Despite a new rock star brand, Wyndham Hotels had a flat quarter in the U.S. market.
The company is continuing to reap the benefits of its recently-acquired La Quinta franchise, which is quickly becoming the bright spot in its massive portfolio. Revenue for Wyndham Hotels increased 69 percent in the fourth quarter, with over a third of that coming from La Quinta, the company said in releasing quarterly earnings on Wednesday. Apart from that, growth in the company’s domestic market remained slow, as the conglomerate struggles to improve its economy offerings. That translates to getting rid of properties that do not meet its standards while trying to add new quality rooms as replacements.
“We still have work to do in the economy segment of our business with certain brands,” said CEO Geoffrey A. Ballotti during an earnings call Wednesday, explaining that room increases in the U.S. would remain modest for the upcoming year. “We’re still looking at 0 to 1 percent growth,” he said.
Shares of the hotel behemoth rose about 2 percent after market open, from $51.23 to $52.23, before falling back down to original levels.
Overall, revenue came in at $527 million, up from $312 million in the fourth quarter of 2017, with about $198 million from La Quinta. The company added 1,600 rooms in North America, a modest increase from the same quarter a year ago, according to Ballotti. Worldwide, the brand has a total of 810,000 rooms, up 11 percent from a year prior.
Wyndham Hotels has been trimming properties that don’t meet its standards, and has cut about 80,000 to 90,000 rooms over the past two years, including 64,00 this quarter. In April, Wyndham sold its Knights Inn brand to Red Lion, accounting for a loss of over 21,000 rooms.
The company does not see these cuts as necessarily a bad thing, however, suggesting it motivates underperforming brands to improve. Currently, the company is investing in a “refresh program” of Days Inn by Wyndham, and said it may use similar programs on other underperforming brands.
Things are improving, albeit slowly. The company has met its goal of keeping roughly 95 percent of its units this quarter, and had its third straight quarter of room growth.
Meanwhile, the brand said it is making good progress on integrating La Quinta into the Wyndham system, and has already begun training. La Quinta should be completely merged with the Wyndham loyalty program in the first half of this year.