Wyndham Hotels & Resorts Q3 2026 Earnings Call: US-RevPAR steigt um 6 %, Prognose angehoben

Kernaussagen

• Wyndham Hotels & Resorts wies für das 3. Quartal 2026 einen Nettoumsatz von 410 Millionen US-Dollar aus, was einem Anstieg von 7 % gegenüber dem Vorjahr entspricht, während das vergleichbare bereinigte EBITDA um 5 % auf 207 Millionen US-Dollar stieg.
• Das bereinigte verwässerte Ergebnis je Aktie (EPS) stieg auf vergleichbarer Basis um 9 % auf 1,43 US-Dollar, gestützt durch das EBITDA-Wachstum und Aktienrückkäufe.
• Der RevPAR in den USA stieg um 6 %, getrieben durch einen Anstieg der Auslastung um rund 300 Basispunkte sowie ein ADR-Wachstum von etwa 280 Basispunkten. Der weltweite RevPAR legte währungsbereinigt um 2 % zu.
• Das Unternehmen erwirtschaftete im Quartal einen freien Cashflow von 100 Millionen US-Dollar und seit Jahresbeginn 269 Millionen US-Dollar. Im 3. Quartal flossen 123 Millionen US-Dollar über Aktienrückkäufe (91 Millionen US-Dollar) und Dividenden (32 Millionen US-Dollar) an die Aktionäre zurück.
• Wyndham hob das untere Ende seiner Prognosen für den Jahresumsatz und das bereinigte EBITDA an. Das Management rechnet nun mit einem Umsatz von 1,48 Milliarden bis 1,50 Milliarden US-Dollar und einem bereinigten EBITDA von 740 Millionen bis 745 Millionen US-Dollar.
• Die Entwicklungspipeline erreichte mit rund 264.000 Zimmern in fast 70 Ländern einen Rekordwert, was das 25. Quartal in Folge mit Pipeline-Wachstum markiert.

Wichtige Finanzdaten

Geschäfts- und operative Entwicklung

Die Nachfrage in den USA war sowohl im Geschäfts- als auch im Freizeitreisesektor breit abgestützt. Die Entwicklung unter der Woche lag um etwa 150 Basispunkte über der am Wochenende. Texas, Kalifornien und Florida, die rund ein Viertel des US-Zimmerbestands von Wyndham ausmachen, erzielten zusammen ein RevPAR-Wachstum von 8 %.

Infrastruktur- und Industrie-Märkte blieben eine wichtige Nachfragequelle. Der RevPAR stieg um 16 % in Iowa, 15 % in Illinois, 10 % in Ohio und 9 % in Indiana. Das Management führte diese Entwicklung auf die Nachfrage unter der Woche in der Nähe von Transport-, Fertigungs-, KI-, Rechenzentrums- und Industrieprojekten zurück. Der bisherige US-RevPAR im Oktober entsprach im Wesentlichen den Trends des 3. Quartals.

Die internationale Entwicklung verbesserte sich gegenüber dem Vorquartal, blieb jedoch gemischt. Der RevPAR in Kanada stieg um 7 %, in Südostasien und im pazifischen Raum um 5 %, in Lateinamerika um 2 % und in der Region EMEA um 2 %. Der RevPAR im Nahen Osten verbesserte sich von einem Rückgang um 45 % im 2. Quartal auf einen Rückgang um 13 % im 3. Quartal. In China fiel der RevPAR um 10 %, was eine schwächere Nachfrage insbesondere in Tier-2-Städten widerspiegelt.

Wyndham eröffnete im Laufe des Quartals mehr als 18.000 Zimmer, was 3 % über dem Vorjahreszeitraum lag. Das Systemwachstum betrug ohne Revo 4 %. US-Eröffnungen wiesen gegenüber geschlossenen Zimmern eine PPAR-Prämie von mehr als 45 % auf, während internationale Eröffnungen einen Aufschlag von fast 40 % erzielten.

Die Nebeneinnahmen stiegen seit Jahresbeginn um 10 %, gestützt durch Kreditkarten- und Partnerschaftsgebühren. Die Anzahl der Mitglieder von Wyndham Rewards erreichte rund 129 Millionen, nachdem die weltweiten Neuanmeldungen um 10 % zulegten. Auf Mitglieder entfiel mehr als die Hälfte der inländischen Check-ins.

Der Technologie-Einsatz wurde weiter ausgebaut. Wyndham Connect war in mehr als 5.100 Hotels aktiv, während der Wyndham AI Concierge in mehr als 1.700 Hotels im Einsatz war – ein Anstieg von 17 % gegenüber dem Vorquartal. Laut Management konvertierte der AI Concierge Reservierungsanfragen zu einer ADR, die 15 % über den direkt im Hotel gebuchten Raten lag, und steigerte den Direktbeitrag um mehr als 500 Basispunkte. Wyndham Gateway war in mehr als 1.100 Hotels live, ein Plus von 35 % im Vergleich zum Vorquartal.

Prognose des Managements

Das Management geht weiterhin davon aus, dass der Marketingfonds auf Jahressicht die Gewinnzone erreicht. Die meisten verbleibenden Revo-bezogenen Zimmerkündigungen werden vor Jahresende erwartet. Von den ursprünglich rund 22.000 Revo-Zimmern hatten bereits etwa 9.100 das System verlassen; das Management rechnet damit, etwa 5.000 bis 6.000 Zimmer zu behalten, wobei der Großteil des Restes im 4. Quartal ausscheidet.

Risiken und zu beobachtende Bereiche

• China blieb die schwächste Großregion mit einem RevPAR-Rückgang von 10 % vor dem Hintergrund einer schwächeren Nachfrage in Tier-2-Städten.
• Die Entwicklung im Nahen Osten blieb trotz einer Verbesserung gegenüber dem Vorquartal negativ, und das Management beschrieb die regionale Lage als dynamisch.
• Höhere Zinssätze und sich ändernde Zinserwartungen vergrößerten die Geld-Brief-Spanne bei US-Hoteltransaktionen. Laut Management gingen die Transaktionsvolumina im Economy- und Midscale-Segment im Quartal um mehr als 30 % zurück, was die Konvertierungsaktivitäten einschränkte.
• Kündigungen von Hotels mit unzureichenden Standards belasten kurzfristig das Netto-Zimmerwachstum, obwohl das Management davon ausgeht, dass die Strategie die Portfolioqualität und die langfristige Generierung von Lizenzgebühren verbessern wird.
• Der Datenverkehr über autonome KI-Agenten und Buchungskanäle auf Basis von Large Language Models bleibt gering und befindet sich in einem frühen Stadium. Die künftigen Auswirkungen auf die Vertriebskosten wurden noch nicht quantifiziert.

Highlights der Analysten-Fragerunde

Das Management gab an, dass die US-Buchungsindikatoren weiterhin konstruktiv blieben. Wyndham verzeichnete für die nächsten 60 Tage mehr als 7 % zusätzliche Buchungen im Vergleich zum Vorjahr, während sich Buchungsvorläufe und Stornierungsraten verbesserten. Das Unternehmen betrachtete die historische RevPAR-Wachstumsrate von 2,5 % bis 3 % im Select-Service-Segment eher als langfristigen Richtwert denn als formelle Prognose für 2027.

Hinsichtlich des Gebührenwachstums erwartet das Management im 4. Quartal ein Wachstum der Lizenz- und Franchisegebühren, das weitgehend dem des 3. Quartals entspricht. Das langfristige Ziel für die Lizenzgebührenrate bleibt ein durchschnittlicher Anstieg von etwa 5 Basispunkten pro Jahr über einen Mehrjahreszeitraum, wobei einzelne Jahre abweichen können.

