• Wyndham’s ‘fantastic tuck-in’

Wyndham Hotel Group has acquired AmericInn for USD170m, adding a midscale brand to the company portfolio.

The deal came as RLJ Lodging Trust confirmed that it had rejected an unsolicited bid from a private equity group, thought to be Blackstone Group.

Wyndham Hotel Group will acquire AmericInn and its management company, Three Rivers Hospitality, from Northcott Hospitality for USD170m.

AmericInn’s portfolio consists of 200 primarily franchised hotels with approximately 11,600 rooms in 21 states, predominately in the Midwestern U.S., Ohio Valley, and Mountain states. The brand’s US pipeline consists of 23 hotels.

Committed to its asset-light strategy, Wyndham Hotel Group will explore options to divest the owned portfolio, which consists of 10 hotels.

The deal, will bolster Wyndham Hotel Group’s existing collection of more than 1,500 midscale hotels while also increasing its footprint in the Midwest and taking the company to a portfolio of 20 brands.

Geoff Ballotti, Wyndham Hotel Group’s president & CEO, said that the deal grew Wyndham in the “heartland” of the US, where it saw “great opportunity for continued growth. AmericInn’s guest-centric culture aligns perfectly with our values, making it a fantastic tuck-in brand for us. And with the global middle class expected to more than double in the next 10 years, we know investing in the midscale segment allows us to offer great experiences and value at price points that travellers need and where they want to be.”

The start of 2017 saw STR forecast that, among the chain scales, the midscale segment was expected to see the only year-over-year increase in occupancy this year. Next year all seven chain scales are expected to see occupancy fall, as demand falls in line with demand.

AmericInn was the latest addition to Wyndham Hotel Group’s growing portfolio of brands following last month’s launch of The Trademark Hotel Collection, a soft brand for upper-midscale-and-above independent hotels. Late last year, the company acquired Fen Hotels and its Dazzler Hotels and Esplendor Boutique lifestyle brands, growing its presence and management business in Latin America.

Steve Holmes, CEO, Wyndham Worldwide, presaged the purchase of AmericInn, which the group is thought to have been eyeing since 2008, at its most-recent results presentation, commenting: “Every hotel company in the world is trying to improve the quality of their brands by getting rid of the weaker ones and bringing in the stronger ones. And that’s kind of a forever fight for us.

“We see new construction ramping up and we’ll continue to grow internationally as we’ve been doing for the last 10 years in a meaningful way. But our focus right now is on that domestic system, and we’ve cleaned a lot and we’re now looking at getting to a faster pace of growth.”

Scale and loyalty have driven the group’s actions. Holmes, CEO, Wyndham Worldwide, hailed the group garnering the top spot of the US News & World Report Best Hotel Rewards Programme in 2016, commenting that it was based on “benefits, geographic coverage, number of hotels in the network, and property diversity”.

Earlier this year the company described its loyalty programme as the “blue thread” that ran through its business, as it reported plans to link the timeshare business, while also confirming that it was considering spinning it off.

At the end of March Wyndham Rewards passed 50 million member enrolments. Since its re-launch in 2015, membership was up 21% and redemptions for room nights grew to 79%. Wyndham Rewards members make up 37% of hotel guests in North America, up from 31% when the programme was re-launched.

As Wyndham Hotel Group was adding to its stable, RLJ Lodging Trust said in an SEC filing that it had rejected a USD24-per-share offer for the group which would have valued it at about USD3bn from a mystery private equity group (widely thought to be Blackstone). Had it accepted the offer, it would have ended RLJ’s offer to acquire Felcor Lodging Trust, itself an owner of Wyndham-branded hotels. The plan to merge and create a Reit with an enterprise value of USD7bn was announced in April.

It is not known whether the private equity group will increase its offer.

RLJ disclosed that it had received the unsolicited proposal on 12 June rejecting the bid as “not reasonably likely” to better its plan to acquire FelCor. The private equity firm twice raised its offer, eventually reaching USD25.50 a share on 23 June before the board would consider the offer.

After an additional examination of RLJ, the bidder resubmitted on 6 July at the original price of USD24, which was duly rejected. The ball is now with, possibly, Blackstone.

HA Perspective [by Katherine Doggrell]: Wyndham Hotel Group has a positive pantheon of brands in its stable, from Howard Johnson to Super 8 and Knights Inn. Fans of independent films are likely to recognise them as giving employment to vaguely discontented youths with acoustic guitars and a problem with authority in the non-glamorous bits of the US.

And, to that, the group has added AmericInn, a brand which, to us folk in the Old World, is something of a mystery. But this is no longer the old world, but a new realm where, as we hear frequently, times they are a changin’. The global operators are about distribution and offering owners a broad spectrum of options, not wildly individual brands.

As has been long known in the hotel sector, the general public cares not for hotel brands. They do not feature in Interbrand’s top 100 (although Alexa owner Amazon does) so why not add one in the US heartland and at such an agreeable price? Moody’s said that, although Wyndham had not said how it would fund the acquisition, “we believe the deal would not meaningfully change the company’s leverage, even if it borrowed the full transaction cost”.

This deal adds not only a brand, but also some hotels to sell on. Can we expect operators to start buying up small groups of hotels, skimming off the brands and then tossing the hotels back into the water? A rapid-fire method of acquiring brands while remaining asset light.

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