Wyndham Worldwide on June 2 completed its spinoff of Wyndham Destinations, and in doing so, created the newly formed hotel company, Wyndham Hotels & Resorts — home to 20 brands that include Super 8, Days Inn, Ramada, Dolce Hotels, Microtel, and now, La Quinta.
Led by CEO Geoff Ballotti, the new Wyndham Hotels & Resorts is no longer part of a massive hospitality company that once included timeshares and vacation rentals. Now it is its own franchise-led company made up of nearly 9,000 hotels, or 790,000 rooms, in 80 countries worldwide.
Ballotti, who has been CEO of Wyndham Hotel Group since 2014 and was previously CEO of the Wyndham Destination Network from 2008 to 2014, said the biggest advantage of the spinoff is the opportunity for growth that it provides, and the value that it’s created for Wyndham’s shareholders.
“This is really unlocking the value of what is by far and away, the most powerful, largest hotel franchise company with the best portfolio of best known brands on the planet,” Ballotti said. “Think about the value that we’ve created for shareholders. When you think about the multiples that we’ll be trading at and when you think about how that will allow us to grow and do, as we’ve done, creative deals like AmericInn, and like La Quinta — it’s incredible.”
And going forward, Ballotti made it clear that he wants to seize this opportunity to continue his strategy for Wyndham he’s pursued the past four years.
“We are now able to tell our own story as opposed to being one of three great businesses in one of the world’s largest hospitality companies,” he said. “Being on our own has all of those strengths, we believe, when it comes to being able to continue to focus on the three things that have mattered most to us over the last few years: On the quality front, on the technology front, on the loyalty front, on providing owners what is making them want to do more business with us, and providing consumers with greater choices around the world.”
Making Moves in Loyalty
Maintaining the momentum that the Wyndham Rewards loyalty program has built in the past few years as the program of choice for the “everyday traveler” is crucial.
“Before we transformed our Wyndham Rewards program a few years ago, our share of occupancy was in the teens,” Ballotti said. “Tonight in America, 40 percent of the half a million people who will be checking in to our hotels will be putting down their Wyndham Rewards point cards and saying, ‘Give me my points.'”
Ballotti, along with former Wyndham Worldwide CEO Stephen Holmes, who now serves as chairman for both Wyndham Hotels and Wyndham Destinations, has repeatedly likened the loyalty program to a “blue thread” that connects all of Wyndham’s various businesses.
And that’s partly why, just days after completing its $1.95 billion acquisition of La Quinta on May 31, Wyndham announced that it will offer a one-to-one point transfer and complimentary status matches for 56 million Wyndham Rewards members and 13 million La Quinta Returns members, beginning June 4.
Wyndham expects to fully integrate La Quinta Returns into Wyndham Rewards by the second quarter of 2019, but until then, members of both programs can use their points interchangeably.
“The big deal for us in terms of the La Quinta franchisees is getting the La Quinta franchisees on our technology platform,” Ballotti said, explaining why the full loyalty integration won’t happen until next year. “We’re already beginning the technology platform migration.
Traditionally, it could take well over a year for loyalty members to be able to receive status matches or the ability to transfer points between programs after a merger was completed. Marriott’s $13.3-billion purchase of Starwood Hotels & Resorts and its Starwood Preferred Guest loyalty program in September 2016, however, has, in some ways, set a precedent for how hotels should work to integrate loyalty programs following an acquisition. A day after the Starwood deal closed, Marriott announced a status match and points transfer capability.
Wyndham’s Vacation Rental Strategy
And as important as the La Quinta points transfer and status match is for the Wyndham Rewards program, Ballotti said another crucial strength of the program is the fact that it also applies to Wyndham’s vast network of vacation homes.
“Building Wyndham Rewards into the program that it’s become was made possible by our blue thread connection to the destination network of 17,000 vacation homes and villas, and aspirational vacation ownership product in places where our 56 million members, and the now 13 million La Quinta return members are going to want to travel,” Ballotti said.
What’s not changing, even after the spinoff, is consumers’ ability to use Wyndham Rewards points to book vacation rentals, and it was a conscious decision on the part of Wyndham’s executive team and board to keep the vacation rental business separate from the hotels, and to sell off Wyndham’s European vacation rentals business.
“We think all the time about what makes a stronger loyalty program, and our ability to offer all of those alternative lodging accommodations without actually operating or owning the business was where we got to,” Ballotti said. “It’s something our shareholders gave a lot of thought to, and in terms of unlocking the value and the re-rating of our businesses from a multiples standpoint, it all made sense to our board and shareholders to do what we did.”
Unlike some of its peers, Choice Hotels, Hyatt Hotels, AccorHotels, and now, Marriott, included, Wyndham Hotels is content to keep the vacation rentals business separate.
“We are going to continue to be able to avail ourselves of that [business],” Ballotti said. “It’s not something that we are going to lose, it’s something that we are going to be able to continue to have [because of the loyalty program].”
Building Stronger Brands and Seeking Out Others
For at least the past two years, Wyndham has invested heavily in brand positioning and earlier this year, the company decided to add “by Wyndham” to some of its most well-known brands — something Ballotti said “was the biggest news at our global conference” in April.
“Folks have asked us why we waited so long, and I think the answer to that is we were not prepared to do it several years ago when we were not able to say about our economy brands and our midscale brands what we’re able to say now from a consumer preference standpoint, from a guest satisfaction ranking standpoint,” Ballotti said. “But to be able to say that we have such healthy brands now, our franchisees are very excited.”
Wyndham’s portfolio, which skews heavily toward economy and midscale hotel brands, is also something Ballotti sees as a clear advantage for the company and the reason why the company has invested so much into improving the quality of the rooms and guest experience at its hotels to deliver “an upscale feeling for an economy price.”
“I would challenge anyone to say that is not where the growth is not going to be,” Ballotti said of the economy segment of accommodations. “Any economic survey you read, in terms of where the growth in travel is going to come is going to be in the economy and the midscale space both here and abroad.”
He also noted that Wyndham, as a company, has been largely built by acquiring brands and that strategy isn’t slowing down anytime soon either. Although the company announced it would sell its Knights Inn brand to Red Lion Hotels Corporation in April, Ballotti said we should expect Wyndahm to make more acquisitions going forward that are similar to its recent AmericInn and La Quinta deals, which he said “added quality rooms.”
“This is a company that has grown almost entirely through acquisition,” Ballotti said. “Eighteen of our 20 brands have been acquired, and we have been, on average over the last 30 years, acquiring a brand every 18 months. So, you could continue to look for us to acquire businesses that fit, and that are strategically similar.”
That means checking to see “if the brand is established, if we could grow the brand, if the brand is a strong strategic fit … And most importantly, if the brand is immediately accretive to earnings,” he explained.
And while Wyndham focuses on acquiring new brands and growing the ones it already has, he said to expect the company to especially focus on development in regions that include Latin America and China.
As for goals to complete within the company’s first year as an independent entity, Ballotti said, “A year from now, we want to be bigger. We want to continue to be known as the world’s largest hotel franchiser that provides the best economy and midscale hotels.”
He added, “We think that La Quinta is transformational for us” and working on the integration of La Quinta into the Wyndham portfolio will be near the top of that list of things to accomplish by 2019.