If you own an independent hotel anywhere in the world, it’s likely just a matter of time before a Wyndham Hotels & Resorts staffer calls you to chat about the benefits of taking on a brand affiliation.
Leaders of Parsippany, New Jersey-based Wyndham are among the most vocal in the hotel industry about their growth plans during the pandemic. They want to convince owners of existing hotels to take on one of their brand flags like LaQuinta or Days Inn, a deal known as a conversion. These talks are going in Wyndham’s favor, as conversions were up 60 percent in the second half of 2020, the company reported Thursday.
It’s now time to take those conversion talks on an international roadshow.
“If we look after the financial crisis, conversions grew to 90 percent of our openings, and we could see that happening again,” said Wyndham CEO Geoffrey Ballotti Thursday on an investor call. “We’re out hiring more conversion sellers and deploying more of our new construction sellers to conversion brands, and we’re seeing conversion opportunities internationally in the years ahead.”
Pretty much every major hotel company, from Marriott to the smaller but rapidly growing Sonesta, sees conversions as a growth vehicle during an economic downturn where ground-up construction projects are difficult to finance. The conversion game is also one Wyndham doesn’t always win, with Choice Hotels recently pulling several of Wyndham’s extended-stay hotels into its own portfolio.
Wyndham largely operates in the drive-to and leisure sector with economy and midscale brands, and company leaders see plenty of opportunities abroad to add to their own portfolio. There are roughly 100,000 non-branded economy and midscale hotels around the world, Ballotti said.
“We now have franchise sales teams in place to sell directly to owners instead of through master licensees, which was historically how we would enter an international market,” he added.
International expansion in the past historically hinged on master license agreements, where a hotel company designates a specific local entity in a new market with the rights to develop and franchise hotels. But Wyndham has moved away from that model to direct sales, saying it is a faster way to fuel growth.
Mainland China and Southeast Asia are Wyndham’s largest international markets, but company leaders are also working at conversion growth in markets in the Middle East.
The franchise sales teams were even able to score a string of firsts for several Wyndham brands in the fourth quarter, with the first La Quinta in New Zealand, the first Super 8 in the UAE, the first Ramada in Nepal, and the first Howard Johnson in Cambodia. Some of those deals were new construction.
“With these [franchise sales] teams now in place around the world, our opportunities are significant, as is our ability to add our brands to new markets overseas,” Ballotti said.
Despite the optimism around future growth, Wyndham’s final quarter of 2020 wasn’t a total financial win. The company still operated at a $7 million fourth quarter loss and $132 million loss for the entire year.
Revenue per available room, the hotel industry’s key performance metric, was down 35 percent for the year across Wyndham’s global network.
But company leaders are looking beyond what they see as a temporary decline in demand and instead use the pace of development and new deals as their performance metric.
Wyndham’s 108 new U.S. hotel agreements signed in the fourth quarter were only one off from the same time in 2019.
“We are highly optimistic about what lies ahead,” Ballotti said. “We are encouraged the vaccines are working, and we believe they will help to deliver a multi-year resurgence in leisure travel unlike any other in our industry’s history.”