Das Management führte das verhaltene inländische Einheitenwachstum in erster Linie auf schwache Hoteltransaktionsvolumina, einen verhaltenen Neubau und qualitätsbedingte Kündigungen zurück und nicht auf Markeneinführungen von Wettbewerbern. Weniger als 1 % des Wyndham-Systems sei in den letzten drei Jahren zu neu eingeführten Konkurrenzmarken gewechselt.

Es wird erwartet, dass die Infrastrukturnachfrage eine mehrjährige Stütze bleibt. Die weltweite Vertriebsorganisation von Wyndham verzeichnete im 3. Quartal 16 % mehr Umsatz als ein Jahr zuvor, was eine Beschleunigung gegenüber dem Wachstum von 12 % im 2. Quartal darstellt. Hotels in der Nähe von rund 350 Rechenzentren erzielten im Jahresverlauf laut Management ein RevPAR-Wachstum von einigen hundert Basispunkten.

Zur Kapitalallokation erhöhte der Verwaltungsrat die Rückkaufermächtigung um 400 Millionen US-Dollar. Laut Management verfügt Wyndham über ausreichend Liquidität, um Dividenden und opportunistische Aktienrückkäufe fortzusetzen, abhängig von anderen attraktiven Kapitalverwendungen wie internen Investitionen und M&A.

Vollständiges Transkript der Telefonkonferenz zu den Quartalszahlen

Vollständiges Transkript der Telefonkonferenz

Ausführungen des Managements

Operator

Welcome to the Wyndham Hotels & Resorts Third Quarter 2026 Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Matt Capuzzi, Senior Vice President, Financial Planning and Analysis and Investor Relations.

Matt Capuzzi

Thank you, operator. Good morning, and thank you for joining us. With me today are Geoff Ballotti, our CEO; and Amit Sripathi, our CFO. Before we get started, I want to remind you that our remarks today will contain forward-looking statements. These statements are subject to risk factors that may cause our actual results to differ materially from those expressed or implied. These risk factors are discussed in detail in our most recent annual report on Form 10-K filed with the Securities and Exchange Commission and any subsequent reports filed with the SEC. We will also be referring to a number of non-GAAP measures, corresponding GAAP measures and a reconciliation of non-GAAP measures to GAAP metrics are provided in our earnings release and investor presentation which are available on our Investor Relations website at investor.wyndhamhotels.com. We are providing certain measures discussing future impact on a non-GAAP basis only because without unreasonable efforts, we are unable to provide the comparable GAAP metric.

In addition, last evening, we posted an investor presentation containing supplemental information on our Investor Relations website. We may continue to provide supplemental information on our website and on our social media channels in the future. Accordingly, we encourage investors to monitor our website and our social media channels in addition to our press releases, filings submitted with the SEC and any public conference calls or webcast.

With that, I will turn the call over to Geoff. Geoff?

Geoffrey Ballotti

Thanks, Matt, and good morning, everyone. We appreciate you joining us today. And many thanks to those of you who've reached out over the past few months, my treatment for multiple myeloma is going as well as I could have hoped. The doctors are happy with my progress and I'm seeing exceptional clinical results. I feel great, my energy is high and our leadership team has never been more focused on execution and driving shareholder value.

And on that note, our Q3 results reflect yet another successful quarter, executing against our long-term growth strategies. We reported strong earnings with comparable basis adjusted EBITDA and EPS growth of 5% and 9%, respectively. U.S. RevPAR grew 6% and we grew our system by 4%, excluding Revo. On a year-to-date basis, our resilient, highly cash generative business has produced nearly $270 million of free cash flow and we've returned over $290 million to our shareholders.

In addition, last month, our Board increased our share repurchase authorization by $400 million demonstrating continued confidence in our ability to generate significant cash flow and its commitment to continued shareholder returns. Global RevPAR increased 2% in constant currency, a nearly 400 basis point improvement sequentially, driven primarily by domestic RevPAR, which also improved nearly 400 basis points sequentially and to up 6% year-over-year. This 6% growth was well ahead of our second half growth expectations and included a favorable impact of approximately 10 basis points from the World Cup.

Consistent with historical trends, travel demand for our middle-income consumers remains strong despite elevated gas prices. RevPAR growth was fueled by stronger demand with occupancy increasing approximately 300 basis points, driven by everyday business travel and broad-based leisure demand. Importantly, our franchisees also experienced continued pricing power with ADR increasing approximately 280 basis points. Combined strength in demand and pricing created meaningful revenue and margin improvements for our small business owners.

We saw sustained growth across nearly all regions, including our 3 largest states, Texas, California and Florida, representing approximately 1/4 of our U.S. room count, which together improved roughly 400 basis points sequentially to up 8% RevPAR growth in Q3. We continued to see strong performance across our Midwest and industrial states with significant growth in Iowa, up 16%. Illinois, up 15%; Ohio, up 10% and Indiana, up 9%, highlighting a portfolio well positioned to benefit from increasing infrastructure-related demand with nearly 80% of the infrastructure built yet to be deployed.

Higher midweek demand is driving much of this strength, especially at hotels and markets near major transportation, manufacturing, AI, data center and industrial projects. As these investments continue to ramp up, they're creating a durable growth tailwind for our franchisees. October month-to-date U.S. RevPAR has remained relatively consistent with third quarter results, reinforcing our confidence in underlying demand trends as we close out 2026.

International RevPAR continued to recover, declining 3% year-over-year in constant currency in the third quarter, an improvement of nearly 400 basis points sequentially. Canada RevPAR increased 7%, supported by sustained pricing power and improving domestic demand. Southeast Asia and Pacific Rim RevPAR increased 5%, led by Korea, Thailand and Indonesia. Latin America RevPAR rose 2%, improving 900 basis points sequentially, driven by Mexico. EMEA RevPAR grew 2% year-over-year, driven by strong performance in Turkey, India and Spain. This growth represents an 800 basis point sequential improvement which reflects a substantial recovery in Germany, where performance improved 1,100 basis points sequentially.

Coupled with RevPAR stabilization in the Middle East, where RevPAR improved from down 45% in Q2 to down 13% in Q3. Strength across these international markets was offset by China, where RevPAR declined 10% and as softer travel demand, most notably in Tier 2 cities continues to pressure performance.

On the development front, Wyndham's owner-first value proposition continues to drive strong openings and net room growth. We opened over 18,000 rooms in the quarter or 3% more than we opened in the third quarter of last year. Our development pipeline grew for the 25th consecutive quarter to a record of approximately 264,000 rooms across nearly 70 countries with a PPAR premium of approximately 30%, both domestically and internationally reflecting our strategy of adding hotels and higher chain scales and in geographies and markets with stronger long-term economics.

We are increasingly focused on adding higher-fee par hotels that strengthen system quality and strategic positioning while increasing revenue potential that supports long-term fee and adjusted EBITDA growth. The termination of substandard rooms, which cited for the majority of our rooms leaving the system this quarter creates an opportunity to secure franchise agreements for higher-quality hotels in attractive markets.

In the third quarter, U.S. room openings carried a PPAR premium of more than 45% over terminations, while international openings carried a premium of nearly 40%. In the United States, conversion openings included the Hayes Street Nashville Hotel in the heart of Music City and The Blennerhassett, an 1889 Landmark boutique hotel in downtown Parkersburg, West Virginia, both proud new members of our rapidly growing trademark collection by Wyndham.

