Wyndham Worldwide’s first quarter earnings were, as CEO Stephen P. Holmes noted, “right in line with our expectations” and those expectations support a major strategy designed to synergize all three of the company’s businesses: hotels, timeshares, and vacation rentals.
For the first quarter of 2017, Wyndham Worldwide reported earnings totaling $1.3 billion, up 1 percent from the same period last year. Net income was $141 million, compared to $96 million in 2016.
The Wyndham Hotel Group saw revenues of $298 million, compared to $295 million in 2016, boosted by higher fees from franchise properties and more sign-ups for the Wyndham Rewards credit card program. However, the company lost some $3 million from lower occupancy numbers at the company’s owned Wyndham Grand Rio Mar Beach Resort & Spa in Puerto Rico, which the company attributed to lingering consumer fears regarding the Zika virus.
The Wyndham Destination Network had revenues of $391 million in the first quarter, up 2 percent from last year’s $385 million. Vacation rental revenues alone were $184 million, up from $183 million last year.
Wyndham’s timeshare business, the Wyndham Vacation Ownership, had first quarter revenues of $648 million, a slight bump up from $641 million in the first quarter of 2016. Although the number of people taking timeshare tours dropped 1.7 percent in the quarter, the amount of spend per guest, or volume per guest, was up 4.9 percent because of higher average close rates and transaction sizes.
Given these stable results for the first quarter, Wyndham Worldwide is more committed than ever to using what CEO Holmes called its “blue thread,” the Wyndham Rewards loyalty program, to generate more business for all of its businesses, especially timeshares.
The company plans to rely heavily on its loyalty program to generate more timeshare tours among its hotel guests, which could potentially lead to increased timeshare sales.
The Wyndham Rewards program, which was relaunched in 2015 to appeal to “everyday travelers,” now has more than 50 million members, 79 percent of whom are redeeming their points through the program. Since its revamp the program has received a number of accolades for its simpler, more straightforward approach to hotel loyalty.
Currently, Holmes said, a little under 5 percent of Wyndham Vacation Ownership owners are hotel guests and he wants that number to increase dramatically.
“We’ve built the world’s largest timeshare organization without a connected loyalty program, and now we have one,” Holmes said during an investors presentation.
Later, he noted, “Why haven’t we done this before? The reason we haven’t done this before is that we didn’t really have a loyalty program. We had a rewards program that was more rewarding people for staying at the hotels. … With this remake of the loyalty program in 2015 we have now created something that is truly a loyalty program. We needed to have that kind of baseline built before we could start to do what we can now do which connecting hotels to timeshare and vacation rental businesses. It’s been a long time coming. We’re now at the point where we can execute on that.”
Work on implementing this “blue thread” has already begun. In October, Wyndham Rewards expanded its program to allow members to redeem their points at the company’s portfolio of more than 25,000 vacation rentals and timeshares.
Another focus for Wyndham includes maintaining and, in some cases, lifting the quality of its brands and properties globally. Work on this initiative began last year, Holmes noted, when all of Wyndham’s 18 hotel brands underwent a “brand analysis” and marketing repositioning.
“Every hotel company is trying to improve the quality of their brands by bringing in stronger ones and getting rid of weaker ones,” he said.
Further strengthening the company’s timeshare business will be the main responsibility of newly appointed Wyndham Vacation Ownership CEO Michael D. Brown, formerly of Hilton Grand Vacations. Brown replaces Franz Hanning, who stepped down in November.
Is a Spin Off on the Way?
One lingering question on investors’ minds involved whether or not Wyndham Worldwide would eventually spin off its timeshare business as its peers Marriott, Starwood, and Hilton have done.
Holmes said that no matter what eventually happens, the company’s board of directors wants to “maintain optionality” and that it is “dissatisfied with our valuation relative to our peers” and is “actively considering all alternatives.”
And if a spinoff of Wyndham’s timeshare or vacation rental businesses does take place, what will happen to the company’s “blue thread” strategy? Holmes said that pre-negotiated contracts would ensure that loyalty connection remains in place.