• Wyndham embraces M&A trend with Dolce buy

Wyndham Worldwide has followed InterContinental Hotels Group’s lead with a brand purchase, acquiring Dolce Hotels & Resorts for USD57m.
The deal will strengthen the company’s position in the meetings segment and is in line with its strategy of asset-light expansion through management contracts.
The 24-strong Dolce Hotels & Resorts will see Wyndham Hotel Group expand its managed portfolio by nearly 40%. Wyndham Hotel Group has expanded its managed business from 24 sites to 84 over five years.
The company plans to maintain and grow the Dolce brand along with its service, technology and f&b products as part of its existing portfolio of brands.
In a call to analysts, president & CEO Steve Holmes said: “M&A is part of our DNA here and we have a very terrific M&A group. It [Dolce] is not huge, but it’s a great group. There they are constantly turning over rocks and looking for deals.”
Holmes said that Wyndham had been looking at Dolce “for a while” and anticipated the company “adding more group and meeting business capability to us from an inventory standpoint, but also from the sales standpoint”.
He added: “There are quite a few properties in Europe, as well as what we have in the US. But it has been a brand that has been somewhat starved for growth because of the capital structure that the business was living in before and we feel like we have the opportunity to bring our capabilities to bear, including using capital to help growth the business more quickly as we do in all of our upscale managed property environment. We have the ability to open doors that maybe weren’t opened before with the limitations that Dolce had.”
The Dolce Hotels & Resorts estate includes 750,000 square feet of meeting space, hosting approximately 100,000 events each year.
Philip F. Maritz, chairman of Dolce Hotels and Resorts, said: “Our founder Andy Dolce and the rest of our board supported this approach. Also, speaking as a continuing owner of two Dolce-managed properties through Broadreach Capital Partners, I am confident of incremental benefits under the Wyndham Hotel Group umbrella and its dynamic plans for the brand and its properties.”
The news came shortly prior to the group’s fourth-quarter results, which saw a 9% year-on-year increase in revenues for the hotel business to USD267m, with domestic revpar up 8.6%, partially offset by a 7.8% decline in international revpar, resulting in a 3.0% increase in total system-wide revpar compared with the fourth quarter of 2013.
The development pipeline at the end of the quarter included approximately 960 hotels and 117,000 rooms, of which 57% were international and 64% were new construction.
Looking forward, the company forecast 2015 hotel group Ebitda of USD360m to USD375m, against USD327m for 2014. Dolce Hotels & Resorts was not expected to make a significant Ebitda contribution until 2016. For the wider Wyndham Worldwide group, Ebitda expectations were lowered by USD15m to between USD1.285bn and USD1.315bn as a result of unfavourable currency exchange.
Commenting on Starwood Hotels & Resorts’ decision to spin-off its timeshare division, Holmes said that the company would “at all options and all opportunities”, but saw a “great connectivity” between its businesses and was continually looking at how they could “cross fertilise and cross market”. Wyndham’s timeshare business accounts for close to half of the total business.
The company appears set on adding businesses, rather than taking away.

HA Perspective [by Chris Bown]: Dolce provides Wyndham with an opening into the larger conference hotel market, and there’s a promise to spend to grow the chain in a way that has not been possible before. With three of the US Dolce portfolio branded as corporate training centres for IBM and American Airlines, here too is the opportunity to showcase the Wyndham portfolio to larger corporate customers.
Does the business have scale in Europe? Not right now, and while Wyndham will be able to integrate some of the European Dolces into its own portfolio, the worry is that the Dolce properties in France – a country where the group has just two other hotels – will be left rather on their own. Wyndham might do well to look for its next acquisitions, at ways to bolster its patchy coverage of the European hotel marketplace.
[Additional comment by Andrew Sangster]: Wyndham is a timeshare and exchange business with a fee-based hotels business bolted-on.
The economy and budget franchising hotel business in the US has looked tired for some time and the move into management was clearly part of an effort to position the group in more upscale segments. The Dolce acquisition was no doubt part of this logic.
But in in absolute terms, Wyndham is simply not a significant player in the upscale hotel business and the acquisition Dolce does not radically alter this situation.
In contrast, Wyndham is both the biggest timeshare company in the world and the biggest player in exchange. Investors might reasonably ask why Wyndham is bothering with the hotel business. Within the exchange and holiday rentals business Wyndham is working hard to cross market its brands. It seems logical that this approach is taken with the hotel business as well. In the absence of obvious “great connectivity” and cross-fertilisation it seems hard to see why the deal-making management team at Wyndham will hang on to the hotels business.
Meanwhile, the Dolce acquisition delivers to Wyndham access to a seasoned sales-force in conferencing and incentive travel which should help bolster its upscale properties. And building a stronger management business will certainly help make the overall hotels business a more attractive target.

Share →