Since introducing Dazzler Select 1 year ago, we converted the Big Horn lodge last month in historic downtown Moab, Utah in the heart of Red Rock Country. It's our 14th Dazzler Select opening, validating demand for our latest brand extension and our distribution network, along with our ability to bring more high-quality independent economy hotels into the Wyndham Global system. New construction openings this quarter included the La Quinta Roanoke, Virginia, the La Quinta Shonto, Arizona, the La Quinta Tracy, California and the Microtel by Wyndham Nephi, Utah, in the Topaz Mountain range.

We also opened 3 new construction Echo suites, which USA today readers recently named the #1 extended stay hotel brand in the United States including our 23rd Echo Suite by Wyndham in Middleburg outside of Jacksonville, Florida. EMEA net room growth was 13%, excluding Rio and notable new construction openings included the Ramada Encore, Kochi, our first Ramada Encore in Kerala, India and a trip by Wyndham in the Netherlands, a newly renovated beachfront property in the Hague. Conversion activity was also strong in EMEA highlighted by over a dozen new hotel additions, including the Wyndham Residences Piraeus, Marina Zeas in Athens, overlooking the super yacht marina Zea Marina on the Aegean Sea.

Latin America and the Caribbean also delivered 13% net room growth. Notable new construction openings included the Wyndham Garden San Paulo further strengthening our presence in 1 of Brazil's largest urban markets and over 2 dozen conversion openings, including the Wyndham Garden Resort along the Belize City River side, featuring fine dining casino, pools and fitness facilities. In Southeast Asia, in the Pacific Rim, net room growth reached 10% for the second consecutive quarter.

Notable new construction openings included the luxurious Orion Kuala Lumpur, our first Registry collection hotel in Malaysia, located in the heart of KL's premier shopping, dining, nightlife and entertainment district. In China, our direct and overall franchising system also again delivered double-digit net room growth. We opened 16 new Days Hotels, bringing this former master license brand to 177 directly franchised hotels, nearly triple the size or a 17% compounded annual growth rate since 2019.

Conversion openings included the Wingate by Wyndham Foshan, our 20th Wingate in Greater China and the La Quinta Lishui, our ninth La Quinta now open in China and our 12th in Asia Pacific since introducing La Quinta in this part of the world. Ancillary revenues have increased 10% year-to-date. Growth has been supported by expanded strategic partnerships, ongoing technology innovations and the continued adoption of our refreshed and award-winning suite of Wyndham Rewards credit cards.

Our Wyndham Rewards Earner Card has been named the #1 travel and hotel credit card in the U.S.A. Today, 10 Best Readers Choice Awards for the ninth consecutive year and our card portfolio has gotten even better with our new Earner Premier Card, our first -- our very first premium card whose success is driven by its ability to easily offset its $395 annual fee through 30,000 guaranteed annual anniversary points over $400 in everyday lifestyle statement credits, complementary Wyndham Rewards insider membership, top-tier diamond stites and a 25% discount on awards stays.

Wyndham Rewards is central to ancillary revenue growth with members contributing more than 1 out of every 2 domestic check-ins. Global enrollments grew 10% year-over-year, bringing total membership to approximately 129 million members. As our membership grows, we remain focused on creating new ways for members to engage, to access differentiated travel experiences and benefit from a program consistently ranked as the #1 hotel loyalty program in the industry by the readers of both USA TODAY and U.S. News and World Report.

Through Wyndham Rewards experiences, members are increasingly redeeming points for memorable events and behind the scenes access. These offerings are especially effective at attracting younger, more affluent travelers who book earlier, who stay longer and who engage with us more intently through this program. This experiential focus also continues to shape the evolution of our brand portfolio. And earlier this month, we announced the expansion of our partnership with Travel & Leisure to bring Sports Illustrated Resorts into the hotel sector.

Together, we see an opportunity to create immersive year-round destinations in college towns in major urban markets, featuring distinctive programming, premier sporting events and unique guest experiences. For Wyndham Reward members, these properties will provide access to new sports-focused destinations and new travel experiences. Supported by our loyalty distribution and marketing platforms we believe Sports Illustrated resorts will become a differentiated and attractive offering among our growing affiliate base of aspirational hotels that further deepens member engagement and expands our reach across high-growth segments.

Beyond expanding our brands and loyalty ecosystem, we continue to invest in technology that helps franchisees grow revenue, lower costs and improve the guest experience. Wyndham Connect, our Wyndham trained LLM powered guest engagement platform is now deployed at more than 5,100 hotels and has generated tens of millions of dollars in year-to-date upsell opportunities for participating franchisees. Wyndham AI Concierge, our AI-powered voice platform is autonomously handling costs. At more than 1,700 hotels worldwide today, up 17% sequentially. The platform is answering tens of thousands of previously missed calls and services guests immediately with no hold times.

Additionally, Wyndham AI Concierge converts reservation requests at an average daily rate that is 15% above hotel book rates, generating meaningful incremental revenue and driving over 500 basis points of increased direct contribution for franchisees as former loss calls are captured before migrating to third-party channels.

And finally, Wyndham Gateway, our new guest WiFi portal that is standardizing the log-in experience in providing franchisees with revenue-generating upsell opportunities is also ramping, and it's now live at more than 1,100 hotels, up 35% sequentially. Wyndham Gateway has become 1 of our most effective new member enrollment channels for Wyndham Rewards, providing valuable first-party guest insights that help drive repeat business, while importantly creating new local advertising and ancillary revenue opportunities for franchisees.

The investments that we've made over the years in our technology stack, that moved us off of multiple legacy central platforms onto 1 that consolidated dozens of property management systems onto 2 have optimized and accelerated our AI readiness via a 100% cloud-based, fully optimized infrastructure across best-in-class partners like Oracle, AWS, like Salesforce, Adobe, like Canary Technologies. This investment has allowed us to deploy AI at scale across all guest touch points and establish ourselves as a leader within our industry and within the AI space as booking behavior continues to evolve. Google AI mode is now live alongside our apps in chat GPT and Cloud supporting end-to-end direct booking, including payment without ever leaving the LLM conversation.

We're also now bookable on Muse, on Instinct and on OpenAI's newly launched dot as we continue to enhance agentic booking flows that drive increased direct contribution and help hotels lower costs and increase revenue. These technology investments exemplify how we're turning innovation into stronger hotel level economics with franchisee profitability and engagement remaining our top priority.

In recent years, we've introduced owner focused reimbursement and incentive programs that reward hotels for strong guest satisfaction and strong quality scores. These include performance base reductions and guest response fees, enhanced Wyndham Reward reimbursement opportunities and loyalty fee incentives tied directly to the guest experience combined with industry-leading and cost-effective technology. These programs are lowering the total cost of ownership, improving hotel level economics and further differentiating Wyndham's owner-first value proposition for our franchisees.

Looking ahead, we are very encouraged by the accelerating RevPAR recovery across both our domestic and our international markets. Our teams are well positioned to build on this momentum through the scale of our network, our award-winning loyalty program our industry-leading technology platform and our presence in markets benefiting from continued infrastructure and industrial investment. And as always, we thank our team members around the world for their dedication and their commitment to our franchisees and guests the very foundation of our success.

And with that, Amit will now walk us through our financial highlights and full year outlook. Amit?

Amit Sripathi

Thanks, Geoff, and good morning, everyone. I'll begin my remarks today with a detailed review of our third quarter financial performance followed by an update on our cash flows, balance sheet and outlook. Before I begin, let me remind everyone that the comparability of our financial results continues to be impacted by the timing of our marketing fund spend.

