Wyndham May Sell Its European Vacation Rental Brands on the Way to a Spinoff

This week, Wyndham Worldwide divulged its plans to spin off its hotel business and separate the organization into two separate companies: one primarily focused on timeshares and U.S.-based vacation rentals, and the other having to do solely with the hotel business.

Thursday, during Wyndham’s second quarter 2017 earnings call with investment analysts, CEO Stephen P. Holmes offered a few more details about that planned spinoff, as well as the possible sale of Wyndham’s European vacation rental businesses.

Holmes said that as the company follows the path toward a completed spinoff by the first half of 2018, it will “explore strategic alternatives” related to its European rental brands, which collectively account for approximately 110,000 properties.

A spokesperson for Wyndham told Skift on Wednesday that Wyndham’s North American rentals, which comprise approximately 10,000 properties, will become part of the timeshare company while the Wyndham continues to explore options for its European rental brands.

In conversation with investors, Holmes said the value of Wyndham’s European vacation rental businesses “is greater than when we bought them” and that the company has “received, over the years, indications of interest on the businesses” but that they “never thought it was the right thing to do” at the time. With the pending spinoff, however, Wyndham is interested in potentially selling off the brands — but the company is also looking at other alternatives.

Wyndham has been consistently growing its vacation rental inventory through acquisitions around the globe and it is particularly strong in Europe. In 2016, the company acquired Friendly Rentals, Dayz Resorts, and German Airbnb rival Wimdu, which was approved in early 2017 by the German Cartel Office. Wyndham Vacation Rentals UK includes the following brands: Cottages.com; Hoseasons, acquired in 2010, with a total inventory of 20,000 listings; James Villas, acquired in 2010, with a total inventory of 2,500 villas; and Blue Chip Holidays, acquired in 2016, with a total of 1,100 properties.

In addition to selling off its European vacation rental brands, Wyndham could also likely be more acquisitive once it’s split into two different companies, Holmes hinted.

“I had high hopes and aspirations for M&A [mergers and acquisitions],” he said, referring to the time when Wyndham Worldwide was established 11 years ago. “Unfortunately, the market did not provide us with that opportunity. It limited us in our ability to do transactions.…Hopefully, with a multiple that’s more indicative of its value, we’ll be able to be more aggressive and more active in the M&A landscape.”

More Information Still Needed

While Wall Street looked favorably on Wyndham’s spinoff decision — shares rose almost 8 percent within hours of the announcement — more information is still needed to determine exactly how the company plans to structure its spinoff.

Stephen Boyd, senior director and analyst for Fitch Ratings, said investors and Wall Street will have to pay close attention to the capitalization of the two eventually resulting public companies.

“Traditionally, Wyndham has had more diversified hospitality revenues — lodging, vacation rental, and timeshares. We view lodging as less capital intensive and long-term, recurring fee based,” he said. “We generally see lodging as being more stable. But it’s unclear what the capitalization of the two companies will be. We haven’t yet determined how much leverage they’ll put at each.”

Second Quarter Results

Wyndham Worldwide had a strong second quarter in 2017, beating Wall Street estimates for both earnings and revenue. Adjusted earnings per share were $1.53 and earnings were up 9.3 percent year over year. Net revenue was $1.48 billion, up 5.4 percent over the same period last year.

Hotel Group revenues were $345 million in the second quarter, an increase of 3.3 percent from the second quarter of 2016, boosted by higher franchise fees and the company’s Wyndham Rewards credit card program. Domestic revenue per available room, also known as RevPAR, was up 2.8 percent, and global RevPAR was up 3.3 percent.

Revenues for Wyndham Destination Network were $405 million, up 5 percent from the same period last year. Revenues for Wyndham Vacation Ownership grew 6 percent year over year to $750 million.