• Wyndham and Choice face challenge

The two franchising giants, Choice and Wyndham, are expecting a slow recovery after a comparatively resilient performance during the downturn.

The companies primarily midscale and below portfolios slumped by less than their more upscale competitors but the recovery will be correspondingly less dramatic.

Choice forecast that it would suffer a double digit (12%) revpar drop in the first quarter and a decline of between 2% and 4% for the full year. Wyndham said that the full year would be flat to 3% down.

Franchising revenues at Choice were down 15% in 2009 to $254.7m. Central costs were cut by 9%. The near halving of new franchise signings in the US from 698 to 369 contributed to the worldwide pipeline shrinking by 24% to 66,585 rooms. Wyndham's development pipeline is 108,000 strong and 43% international.

Wyndham CEO Steve Holmes described 2010 as a transition year. The two priorities were to drive bookings through online channels and secondly to support franchisees in better rate setting decisions.

HA Perspective: Both Wyndham and Choice are selling to owners a badge backed with a reservation system and other frills such as loyalty programmes. But it is not at all clear that they are sufficiently differentiated from competitors, both rival hoteliers and online travel agents such as Expedia.

The big challenge for both companies is growth outside of their domestic markets. Wyndham has done well to secure a foothold in the fast growing Chinese market with its Super 8 brand but it remains subscale almost everywhere else. But Choice is still recovering from the setback of its biggest European franchisee, Real, going bust.

It is accurate to describe this year as a transition year. Both companies must prove that their offer is more than a badge.

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