In the third quarter of this year, marketing fund revenues exceeded expenses by $1 million, while revenues exceeded expenses by $18 million in the third quarter of last year. To enhance transparency and provide a better understanding of the results of our ongoing operations, I'll be highlighting our results on a comparable basis, which neutralizes the marketing fund impact. In the third quarter, we generated $410 million of net revenues and $207 million of adjusted EBITDA. Net revenues increased 7% year-over-year primarily due to higher royalty and franchisees, increased ancillary revenues and revenue from our 2 owned hotels.

Importantly, royalty and franchise fees grew in line with the underlying revenue drivers of our business. On a year-to-date basis, ancillary revenues grew 10%, driven by higher credit card and partnership fees. We expect full year ancillary revenue growth of low double digits supported by accelerating fourth quarter performance as the impact from our credit card program refresh and our new premier earner card continues to ramp and drive increased member engagement.

Adjusted EBITDA increased 5% on a comparable basis, primarily reflecting higher revenues, partially offset by the timing of variable costs and the lapping of onetime variable cost reductions made during third quarter of 2025. Adjusted diluted EPS for the quarter was $1.43, a 9% increase on a comparable basis reflecting growth in comparable basis adjusted EBITDA and the benefit of share repurchase activity.

Free cash flow was $100 million in the third quarter and $269 million year-to-date. We continue to expect full year free cash flow to convert at approximately 55% to 60% of adjusted EBITDA. At our current trading levels, our free cash flow yield of over 7% continues to lead the lodging sector. Development advanced spend totaled $18 million in the third quarter reflecting our consistent and disciplined approach to investing in higher PPAR hotels that enhance the quality of our portfolio and drive long-term adjusted EBITDA growth. We continue to see strong demand for our brands with year-to-date openings up 3% year-over-year and our pipeline up 4%, excluding Revo.

Historically, hotels with development advances have entered our system at a PPAR premium of approximately 40% relative to our system average. We returned $123 million to our shareholders in the third quarter through $91 million of share repurchases, which increased 30% year-over-year and $32 million of common stock dividends. In the third quarter, we opportunistically repurchased nearly twice the number of shares as we did in the second quarter. Year-to-date, we've repurchased 2.5 million shares for $196 million.

We ended the quarter with nearly $1 billion in total liquidity, and our net leverage ratio of 3.6x remained near the midpoint of our target range.

Now turning to outlook. As Geoff mentioned, third quarter U.S. RevPAR growth of 6% exceeded our second half expectations. Based on our Q3 performance, we've increased our global RevPAR outlook to 0.5% to 1% or up 50 basis points from the previous low end of our range. Our revised outlook assumes Q4 U.S. performance is consistent with Q3 as well as continued improvement internationally.

We've narrowed our outlook for net room growth from 4% to 4.5%, excluding Revo to approximately 4%, reflecting the termination of substandard quality rooms and accelerating shift of our portfolio towards higher value opportunities. While this approach modestly impacts net room growth in 2026, it aims to improve the overall quality of our system and support stronger royalty generation and long-term economic value. As previewed on last quarter's earnings call, we expect the majority of Revo related rooms to terminate before year-end.

Net revenues are now expected to be $1.48 billion to $1.5 billion, increasing the bottom end of the range by $5 million. Adjusted EBITDA is now expected to be $740 million to $745 million, raising the bottom end of the range by $5 million, reflecting a flow-through of strong U.S. RevPAR performance in the third quarter and the continuation of those trends through the remainder of 2026.

Our expectation for the marketing fund to breakeven on a full year basis remains unchanged. Adjusted net income is projected to be $363 million to $369 million and adjusted diluted EPS is projected at $4.84 to $4.92, which is based on a diluted share count of 74.9 million shares. And as usual, does not assume future share repurchase activity or incremental interest expense from any potential new borrowings. There are no changes to our outlook for development advance spend or free cash flow conversion.

In closing, our third quarter results underscore the continued strength of our asset-light business model and accelerating momentum in U.S. select service RevPAR trends. Our royalties and franchise fees increased year-over-year in line with our algo. We delivered comparable basis growth in adjusted EBITDA and adjusted EPS, and we maintain a strong balance sheet and disciplined leverage profile.

Additionally, we continue to balance targeted investments in high-return development opportunities and meaningful shareholder returns through stock buybacks. Our increased outlook for RevPAR, adjusted EBITDA and EPS reflects our expectation for continued strength in the U.S. and further recovery in international regions. And we remain confident in our ability to drive sustainable, long-term value for our shareholders.

With that, Geoff and I would be happy to answer your questions. Operator?

Operator

[Operator Instructions]

Our first question comes from Brandt Montour with Barclays.

Fragen und Antworten

Brandt Montour

I wanted to start with the domestic U.S. strength. And maybe you can talk a little bit, Geoff, on what's really driving that sequential step up, whether it's more business travel or more leisure that you're seeing? And then there's a lot of calendar noise and uneven comparisons when you look at last year between third quarter, fourth quarter or even year before that with the hurricane comps. So I wanted you to maybe scrub that for us in terms of what the underlying U.S. run rate growth is here in the back half? And what the implications are for that and how we should think about 2027 based on that?

Geoffrey Ballotti

Sure. Thanks, Brandt, for the question. And there are a lot of calendar noise. Hanukkah, Christmas, New Year's, but it's all positive. Our days of the week shift that should help, we believe, and many of you have been reporting more leisure versus last year for the remainder of the year. And looking ahead -- well, for the -- and for the remainder of the quarter, of course, our comps continue to get easier. As you know, our 3Q comp was down 5%, our 4Q last year we're comping again is down 8%. And so we're feeling good about the comps. We're feeling good about the noise and the calendar shifts for the remainder of the year.

And looking ahead to 2027, really all of our leading indicators, which we look at daily remain just so strong. I mean, if we look at the economy demand over the last 8 weeks, it's outperformed the industry by 50 basis points as we had talked about on the last call, we were starting to see, we're seeing it. Our booking windows have improved from June into July, from July into August, August into September. And our booking pace, while it is short term, hasn't been stronger since coming out of COVID. We have now over 7% more business on the books for the next 60 days versus the same time last year. Cancellation rates, they continue to improve. Average drive distance continues to go up from the second quarter to the third quarter, and it should continue to.

As airfares, as we all know, are running 30% ahead for Thanksgiving, $0.25 they're saying for Christmas, people are driving and our lengths of stay continue to lengthen. We think that the second half tax refunds, we talked about this on the last call are unlocking increased discretionary spending and our middle-income consumers, they remain financially resilient. And we think fundamentally healthy. And that is driven by -- and we see no change to that going into next year, strong employment, strong wage growth, which is supporting increased leisure spending.

And the banks reporting last week, they all talked about travel spend growing, especially that drive to leisure. And all of the research that's out there, MMGY fall travel Edition just came out. and it confirms the same. Travel demand is bouncing back this fall. And consumers are becoming more strategic about when they go and what they can or worth paying for and with rising costs, pushing more consumers to travel domestically versus internationally, we see the continued truism is that vacations for these consumers have remained this quarter, next quarter, into next year, a priority.

And so we're feeling really good on the leisure side. And of course, on the biz side for us, GBTA just came out in its September survey last week saying that business confidence is at its highest level since October of 2024, with a continued focus on cost and justification. And there's no better business travel justification then that blue collar essential infrastructure-related frontline travel that we cater to. So for the remainder of the year, we're feeling good. And looking ahead into 2027, all the trends are positive.

