Skift Take

It's unclear if talks between the two largest U.S. operators of non-luxury hotels are earnest. But even the idea that Choice Hotels is interested in a merger speaks volumes about how the sector is becoming a scale game.

Choice Hotels International has signaled an intent to acquire Wyndham Hotels & Resorts, the Wall Street Journal reported on Tuesday.

A spokesperson for Choice Hotels told Skift: “We do not comment about market rumors and speculation.”

“We don’t comment on rumors,” said a spokesperson for Wyndham. “We are focused on business as usual.”

The Journal said the companies are not in serious talks. However, the report will trigger sector speculation because a potential merger between the companies would likely create North America’s largest franchisor of budget hotels.

If Wyndham executives resist a deal, Choice Hotels would have the option to pitch the acquisition directly to Wyndham’s shareholders, the report noted.

“This is an extremely interesting situation as the cash flow would be tremendous, enough possibly to offset the high-interest rates on the debt that would be needed to pull this off,” said Alan Woinski, the editor of Skift’s Daily Lodging Report newsletter.

“Yet is this the right time to attempt a hostile deal given macro-economic concerns?” Woinski asked. “Would the federal government even allow one company to dominate the economy segment like the combined companies would?”

Choice Hotels is the Rockville, Maryland-based operator of nearly 7,500 hotels spanning 22 brands, including its flagship upper-midscale brand Comfort and roadside midscale brand Quality Inn. Choice has repeatedly said its strategy consists of expanding its portfolio with hotels that generate higher royalties per unit, meaning higher-end properties.

Wyndham, a Parsippany, New Jersey-based hotel operator with approximately 9,100 hotels and 842,500 rooms, is best known for its budget brands, such as Super 8 and Ramada. But its 24 brands also include higher-end properties, such as Dolce, Wyndham, and Wyndham Grand. (See Skift’s “Every One of Wyndham’s 24 Hotel Brands, Explained.“)

An instinct to merge among hotel groups is understandable. Having a greater scale bolsters the effectiveness of loyalty programs and brand marketing, which can help hotel companies drive more customers to book directly. Direct bookings avoid the commissions of between 10 and 30 percent that online travel agencies charge.

Story has been updated and will be updated further.

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Tags: choice hotels, choice hotels international, mergers and acquisitions, wyndham, wyndham worldwide

Photo credit: Wyndham is the flagship brand of Wyndham Hotels and Resorts. The upscale brand features has rooms, meeting, public areas designed for today's blended travel. Source: Wyndham.

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