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In its first earnings call reporting as an independent company, Wyndham Hotels & Resorts said it’s hyper focused on continuing to grow while solidifying its brand identity.
During a conference call with investors on Wednesday, Wyndham Hotels CEO Geoff Ballotti laid out the company’s future strategy and vision. Wyndham completed its spinoff of Wyndham Destinations on June 2, leaving the hotel business as a standalone..
Ballotti described Wyndham as the largest hotel franchiser in the world, leading in the economy and midscale categories, with a total of 20 brands that welcome a half million guests to their hotels every night. He said that currently, a third of Wyndham’s hotels and 20 percent of its royalty fees come from outside the U.S. and that the company intends to grow, both organically and through mergers and acquisitions, both domestically and internationally going forward.
As for potential future acquisition targets, Ballotti said, “There are still several single-brand companies as well as many regional players out there that fit that [role].” He continued, “Established, well-perceived brands with growth opportunities in markets like La Quinta that we know we could grow, would create synergies that are immediately accretive without any own real estate — that would be a strong strategic fit for us and something that we could integrate, I think.”
Quality & Quantity
Wyndham Hotels’ strategy as an asset-light, fee-based global hotel company is also closely aligned with the company’s focus, both on scale and on quality. Ballotti said Wyndham is continuing to focus on the quality of its properties and on the repositioning of its brands.
“Scale is not a proxy for quality,” Ballotti said. “They are two entirely different things. Our brand promises to make hotel travel possible for all, elevating experiences for the everyday traveler regardless of price point and, in doing so, developing brands that attract and retain franchise owners.”
Ballotti noted that, “We have been talking for the last three years about our main focus on quality. And we’ve removed roughly 80,000 substandard rooms domestically from our system, which were not meeting our brand standards.”
At the same time, however, he noted, that the company also continues to add more hotel rooms, while making sure that any rooms that don’t meet quality standards are removed.
In total, as of June 30, Wyndham has nearly 9,000 hotels and more than 792,000 rooms worldwide — an increase of 12 percent from the same period last year. Room count, excluding the purchase of La Quinta and the sale of Knights Inn, which Wyndham is selling to Red Lion Hotels Corporation, is up 3 percent year over year.
Most recently, the company also added “by Wyndham” to its brands, and that, Ballotti noted, has resulted in an increase of online searches for “Wyndham” by more than 10 percent, and has also led to “increased conversion rates in many channels.” In other words, more people are searching for Wyndham and booking Wyndham-branded hotels.
In addition to focusing on brand identity and cohesion, Wyndham will continue to emphasize its Wyndham Rewards loyalty program — which now has 58 million members — and which also connects Wyndham Hotels to Wyndham Destinations, the spun-off business unit of Wyndham Worldwide that includes timeshares, home exchanges, and vacation rentals.
Integrating La Quinta
Having closed its acquisition of La Quinta on May 31, Wyndham is also very focused on making sure the integration of La Quinta’s 870 hotels and its loyalty program of 13 million members goes smoothly. Ballotti has said the addition of La Quinta will be “transformational” for the company.
Ballotti said the company expects to have La Quinta’s hotels on Wyndham’s cloud-based central reservations system by the end of the first quarter of 2019.
He also noted that since buying La Quinta, Wyndham has been able to sign 50 new hotel constructions deals for the brand, and the brand’s pipeline of new and upcoming hotels has grown from 250 hotels to 266 hotels — an all-time record for the brand.
In all, Wyndham expects to see $55 million to $70 million in annual synergies from the integration of La Quinta into the Wyndham Hotels portfolio.
Earnings by the Numbers
Wyndham Hotels’ second quarter revenues were up 31 percent from the same period last year, rising to $435 million from $331 million, reflecting $77 million in incremental revenue from its acquisition of La Quinta.
Net income was $21 million, compared to last year’s $48 million, due to costs from the spin-off and from the purchase of La Quinta.
Global revenue per available room (RevPAR), a popular hotel industry metric for business health, was up 9 percent year over year and 4 percent in constant currency, excluding Wyndham’s purchase of La Quinta and the sale of its Knights Inn brand.