Amit Sripathi

Yes. And Brandt, if I could just put some numbers around your question on weekday business versus leisure, weekdays really -- we saw strength in both weekdays were ahead by 150 basis points over a weekend. So it was broad-based demand strength and both ADR and Aker strong about equally. So that kind of gives us confidence about not only into Q4, a continuation of the trends, but really the momentum into 2027 to return to kind of like the select service CAGR we've seen over the last 20 years, so 2.5% to 3% RevPAR growth.

Geoffrey Ballotti

That's a great point, Amit. I mean the ADR opportunity ahead for our economy and our mid-scale franchisees, they have a ton of room to grow rate. The ADR differential right now between the chain scales has never been higher, and it just presents a huge opportunity. for these franchisees to recover that lost ground as we're starting to see. So yes, we're very bullish about being able to continue to recover demand, but more importantly, pick up rate, great point of it.

Operator

Thank you. We'll move on now to Steve Pizzella with Deutsche Bank.

Steven Pizzella

On fees, the royalty and franchise fees accelerated nicely in the quarter, growing north of 6%, which was above the implied algorithm. Can you unpack the drivers of that strength and how we should think about the fee growth relative to the algorithm moving forward?

Amit Sripathi

Steve, thanks for the question. Geoff touched on the RevPAR strength, and that was really a momentum we had throughout the year, exceeding expectations. when we give our outlook at the beginning of the year and the other quarter as well as in the last quarter, -- we really -- we had some noise from Revo and the lapping of that as well as some timing of franchise fees. And we said our expectation was that we would kind of be back in line with Algo starting in the back half of the year. And so we were really pleased to see that happen.

As you noted, royalty and franchise fees were up 6%. Comparable adjusted EBITDA was up 5%. And as we look ahead to your question about, yes, we expect to be back in line with Algo. You look at our full year guidance, what that implies for Q4 is also royalty and franchise fees kind of consistent with growth with Q3 and same thing with comparable adjusted EBITDA. So we expect that to continue into Q4 and beyond.

And the only thing in terms of the puts and takes in Q4 is marketing fund. We obviously are going in with about $7 million of underspend into Q4, and our expectation is we will end up at breakeven for the full year. So right in line, all the drivers should be, we expect will be in line with Algo.

Operator

Thank you. We'll move on now to Shaun Kelley with Bank of America.

Unknown Analyst

Geoff, glad to hear about the health update best wishes and the continued recovery there. So for me guys, I'd love to just touch on some of the comments you made around AI actually. I think in the prepared remarks, you talked a little bit about you're now live in Google AI mode, some of your integrations with the LMs. But I specifically wanted to ask about agents. You talked about some integrations or your bookable from us and Instinct.

I'm wondering if you could tell us a little bit more about how that actually works? Just specifically, are agents able to see your inventory through some sort of direct connection? Are they going through the front door? And then I think more strategically, what incentives are you providing to kind of get agents to make sure that they book direct don't go through an OTA channel. I think this is a quite big debate in the industry.

And then lastly, if you could talk at all about just traffic you're seeing from these channels? Are they starting to move the needle at all? I know it's extremely early, but the types of adoption curves we're hearing out there are significant.

Geoffrey Ballotti

It is extremely early. Thanks, Sean, for the wishes. And yes, it's low traffic, but it's a great question. I mean it's this morning's skipheadline. -- tiding travel as a top use case and listening to their call last night. So Meta Muse, Instinct AI, OpenAI dots, we now have a new type of guest and these are our new autonomous agents, as you referred to, who we are built to service and we're excited about this. And we're embracing it. We're embracing these agents through our brand websites through our MCP engines which we can do with very little investment, given the technology forward, best-in-class foundation that Scott Strickland and his team have put in place.

We are providing our inventory, to your question directly to these agents. As they query and they come in to our CRS via brand web via our MCP or via our voice channels. On the brand web queries, they're acting just like a guest would. On voice queries, they are talking to our Wyndham Connect agents that we've talked a lot about, who are interacting with these Muse agents or he's in state agents or these dot agents who want to talk to our hotels, just like a guest might want to talk to a hotel front desk agent for any special request, if you think about it that way. So the team is working with various AI labs. We're making these bookings faster and easier for these agents.

And to the last part of your question, in terms of incentives, with Wyndham Rewards becoming our differentiator from the OTAs, given the personalized data, the context that we can provide, the third parties simply can't. We envision a future in which these new autonomous agents are explicitly instructed by our guests and especially by our Wyndham Reward members to use our hotel loyalty program as preferences as a requisite in their search criteria. So we think it it's a big deal, and we think it could really help us grow when it comes to driving direct traffic to our franchisees as the other tools that we outlined in our IP are already doing.

Operator

Thank you. We'll move on now to Michael Bellisario with Baird.

Michael Bellisario

Thanks. Good morning, everyone. Geoff, I want to focus on sort of franchisee feedback and what you're hearing from particularly our U.S. partners. Any feedback on sort of higher rates, weighing on sentiment. Any change in development starts and conversion activity there? And then similarly, in Europe, sort of what's the health of the franchisee there? Any lingering Middle East impacts? And then just can you quantify France for us just in terms of system-wide earnings in your pipeline?

Geoffrey Ballotti

Yes. A lot in there. France is a very limited impact for us. We have very few hotels. As I think you know, in France right now. So that has not been and won't be an impact for us going forward. The Middle East fluid situation, but really no disruption to opportunities and business continuity. It remains intact across the portfolio. It's still negative, as we said in the script, but certainly improving. We're down 45% in Q2, down 13% in Q3.

And our teams there on the ground, they're expecting gradual stability. We're not assuming any further escalation, but our hotels in the KSA, in Dubai across the UAE, Abu Dhabi Bahrain, Qatar, they're all -- they've all seen obviously some improvement with a pickup from some inbound group travel from China, some military personnel. And I think most importantly, from a development standpoint, the pipeline is strong. We have over 2 dozen hotels in our development pipeline in the Middle East, and we've recently executed 5 new contracts across Saudi Arabia and the UAE. And all of those projects are still moving forward.

In terms of the U.S., we're feeling very good about our franchisees, our attention and internationally picked up sequentially about 20 bps internationally, 20 bps domestically. And so far, we've opened a record of over 50,000 rooms globally, 4% more than last year, excluding Revo. International opens have been really strong and should continue to be so. I mean we're -- we've been ramping actually and accelerating. We're 10% up year-to-date. That accelerated to 24% more opens in Q3 than last year.

And domestically, I mean, we had a record year of domestic openings last year. Q1 was a record. Q2 was a record, both record quarters. And we've opened, I think, it's about 19,000 rooms year-to-date versus last year. We're about I think, 20,000 rooms. So we're tracking the last year's record despite the rising interest rates and a significant drop in buy-sell transactions which slowed us down in the economy segment. But we're obviously very pleased with the 2% net room growth in the mid-scale, upper mid-scale segments. And yes, we're looking forward to a strong Q4 and a good '27.

Operator

Thank you. We'll move on now to David Katz with Jefferies.

David Katz

Good to hear from you, Geoff, and the update. Look, I think there's a lot in the quarter -- and so I'd love Geoff for you to just pull out for us what you think is really the most important development. I know I've asked this question in the past, but I always value your perspective on what's your favorite part right, out of the whole report. And frankly, just following on the AI stuff, to the degree that you can help us measure statistically franchisees that are either engaging or actually signing up based on those initiatives, which obviously are industry-leading, those would help.

