Some Hotel Owners Balk at Proposed Choice-Wyndham Merger

A survey of hotel owners found many of them raising concerns about Choice Hotels‘ proposed hostile takeover of its rival Wyndham. Issues include the effect on their revenue and a potential increase in fees they pay.

The Asian American Hotel Owners Association (AAHOA), whose members own roughly 60% of U.S. hotels, polled about 1,000 of its members on the proposed merger, Reuters reported on Thursday.

“About 80% of Wyndham franchisee respondents said a tie-up would hurt their business and about 60% said they would terminate their contract in the event of a merger if they had the option,” Reuters reported.

The AAHOA, Wyndham, and Choice didn’t respond to immediate requests for comment.

Laura Lee Blake, CEO of AAHOA, cited a few issues worrying some owners:

• Revenue may fall if the merger has trouble either because of a protracted antitrust review or because of poor execution of the deal.

• Fees may rise if there’s less competition. The merged company would have 16,500 hotels and more than 46 brands.

• Brand dilution, meaning the price any given franchisee might fetch for selling their property may decline if the merger means there’s less difference between that branded property and other nearby properties that belong to the same grouping of brands.

Choice Hotels has said its merger would help franchisees and owners increase profits. It’s given a few reasons why, including:

• Lower total cost of ownership: The merged company would theoretically have greater scale and thus more resources to invest in areas like technology, marketing, and loyalty programs. This scale would help drive more direct bookings and lower distribution costs for franchisees.

• Enhanced loyalty program: Combining membership in the companies’ loyalty programs could lead to more robust participation, which could translate into more direct bookings for hotels — reducing reliance on costly online travel agencies.

• Cost-cutting through synergies: Choice points to synergies realized from its Radisson Americas acquisition as evidence of the cost savings and improved performance that could also benefit Wyndham hotel owners after a merger. It also closed that transaction faster than many projected — suggesting Choice’s skill at handling mergers.