• International challenges for franchising

The two franchise giants, Wyndham and Choice, both increased their revpar guidance following their respective first quarter results announcements.

But in both cases the economy and budget focus of the bulk of their US hotel business meant the guidance was still in negative territory. And neither company was optimistic about the opportunity for conversions to increase sharply.

A big hope for both companies is to pick up hotels being ejected from the systems of rivals. In the case of Choice, it believes it will be able to pick up some of the 200 or so Holiday Inns likely to be removed during this year by IHG. And Wyndham is set to pick-up some of the hotels being kicked out by Choice.

The rate of terminations at Choice has picked up in the past couple of years as it seeks to more aggressively manage its brands and as a result of non-payment of fees. The company said it was confident of hitting 2% net unit growth.

At Wyndham, a series of strategic initiatives are being launched to improve brand standards and drive incremental revenue to franchisees which are referred to as Apollo. The programme is being rolled out over the next 18 months.

Not on the agenda at Wyndham is eliminating hotels as franchisees. It remains focused on retention. "Keeping somebody on is easier than having to go and find a new hotel," said CEO Steve Holmes, during the first quarter conference call.

At Choice there has been some movement of hotels from one of its brands to another. CEO Steve Joyce said that about 80 Comfort Inns has become either Quality or Econo Lodge.

Choice CFO Dave White said that hotels where revpar was down 20% had seen a halving of typical net operating income. The survival of the hotel is then determined by the extent of its borrowings.

Steve Joyce added that in general the franchisees were lightly leveraged and able to operate at lower occupancy levels than many hotels. Few properties have been foreclosed.

The amount of reservations being generated centrally has moved up slightly from last year and remains at around a third. The amount of reservations coming from the high cost route of online travel companies such as Expedia has remained flat at about 6%.

HA Perspective: Wyndham has set itself ambitious growth targets, wanting to be the world's leading hotel company in terms of size, customer value and performance. It may well become the biggest hotelier in the next year or so as IHG sheds hotels that do not conform to the new Holiday Inn brand standards.

Value is an amorphous term but it is hard to see how Wyndham will deliver on the performance aspect. Hoovering up the detritus of other hotel companies is not likely to build a robust brand offer that will outperform rivals.

Internationally, Wyndham has made strong progress in some territories, notably China with its Super 8. But its lack of scale in most countries outside of the US gives it significant challenges in building its franchise network. The story for Choice is not dissimilar.

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