It looks like Wyndham's in the market for another midscale brand, but it probably won't happen this year.
Wyndham Hotels has finalized its integration of La Quinta, and the company says everything is going smoothly — so much so that it may be on the hunt for more brands.
Nearly a year after the hotel group acquired midscale brand La Quinta, it continues to be the driving force behind Wyndham’s revenue and room growth in the U.S. Despite high marketing costs, overall revenue came in at $468 million for the quarter, according to an earnings release Tuesday, a 55 percent increase from a year prior.
With the integration largely completed, the company is focusing on stepping up its digital marketing and loyalty program, as well as continuing to add new rooms.
As for future acquisitions, Wyndham is hopeful about the possibility, but cautions it may not happen this year:
“I think the good news is that with the La Quinta integration largely behind us, we’re again positioned to be able to look at brand acquisitions,” Geoff Ballotti, CEO of Wyndham Hotels & Resorts, said on an earnings call Tuesday. “We intend to approach this area with real prudence and discretion, and we don’t want anyone to be disappointed if we don’t add a brand this year after having completed our largest acquisition ever in 2018.”
He added that the next brand acquisition would likely be in the amenity-sparse select service space, although that is subject to change.
During the quarter, Wyndham’s revenue per available room increased 13 percent domestically, with the vast majority of this coming from La Quinta. Meanwhile, net profit came in at $21 million, a decrease from $39 million a year prior, partly due to marketing spend. Stock went up 4 percent after the market opened Tuesday.
“On April 3, we successfully completed the last major milestone of this integration by moving La Quinta off of its legacy property management and central reservation systems and onto our state-of-the-art distribution platform,” said Ballotti.
The hotel brand is now part of the Wyndham loyalty program, Wyndham Rewards, one of the final steps in bringing it into the fold. This is just one of several changes the company has made to its program in the past quarter.
In particular, the company has partially increased costs for the rewards plan, installing a three-tier redemption system, something it announced it would do in February. Previously, guests had one option: 15,000 points allowed them to redeem free nights at Wyndham brand hotels. Now, guests can choose from a low tier for 7,500 points, mid tier for 15,000 points, or high tier for 30,000 points.
Earlier this year, the company also launched a new marketing campaign for La Quinta, running digital, radio, and television ads, which it plans to continue through the rest of the year.
This comes at the same time as another multimillion dollar marketing campaign, which aims to increase awareness of the By Wyndham brands. This is a change from Wyndham’s usual marketing strategy, where it invests in advertisements toward the second half of the year rather than the first.
Along with the campaigns, the company is also investing in its websites and mobile apps in order to drive up direct bookings. Revenue through digital channels is growing faster than through any other distribution channel, the company said.
In addition, the hotel group is still completing its separation from Wyndham Destinations in June, which is another added cost.
The company plans to open 2,000 new hotels in the next three years, according to Ballotti. About 50 percent of these hotels will likely be in the United States, with the other half located in China and other international markets. As of December 31, the company has already signed four new La Quintas in Latin America and the Caribbean.
In particular, the hotel group is focusing on select service lodgings, meaning hotels like La Quinta that do not offer extra amenities such as on-site restaurants or swimming pools.
“Select service hotels are what the majority of travelers want the majority of the time,” said David Wyshner, chief financial officer for Wyndham.
So far, the hotel giant has 812,000 rooms, an increase from 810,000 a year prior. With a retention rate at 95 percent, the company advises that domestic room growth will likely settle around 1 percent, as the pool of underperforming hotels shrinks.
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Photo credit: Wyndham Hotels and Resorts acquired La Quinta, a midscale, select service hotel brand, in May 2018. La Quinta Inns & Suites