Geoffrey Ballotti

Sure. David, I would say the most favorite part for all of us in the quarter was looking at the outperformance of our domestic RevPAR, which we've been waiting for talking a lot about. And really how well I think what was exciting for us was how well our brands are performing, especially from a market share standpoint and an overall satisfaction standpoint. I mean the quality this past quarter and really throughout the whole year, we have seen our strongest year-over-year gains in our overall satisfaction and our quality scores since going public. And that's just huge for us.

Our economy brands are seeing some of the highest Net Promoter Score growth and improvement year-over-year that we've ever seen. Super at up 800 basis points, days in, up 900 basis points, we're seeing huge gains in our overall satisfaction, which was up over 400 basis points and Net Promoter Scores up 600 basis points. So these brands are resonating with our consumers. Our Medallia OSR index, which is our overall social review index we look at every month comparing our overall social review scores to our peer competitors is running well over a fair share and it continues to grow.

And that's just a great testament to our franchisees, obviously, in terms of their engagement with our teams and importantly, to our directors of franchise operations who don't all always receive the credit that they deserve. Relationships in this franchise world matter, and there is no more important relationship that franchisees have then their relationship with their Director of franchise operation. It is consistently ranked at the very top of what owners value the most. And these directors of franchise operations they're out there traveling all the time. It's nonstop. They do over 10,000 site visits annually.

And we survey after every visit to each franchisee, how is your visit, not all of them respond, but many of them do. And they are running a 98.9% overall satisfaction score, which -- that's year-to-date, which just blows me away. And what franchisees tell me all the time, is how great their DFO is, citing their responsiveness, their professionalism, their willingness to listen to. And so that just results in franchisees or being more engaged than ever today.

I mean over 6,000 of our 75% of our hotels had their customer service fees wave last month due to higher quality because they are engaged. So that's for me, passionate about that and very excited about that. And when it comes to these franchisees in terms of what they're most excited about to the last part of your question, it's really the achievements that they're starting to see with just massive rollouts of these tools.

I mean our Wyndham Connect tool now to think that we're over 5,100 of our hotels, how these franchisees are making extra room revenue and extra ancillary revenue that -- it's just -- it's amazing how easy it is for them as they embrace it, how excited they become as they embrace it. And it's allowing these upscale franchisees to drive, as we said, in Matt's deck, $100,000, $200,000, $300,000 of increased annual revenues. But even for small franchisees, they're generating anyway anywhere between gosh, at the low end, $500 to more like $2,000 per month. That's a big, big deal, especially it has been in this environment, which up until now. We haven't seen the rate growth that we're getting. And so that's obviously making it a lot better.

But it's a really big deal that delights them. And I could go on and on with the other tools. I mean the Wyndham AI Concierge is just huge. It's really early days. 1,700 hotels enrolled on it. And when you think that on average, over 25% of inbound costs are dropped by these franchisees because they can't get to them in time. And we have now AI agents with this tool, preventing that from happening. These AI agents on Wyndham AI Concierge, they answered over 3 million calls year-to-date and that's driving increased direct contribution because we're capturing all those costs, yielding 0 drop calls that might otherwise migrate to an OTA. So a lot of exciting stuff going on and that was a long answer to your question.

Operator

Thank you. We'll move on now to Patrick Scholes with Truist Securities.

Charles Scholes

Great. Good morning, everyone. Geoff, very happy to hear that your treatment is going well. My question, you had briefly mentioned about increased terminations. I think it was in the economy segment. Is that something that you see impacting or continuing into 2027? Or would that alter at all your multiyear net room growth targets? And then a follow-up or related to that, any changes related to key money Strategy?

Geoffrey Ballotti

Okay. I'll let Amit take the key money. No, no changes. I mean, we talked about this on the last call. We do have domestic substandard quality terms. -- in the economy. We've been focused on that, and we are focused on it, obviously. Whenever the OSAT score or the RevPAR, the market share drops below. And when we look at where we've had year-to-date throughout the year, some of the biggest deletions, if you will, of substandard terminations in brands like Howard Johnson's and even Super A -- those 2 brands in the economy space have seen some of the highest OSAT improvements year-to-date of any of our brands.

Howard Johnson's overall satisfaction is up 800 basis points in the quarter over last quarter, and that's been growing as we've been focused on. Supers 8 up 600 basis points. And they've also seen the most significant year-over-year RevPAR index gains. So we'll continue to be focused on that. Our economy brands domestically the industry from a retention standpoint. It's something we're very focused on. We want obviously to continue that. We lead by about 100 basis points. And that, again, is our continued focus, our DFOs focus our operations teams focus on quality. And we are confident that we could get back to that 96% domestic retention, which we've moved into nearly before from 93% the which is where we were at spin. And Amit, maybe you'll talk about the back part of this question.

Amit Sripathi

Patrick. Regarding key money strategy, really no changes to our outlook in terms of the $110 million for the full year. And as far as the sentiment itself, look, Key money has always been a tool we selectively use to prioritize investing in high-quality growth and when returns meet or exceed our hurdle rates. And we continue to -- you look at the sites that we're bringing in with key money and they come in an attractive fee PAR premiums but the priority is always like our development teams, as Geoff touched on, lead with the value proposition of our segment-leading brands, our loyalty program and all of the tech initiatives and the AI initiatives that we've invested in to promote franchisee health.

So really no changes to our key money strategy or outlook. It remains a tool. We have ample balance sheet capacity and within the year as well as outlook for the $110 million we have to deploy that.

Operator

Thank you. We'll move on now to Stephen Grambling with Morgan Stanley.

Stephen Grambling

I want to go back to the genic AI question and perhaps consumer use of LM in general. You mentioned the upsell opportunity. We've also heard from some hotel owners that there's been some material declines in top of funnel costs search already. Are you seeing benefits to customer acquisition costs that you can quantify at this point? And then as you think about the magnitude and cadence of various benefits, how would you rank improved mix of direct bookings versus lowering third-party commission rates versus lowering the cost of direct bookings or simply just improving conversion across all channels.

Geoffrey Ballotti

Yes, it's the $1 million question. And I think, first and foremost, Steven, and we sort of lay that out on Page 3, the IP. How we think about it, we always think about it from our own value proposition. First, we think about our franchisees and we think about the benefits that we could drive to them as opposed to driving to our marketing fund. I mean if we could increase their direct bookings, if we could drive increased direct revenues and we could lower their operating costs, which we're doing with these tools, it's a home run.

To the first part of your question, in terms of distribution cost declines, they do have significant potential. The AI interactions are all going through our brand websites or our MEP servers or our voice channels, which whether it's as I talked about a little while ago on the last question, Wyndham Connect AI agent answering a Muse AI agent, those are obviously less costly for us. And the ADR lift from Wyndham AI Concierge has huge potential for a [indiscernible] mentioned on the last question as we roll this out way beyond the 1,700 hotels, who are subscribed to it today. I mean that is driving occupancy index gains, rate index gains because the AI is delivering a 15% increase in rate. RPI gains and labor savings, obviously, back to the lens, we look at this through for our franchisees.

And on the LLM search equation, it's still really early days, as I said earlier, GEO may well prove to be for us and for our marketing fund, a whole lot less expensive than SEO. That to be determined. It is a great question. I mean, as AI transactions ramp. You've got Meta's Muse out there, again, skipheadline, building in right now, a small commission but it is the space to watch, and it will shape the economics of direct distribution for every brand and every OTA in the coming years.

