIPS Act in terms of how that spending is being spent, I mean, there are dozens of hotels and they’re not only Extended Stay hotels around the Intel site in Chandler, Arizona or the Samsung plant being built, we’ve talked about in Taylor, Texas, which is a $17 billion bill with 2,000 jobs over the next five or so years.
And we’re placing millions of dollars of contracted business into both transient hotels and new build hotels like our Hawthorn Suites, which is extended and the La Quinta nearby. But I mean the investment that we’re making that we’re so excited about is, first and foremost, we’ve got, we feel, the best field sales team out there. We’ve increased our sales force that’s selling to these infrastructure accounts by 25%. So, that’s first and foremost. Secondly, we are doing a lot on the technology front. We’ve got, we think, the best IT team out there. Our teams have rolled out some really robust technology that’s identified 3,600 projects within 10 miles of markets, which have multiple transient and extended stay Wyndham Hotel so far. And that’s just a sliver of the 40,000 infrastructure projects that have been announced to-date by the Federal government, including — we’re really big on the Federal rail infrastructure bill that our teams are following.
That’s estimated at a $26 billion spend, dozens of new accounts already and growing, both on the East Coast and the West Coast. And we’re excited today about the announcement on the airport terminal grants to, I think, it’s 40-plus states. So, yes, we’re excited. It’s early days, and — but we are seeing a double-digit uptick, not only in infrastructure bookings but more importantly, leads from those projects with a 20% increase in new accounts so far this year.
Ian Zaffino: Okay. Thank you. And then just as a follow-up, maybe a little bit higher level, but then we’re hearing a lot of that Echo, but then we’re hearing a lot about sort of moving upscale a little bit. So, if we look out three years or something along those lines, how does the portfolio mix look? And what type of either M&A that you need to get there? Maybe just broadly speaking. Thank you.
Michele Allen: Yes, sure. So, Echo obviously, will make up a bigger portion of the system as it comes in. Remember, though, it is coming in at an accretive RevPAR to where we are today. So, when we think about our 70% pipeline in the midscale and above and how that’s going to come into the system and then how Echo comes in the system, obviously, will be a lot less dependent on just the economy itself, which has been in a very limited new supply environment for quite a long time.
Ian Zaffino: All right. Thank you very much.
Geoff Ballotti: Thanks Ian.
Operator: Thank you. Our last question comes from Meredith Jensen with HSBC. Please go ahead.
Meredith Jensen: Good morning. Thanks for taking my questions. I wondered, I know you’ve spoken about the growth possibilities and in the ancillary fee streams. I think on Page 19, there’s a nice discussion of it. Could you talk just a little bit more about the co-brand credit card opportunity and some of the other partnerships you’re looking into? So, maybe we can build that out a little bit more because I know there’s a lot there. Thanks.
Michele Allen: Sure. Meredith, we’ve seen multiple opportunities that are currently underway for which, again, we have a really good line of sight for ancillary fee stream. To name a few, we’re working to tap the significant potential in the credit card suite of products, and that’s going to include new products. It’s going to include expansion internationally. Right now, the card is US-centric, so there’s a lot of opportunity as we think about the potential to leverage Wyndham Rewards and the Wyndham Rewards Loyalty across the 95 countries and in which we operate. On the partnership opportunity side, I won’t get into specifics for competitive reasons. But again, we’re working to leverage our global footprint and expand beyond just again, the US-centric partnerships that we have in the house today.
And then, of course, we’re going to continue to focus on our relationship with T&L and helping them grow their business. including through the use of the Wyndham Rewards points currency. So, there’s many levers here on the ancillary side.
Meredith Jensen: Super. Thanks. One quick expansion on the international side in terms of the direct franchise business, which I see, again, the presentation is great. On Page 13, it talks about the increase in the direct franchise business rising again. Is there more to be done there? Or how much left of the transition from the master franchise to direct? And should we build in any particular changes, lifts to fees there? And maybe just a little on China too, if you don’t mind. Thanks so much.
Geoff Ballotti: Yes, I’ll start with China and then maybe you could talk about how to model it, Michele. I mean we are going to continue, Meredith, to be seeing more direct franchising in terms of percentage growth. Now, remember, it is a — I think Michele could correct me here, but it’s about one-third of our China system, but it has been growing double-digit as it did this quarter, as it did this year. And it’s growing, as Michele has pointed out, at three times the license fees our master. So, going forward, I think we’ll continue — we’re not selling master license agreements any longer. I mean that was something that we did 15, 20 years ago. Our growth and if you take China as an example, is much faster on the direct franchising basis than it is on the master.
I think our overall net room growth in China was 6%. It was something like 2% for the master and 13% from the direct and that’s consistent elsewhere. And we don’t have a lot of masters left, but our focus is really direct. What would you add to that, Michele?
Michele Allen: Yes, Geoff, I think you covered it all. I mean at three times the royalty rate coming out of the direct franchising business versus the master franchising business and the vast majority of the growth in China coming out of that direct franchising business, we are going to see royalty rate expansion for sure. You can see that already showing up in some of the 30 basis points improvement in 2023, and we’ll continue to see that show up as we move forward. Overall, I’d say, in addition to moving from masters to direct, the other thing we’re benefiting from in international is just scaling the footprint so that we can continue to take advantage of pricing opportunity for brands that have scale in specific regions.
Meredith Jensen: That’s super helpful. Thanks again for the color.
Geoff Ballotti: Thanks Meredith.
Michele Allen: Thanks Meredith.
Operator: Thank you. At this time, I will turn the floor back over to Geoff Ballotti for closing remarks.
Geoff Ballotti: Thank you, Todd and thanks everyone for your questions, for your interest in Wyndham Hotels & Resorts and or most importantly, your support and our ability to realize our future growth potential. Michele, Matt and I look forward to talking to and seeing many of you in the weeks and the months ahead. We wish everyone a happy President’s Day weekend coming up and we look forward to seeing you soon.
Operator: Thank you. This does conclude today’s Wyndham Hotels & Resorts fourth quarter and full year 2023 earnings conference call. Please disconnect your line at this time and have a wonderful day.
