• Wyndham to pursue acquisitions 

Wyndham Hotel Group said that, as it split off from its parent company, it planned to continue making brand acquisitions.

The comments came as fellow franchisor Choice Hotels International hailed the diversity of its portfolio as it promised key money for the upscale Cambria brand.

At Wyndham Hotel Group, Geoff Ballotti, CEO, told analysts: “We will continue to look to opportunistically acquire and integrate brands into our franchising platform and for brand acquisition and hotel management opportunities in new and existing international markets.

“Over the last 30 years, we have averaged one brand acquisition every 18 months and we have the capability to integrate these brands both quickly and seamlessly providing owners with more distribution at a lower cost point. There’s a tremendous amount of chains out there today that are looking for distribution.”

April saw the group agree to sell its Knights Inn brand, described as the lowest domestic revpar brand in the portfolio “by a considerable margin” and responsible for 1% of the hotel group’s pro forma adjusted Ebitda. There were no plans to dispose of other brands.

One of the company’s most-recent acquisitions, La Quinta, underlined this pull away from Wyndham’s economy history, with Ballotti adding: “We’re seeing great growth from a pipeline standpoint in both the economy and in the mid-scale. And when layered on top of what we now have with La Quinta in the upper mid-scale space really exciting growth prospect from a new construction standpoint in the US.

“Our portfolio enables us to operate at virtually any price point. Our flags represent roughly 30% of the global branded economy hotel inventory, 40% of the branded economy hotel rooms in the US, and with La Quinta, nearly 40% of branded midscale hotel rooms in the US.”

The group said that it was continuing to target 3% net room growth post-split, having maintained the rate of expansion over the past three years.

The comments were made as part of the company’s first-quarter earnings call, where it reported a 4% year-on-year increase in revenue for the hotel business, with adjusted Ebitda rising by 17%. The group said that the results reflected reflected 8% growth in our core royalty and franchise fee streams including a three-point benefit from the AmericInn acquisition.

Global revpar grew 4.7% and global pipeline grew 3% year-over-year, including a 5% increase in the US. The group forecast full-year revenues of USD1.99bn to USD2.04bn – growth of 1% to 3% – with adjusted Ebitda expected at USD590m to USD610m, representing growth of 6% to 10%. Revpar growth was expected at between 2% and 3%.

At Choice Hotels International, the company forecast full-year adjusted Ebitda of between USD330m and USD337m, against the USD681.1m reported in the first quarter, a 15% rise on the year. Domestic revpar was expected to rise between 2% and 4% in the second quarter and between 1.5% and 3.5% for the full year.

The group used its results to confirm that it was investing USD500m in key money to support its Cambria brand, taking it from 37 hotels to 100 by 2020. Mark Shalala, VP, Cambria development, said earlier this month: “With Cambria’s upscale brand positioning within the Choice family, you will never compete against another Choice brand. Cambria is attracting more and more top sponsors, institutional investors, private-equity groups, and we’re rapidly gaining acceptance in the lending community. This is making raising equity and securing debt for new construction easier for our owners, as well as to refinance for current owners.”

The company was also focused on extended-stay brand Woodspring, which it closed on earlier this year, and where first quarter revpar was up by 13.5% on the year for the quarter. President & CEO Pat Pacious told analysts: “There is no indication that this was a one-time phenomenon. The extended-stay business is strong, and with Woodspring’s model we believe we outpaced the rest of the segment.”

Net domestic unit growth for 2018 was expected to range between 2.5% and 3.5%.

HA Perspective [by Katherine Doggrell]: Neither Wyndham nor Choice was fretful over the comments made in other earnings calls, noticeably Marriott International, about the tightening of construction conditions in the US, confident that the heft of their brands in the domestic market would see them right. And, like Marriott International, they have been hoovering up brands to make the offering to owners all the more persuasive.

Now the market is watching to see how Wyndham Hotel Group will fare on its own. It is expected to trade at a premium compared to the current trading of the group as a whole, with the timeshare business blamed for pulling the company down.

 

The group has been tidying up its estate, shedding poorly-performing hotels and adding the “…by Wyndham” suffix to underline the branding. With the markets more confident without the timeshare element confusing the issue, raising funds is likely to be easier. It seems clear what the cash will be spent on. And it won’t be an economy brand.

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