Again, our focus on our strategy is to make our availability, our rates, our inventory the most readable, the most actionable data source for the LOMs. And if we could offer a direct booking path that an AI agent can execute on easily, then we capture that guest.

Operator

We'll move on now to Dan Politzer with JPMorgan.

Daniel Politzer

Thanks for the question. It's great to hear from you. I have a follow-up on the domestic net unit growth and maybe ask from a different angle. I mean how much of the kind of pivot here or kind of evolving landscape do you attribute to kind of reducing or terminating some of those substandard hotels versus competition from new brands coming into the segment? Or maybe just kind of a change in the macro construction environment. Is there any kind of detail you could give on the conversation with developers and maybe any early thoughts on getting back to positive net unit growth there in the coming years?

Geoffrey Ballotti

Yes. Sure. We achieved, as we've said all along, by increasing our gross adds to where it's been before, around 6% and reducing those terms to 4%, which is where they've been before flattening out this year with the unexpected buy/sell transaction slowdown. I'd say that because of rising interest rates was 1 of the biggest impacts that we saw this year. Interest rates, as we all know, which were expected to fall in the second half of the year. We think have temporarily widened that bid-ask spread on buy-sell transactions, which are so important to our conversion engine.

With transactions in our segments falling over 30% in both the economy and the mid-scale segments, select service segments this quarter to historic all-time lows -- we -- and on top of that, the subdued industry new construction activity. So you take transaction volumes, you take industry new construction being muted. It's really building pent-up transaction demand for when those transaction-driven conversions pick back up in our segments in the quarters ahead. As we saw in late 2024 and into 2025, we're very confident that as economy by cell transactions resume. U.S. net rent growth will pick back up as it has before in the past.

Amit Sripathi

Yes. And Dan, the only thing I'd add to that is, I mean, to your question around new competitors versus [indiscernible] just a slowdown in transaction volume like or the termination of what really had an impact. Listen, I think we've talked about this before on the competitor side. Brand launches, the new brand -- the first of the new brands kind of launched in 2023 and a couple have followed tubes since then. You look at that 3-year period, really less than 1% of our system has switched over to those brands and you look at it in terms of year-over-year, that's been a declining trend.

Really, what we are looking at, what Geoff talked about in the terms of the transaction volume, it's not just about the higher interest rates. It's kind of like the shift in expectations, right? You entered the year thinking you're going to have rate cuts. And then midway through the year, you ended up with rate hikes and expectations for remote rate hikes. So -- and so rate hikes in itself, we've seen this before, right? That in itself doesn't really cause -- of course, we want lowers better, but it's more the stability. I think the market is just looking for, they want to understand it's going to normalize and then transaction activity is going to pick back up. We've seen this multiple times throughout the cycle.

So we feel good about our setup. We feel good about our segment-leading brands or a loyalty program and all the technologies. So we're expecting kind of U.S. to be back in sequential growth really make up for -- and all we were just lapping some very outsized terms in the beginning of the year. That's kind of had an impact this year.

Geoffrey Ballotti

And you also asked Dan about developer sentiment, which I forgot to address just looking at my notes. I mean it remains really positive, given the strong long-term fundamentals. I mean, historically low supply less than 2% with -- when you think about the U.S. active pipeline supply down 8% year-over-year. Out at the lodging conference, many owners were up on stage talking about industry fundamentals being the best has seen in a decade. And that is showing up for us with our institutional developers with record openings, executions and pipeline growth. I mean the market is so undersupplied with new quality, affordable select service accommodations to serve the lodging demand from the public and private investment across the U.S. So as Amit said, we're confident.

Operator

We'll move on now to Ben Chaiken with Mizuho.

Benjamin Chaiken

The Algo fee growth relationship was very impressive in 3Q as you touched on. But specifically, I'd love to think -- touch on how you're thinking about royalty rate expansion, I guess, both in 4Q, but also longer term. I think 2Q net of Revo that was theoretically around 100 basis points of contribution to the Yogo from realty rate expansion. I think 3Q was maybe more flattish ex REVO. Just curious how you think about royalty rate expansion and the moving parts both in 3Q, 4Q, but more importantly, longer term.

Amit Sripathi

Ben, thanks for the question. our royalty rate, kind of our expectations within the Algo is 5 basis points of growth, both domestically and internationally, kind of on the long term. And that's not necessarily 5 basis points every single year, but you look at it on a multiyear period, we expect it to be 5 basis points on average. And we have seen U.S. royalty rate increased 10 basis points in 2024, 7 basis points in 2025. It's down approximately 2 basis points year-to-date in 2026.

But again, you look at it across the 3-year period, the average is approximately to 5 basis points, so in line with our objective. So individual years may vary, but the multiyear target is unchanged. And same thing internationally, as you mentioned, there are some revo-related noise, which we stripped out and disclosed kind of adjusting for that, you did see royalty rate growth there. And it's really a testament to both expansion into higher chain scale segments as well as the mid-scale and plus above strategies.

So both domestically and internationally, and that's obviously bearing fruit as we've seen look at kind of like a 3-year average on the royalty rate.

Operator

Thank you. We'll move on now to Alex Brignall with Rothschild & Company.

Alex Brignall

Great to hear from you, Geoff. Just 1 on U.S. net unit growth. Obviously, it continues to be relatively subdued, but the commentary you've made on signings is very encouraging. I wonder if you could just run us through the cadence of how that progresses in the next quarters and years. and how the RevPAR performance of kind of maybe perhaps most of relative rep performance of the low and high end segments might affect that.

Amit Sripathi

Yes. I think since you asked about kind of what's the outlook, I'll take the question. I think that in terms of sequential growth, U.S. Obviously, we saw pipeline growth, both domestically and in the U.S., and pipeline is really the inflection of the execution sentiment and so we're pleased to see continued growth, 25 consecutive quarters of global pipeline growth. And then U.S., we saw again, year-over-year growth.

As far as the RevPAR sentiment, listen, obviously, we were coming back, we in an environment last year where we saw sequential declines in RevPAR growth every year. So obviously, having the opposite of that and kind of getting up to above the 20-year select service average of 2.5% to 3% is a positive, and that's kind of what Geoff was touching on earlier about the owner sentiment. So I think our expectation is to see sequential growth in the U.S. continue to kind of get to that 4% globally.

And too early to talk about 2027 in terms of RevPAR outlook, but our expectation is that this momentum continues and then translating that into net unit growth, transaction volume should pick back up, as I said, really the markets just looking for stability. And as we see that, we should see some continued improvement.

Operator

Thank you. We'll move on now to Ian Zaffino with Oppenheimer.

Ian Zaffino

Geoff, glad to hear everything that's going on the health side. Question would be, just given kind of where the business is and how it's performing versus your expectations? How do you think about capital allocation here? You got the dividend, you have a buyback is -- are you more encouraged by kind of what you're seeing here? And would that then mean accelerate more buyback? Or how are we kindof about returning the cash to shareholders?

Amit Sripathi

Thanks for the question. We have -- we repurchased approximately 91 million shares in Q3, about 30% more than last year and materially more than the prior quarter. The stock traded at a significant discount to the 52-week average. And we believe it's trading at an unwarranted discount, so we continue to support the stock and we have ample liquidity and balance sheet capacity to do so. I think our Board's authorization of an additional $400 million share repurchase, obviously reflects confidence in the strength of our business and ability to generate a significant amount of free cash flow.

So while we don't guide towards what our future share repurchases are, I think we will continue to support the stock when it trades at an unwarranted discount and barring any attractive deployments into M&A and investments within the business, we have ample free cash flow to deploy to build dividends as well as repurchases.

