A refresh of hotel brands, and a marketing campaign for the Rewards loyalty programme were among the innovations detailed by Wyndham’s Stephen Holmes, as he presented a strong set of second quarter results.
Any suggestion of breaking up the three-part Wyndham business was rebuffed, while Holmes said judicious acquisitions were always up for consideration as a way to grow the company’s activities.
The second quarter saw domestic revpar continue to accelerate, up 8.8%, led by Days Inn and Wyndham. Systemwide the revpar growth was lower at 5.6%, which Holmes put down to currency impact and growth in low revpar markets. Overall international revpar was down 1.8%, but excluding China was up almost 3%. Revenues in the hotel division were USD283m, up 8%, and contributing to overall group revenues of USD1.3bn.
The Exchange & Rentals, and Vacation Ownership divisions also continued to do well. In the new world of competition from Airbnb, Holmes pointed out the high level of professional management Wyndham offers homeowners under its rental wing. As a result, group figures delivered revenues up 7% and ebitda up 9%.
In hotels, a number of brand refreshes are planned. Holmes said a downsizing was underway at Hawthorn Suites, to help reduce the cost of the product. A new prototype will reduce developer costs by 40%. Days Inn and Super 8 next on the upgrade list, while prototypes are also being rolled out for three further brands. There has also been a drive to get more sign-ups to Wyndham’s hotel loyalty programme, Rewards. The company’s first umbrella advertising campaign has sent respondents to the Rewards website to sign up, with the result that bookings via the channel are up almost 20% since launching the campaign in May.
Holmes has not ruled out M&A as a route to growth: “We would continue to look in particularly the hotel and the rental business for areas to make acquisitions. Size is only relevant in that it kind of determines how we structure a transaction. We’ll continue to look at big deals, small deals, any deals that make sense for the shareholders.” However, Holmes said the board wanted to keep debt levels low enough to ensure Wyndham retains its investment grade ranking, something that might limit its appetite for debt-fuelled growth at least unless there was a short term reason. “We never say never to anything. But, having said that, we would only do it if we saw line of sight to get ourselves back to investment grade.”
One thing Holmes ruled out, was buying into hotel management. “It would be a very unusual deal that would put us in a position of wanting to increase the size of that business. Bear in mind, people aren’t going to come to us to manage a Marriott. They’re going to come to us to manage a Wyndham property, and we generally want to manage in the upscale sector. Could we do more? Yes, we need to grow more on the Wyndham side and we will continue to push that, but I don’t think the answer to that is M&A.”
During the quarter, Wyndham increased its system size by 2.4% over the same quarter in 2013. Its pipeline stands at over 970 hotels, of which 57% are outside the US and two thirds are new build.
Holmes noted that, in eight years as a listed company, Wyndham had delivered USD4.2bn in dividends and share repurchases; with returns double that of the S&P 500.
HA Perspective [by Chris Bown]: What was remarkable about Holmes’s presentation was its lack of information about growth plans. In common with its hotel peers, results from the US were positive, less so in international markets; and China was the group’s weak point.
Yet the last quarter has seen Wyndham, self-proclaimed “world’s largest and most diverse hotel company” open the first Super 8 in the Middle East, and sign the first Ramada in Kenya, due to launch later this year. It is unclear where the group’s expansion is focused, unless it is based on opportunistic acquisitions, which Holmes suggested he was ready to look at.
Meanwhile, a series of brand refreshes are afoot in the US market, where its Microtel budget brand recently won a top guest satisfaction ranking with JD Power. Judicious repositioning from a position of strength is no bad thing, and taking account of rivals’ interest in growing into the select service space, it may be good timing.
Again, Holmes had to answer analysts as to why Wyndham is a three part business, amid concerns that the group’s shares are undervalued compared to pure hotel operators. “I don’t see a compelling argument,” was his answerto the suggestion of a split.