Operator

Thank you. We'll move on now to Lizzie Dove with Goldman Sachs.

Elizabeth Dove

Geoff, great to hear that you're doing well. So it's clearly so much investment going into data centers, manufacturing, broader infrastructure projects, as you kind of mentioned and gave some great data points earlier and on the slides. I'm wondering how are you thinking about the potential for this to create really a multiyear demand tailwind for Wyndham? Is there a way to kind of quantify that impact to U.S. RevPAR in aggregate? And is this something you think is accelerating as we look to 2027 and beyond?

Geoffrey Ballotti

Lizzie, thanks for the question. Absolutely accelerating and strengthening. It is performing right now. It was up about 6%, in line with the rest of North America, but it's no longer the drag from an acceleration standpoint to my point than it was during those quarters and the government slowdowns of last year. We're seeing -- our teams are out there contracting. They're seeing ongoing highway expansion. They're seeing ongoing an increasing manufacturer builds big utility grid upgrades and companies that are just continuing to deploy field crews and regional service teams across the country. And these teams operate on and these companies operate on strict per diems, really anchoring them to our select service brands across the U.S.

Where it's really showing up for us is in terms of what has been booked by our GSO. In Q3, our GSO booked 16% more revenue in Q3 than they did last year. And that was up from booking 12%. I talked about on the last call, more revenue in Q2 than they did in last year. So continued acceleration. And GSO contracted infrastructure on the books, which gives us looking into '27, a lot of confidence continues to pace well ahead of where we were same time last year. We continue to place infrastructure business into more hotels than we ever have. This quarter, we put it into 5,000 -- almost 6,000, I believe, of our hotels this year, which was up quarter-over-quarter.

We're seeing business from oil and gas room night production that was up 350 basis points. I think I talked about in our remarks versus the rest of the portfolio. And hotels near data centers continue to the first part of your question to see great strength. We have about 350 data centers that were circling that are around approaching 1,000 of our hotels in those markets, which have seen a couple of hundred basis points of RevPAR growth this year.

I mean you look at Arizona, TSMC semiconductor quarter remains 1 of our strongest markets. And we're seeing hotels servicing this project seeing big double-digit increases year-over-year in both their revenues, their bookings, their market share. So absolutely, it should become a tailwind, assuming it continues to pick up as it has over the last 2 quarters and not be the drag it was last year. So much of it, as we said in the script, has yet to be spent.

And this Bipartisan Build America Act, we think should really help as those funds become authorized from '27 into the 2030s.

Operator

Thank you. We'll move on now to Meredith Jensen with HSBC. And Ms. Jensen, please check your mute switch. Your line is now open.

Geoffrey Ballotti

I know we're running late maybe she might have exited the call.

Operator

We'll move next to Tray.

Meredith Prichard Jensen

Sorry about that. Yes. Sorry about that. I was hoping you might speak a little bit about Mainland China and obviously facing some headwinds this day on the macro side. But if you could speak to the strong net unit growth that continues despite that? And what maybe is driving investment decisions for franchisees? And sort of any trends you're seeing in development activity there, the types of owners who are entering your system.

Geoffrey Ballotti

Sure. Yes. If I was to -- if I was to answer the least favorite part, which David obviously asks of the quarter, it was how China RevPAR of your question came in. And as we talked about in the script, we do have a much heavier weight in Tier 2 cities, which underperformed the industry by about 500 basis points, which was not unique to us. I mean the good news is that despite that slowdown, our hotels were able to hold rate flat to prior year, which is a big, big deal. And as our teams look ahead, I mean, they do believe, and there's a lot of analysts out there that believe that the deflationary cycle that China has been in is beginning to bottom.

I mean we've seen this year, PPI turned positive for the first time in several years. We've seen CPI recently also turned positive -- and so there's just so much tailwind potential there in terms of how far occupancy is below where it's been historically. And it was great again to see our hotels at a China is doing a lot to boost consumption. And we're really optimistic for the long term. As is the industry, I mean, Horwath, recently put out a sentiment survey, which has hotelier market confidence climbing to a 7-quarter high breaking out of a prolonged period of pessimism.

And if we look at the pipeline, LE's reported pipeline in China, Actually, we saw a tick up. 3,600 projects saw early planning up 4% with construction starts up 7% as hotel conversions hit a record high, rising over 20%, and that's certainly helping us to the back part of your question from a development standpoint. I mean once again, we've got a fantastic team over there, Joon Aun and Bill Wang are doing just a great job quarter after quarter, delivering double-digit net room growth for both our direct franchising and our overall China system. 2/3 of the contracts that we signed were new construction, which was great to see.

The other third conversion, but we're also seeing a lot of senior cell and same year opens -- to your question in terms of what we're hearing from people that are signing with us in the quarter or in the year to open that year is they're looking for that incremental distribution as demand has been so soft. And so we're super bullish as our growth has pivoted from master license agreements to direct franchise agreements at 3x the royalty rate that, that double-digit net room growth is going to really help us continue to grow our international royalty rate. And we see no signs of that business slowing down.

Operator

Our final question is from Trey Bowers with Wells Fargo.

Raymond Bowers

Geoff, great to hear things are going well. Just 2 quick ones. One on -- you've talked to this, but I'll ask it quite directly. Is there a chance that domestic growth next year gets back to that 6% growth with a kind of 4% churn rate against it. So we could see 1 or 2 points of domestic log. And then two, just so I understand the Revo numbers. We started about 22,000 rooms. Now it says there's 13,000. Are those kind of delta of 8,000 or 9,000 rooms, ones that have run through the deletion counts already? Or are those rooms that have kind of graduated to returning to the system.

Amit Sripathi

Trey, domestic net unit growth, I think we are expecting sequential growth in the year. We're obviously lapping outsized terms from the beginning of the year that we kind of expected to make up in our seasonally Q3 and Q4, which are strongest net unit growth quarters, obviously, transaction volumes kind of slowed down, which had an impact. So I think looking ahead, we obviously are expecting sequential growth in Q4.

And then beyond that, we want to kind of get back to see the transaction volumes to resume construction arts with, again, not necessarily predicated among interest rates coming down, but just more stability there, which should give owners confidence. We are seeing that -- and then -- so that's really kind of how we think about that on the domestic side.

And to your question around rebuild we started with about 22,000 rooms. We've kind of disclosed in the earnings release about 9,100 Revo rooms left the system. So the 13,000 that are remaining, our expectation is that off the 23,000, about 20% to 25% will be retained, so call it, 5,000, 6,000 addition rooms. And the revoinsolvency process, it's nearly finalized, but it's still kind of in the -- putting the finishing touches. So other than the 6,000-ish rooms that we expect 5,000 to 6,000 rooms that we expect to retain the rest will be leaving the system in Q4. And so whatever that 20% to 25% should be an upside for 2027.

Operator

Thank you. At this time, I will now turn the meeting back to Geoff Ballotti for closing comments.

Geoffrey Ballotti

Thanks, Leo, and thanks to anyone still on the line. I believe this is a record at in terms of 75 minutes. We appreciate your questions and your interest in Wyndham Hotels and Resorts. We know how busy your days are. Amit, Matt and I look forward to talking to many of you in the weeks ahead. But in the meantime, have a great weekend and happy Halloween next Saturday. And thanks, everybody, again for joining us today.

Operator

Thank you. This does conclude today's Wyndham Hotels & Resorts Third Quarter 2026 Earnings Conference Call. Please disconnect your line at this time, and have a wonderful day.