Wyndham eyes a brand takeover after a profitable start to the year
Wyndham Hotels & Resorts, owner of brands like La Quinta and Days Inn, this week reported a $106 million profit for the first three months of the year. Profits during a pandemic are always a good thing, but company executives also zeroed in on brand growth during a Wednesday investor call.
It was a strong financial showing considering the omicron variant hindered travel demand earlier this year in the U.S. and continues to in many parts of the world like China, where lockdowns in Shanghai have Wyndham's hotels there operating at roughly 30% of pre-pandemic levels. But in the U.S., where Wyndham does a bulk of its business, 2019 performance levels were exceeded by 4%.
Wyndham has been one of the more resilient hotel companies during the pandemic, as its 22 brands largely cater to drive-to and leisure travelers at affordable price points. Company leaders Wednesday indicated the brand lineup is likely to grow if they can find the right kind of acquisition.
"We are focused on growing our business, so our first preference is to always invest for future growth, but we're going to be disciplined," Michele Allen, Wyndham's chief financial officer, said during the company's first-quarter earnings call. "We're not just going to do a deal to do a deal."
Allen didn't provide too much in the way of specifics of what kind of brand the company is chasing. It could be a "bolt-on" deal, where the brand is smaller but fills a gap Wyndham might have in its portfolio.
Marriott's executive team last year signaled they were pursuing these kinds of deals in their own mergers and acquisition strategy going forward. They previously did this when acquiring AC Hotels, which was initially concentrated in Europe, and Protea, a major hotel brand in sub-Saharan Africa.
However, Allen also noted Wyndham could eventually purchase a larger brand. The only specifics mentioned were the takeover target would have to be "accretive to earnings" and help the company beef up its overall guest room count within the first 12 months of the acquisition.
Wyndham's pursuit of a new brand comes months after executives at Choice Hotels, seen as a direct competitor to Wyndham due to its extensive lineup of affordably priced brands like Comfort and Clarion, indicated they were looking to add an upscale extended-stay brand, as well as an "upper upscale" brand. Marriott's Residence Inn is an example of an upscale extended-stay brand while Hyatt Regency is considered an upper upscale brand.
Like Wyndham, the Choice executive team didn't disclose what specific brands might fit the bill in their expansion plans.
"While we've been tracking some actionable opportunities this year, nothing so far has met our investment criteria," Allen noted Wednesday of Wyndham's brand pursuit.
No Inflation Pain
There was some industry speculation Wyndham's first-quarter earnings report could be a signal of whether travelers were going to shy away from booking hotel stays due to inflation.
The idea is that budget-conscious travelers are more sensitive to higher gas prices and hotel rates. That could be a hindrance to companies like Wyndham and Choice, which is why analysts have generally rallied around these companies pushing more into the higher-end brand segment.
However, Wyndham's leadership team refuted the idea inflation was taking a bite out of business. Instead, it appears to be a question of how high rates can go.
"We did not see any meaningful impact from rising gasoline costs, as occupancy for our select-service brands remained steady, about 96% of 2019 levels, in the weeks before and after the gas price increase in March," Wyndham CEO Geoffrey Ballotti said. "We expect to see continued strong drive-to, leisure demand throughout the summer season."
Wyndham's ability to maintain occupancy while rates soar backs Ballotti's claim. Average daily rates were up 8% in the first three months of this year compared to the same time in 2019. It has since moved to a 13% increase so far in April, and weekend rates are 18% higher than 2019 levels. Weekend rates at La Quinta are sometimes running as much as 25% higher than 2019 levels, Ballotti shared.
"I think the trend is that our franchisees are feeling that the summer of [2022] could replace the summer of 2021 as the best ever," he added.
That just means their best summer ever involves making a bigger dent in travelers' wallets. So far, occupancy rates at Wyndham indicate that travelers don't appear to mind.
Feature photo by Jonathan Weiss/Shutterstock.
TPG featured card
at American Express's secure site
Terms & restrictions apply. See rates & fees.
| 3X | Earn 3X Miles on Delta purchases. |
| 1X | Earn 1X Miles on all other eligible purchases. |
Pros
- Delta SkyClub access when flying Delta
- Annual companion ticket for travel on Delta (upon renewal)
- Ability to earn MQDs through spending
- Various statement credits for eligible purchases
Cons
- Steep annual fee of $650
- Other Delta cobranded cards offer superior earning categories
- Earn 100,000 Bonus Miles after you spend $6,000 or more in purchases with your new Card within the first 6 months of Card Membership and an additional 25,000 bonus miles after you make an additional $3,000 in purchases on the Card within your first 6 months, starting from the date that your account is opened. Offer Ends 04/01/2026.
- Delta SkyMiles® Reserve American Express Card Members receive 15 Visits per Medallion® Year to the Delta Sky Club® when flying Delta and can unlock an unlimited number of Visits after spending $75,000 in purchases on your Card in a calendar year. Plus, you’ll receive four One-Time Guest Passes each Medallion Year so you can share the experience with family and friends when traveling Delta together.
- Enjoy complimentary access to The Centurion® Lounge in the U.S. and select international locations (as set forth on the Centurion Lounge Website), Sidecar by The Centurion® Lounge in the U.S. (see the Centurion Lounge Website for more information on Sidecar by The Centurion® Lounge availability), and Escape Lounges when flying on a Delta flight booked with the Delta SkyMiles® Reserve American Express Card. § To access Sidecar by The Centurion® Lounge, Card Members must arrive within 90 minutes of their departing flight (including layovers). To access The Centurion® Lounge, Card Members must arrive within 3 hours of their departing flight. Effective July 8, 2026, during a layover, Card Members must arrive within 5 hours of the connecting flight.
- Receive $2,500 Medallion® Qualification Dollars with MQD Headstart each Medallion Qualification Year and earn $1 MQD for each $10 in purchases on your Delta SkyMiles® Reserve American Express Card with MQD Boost to get closer to Status next Medallion Year.
- Enjoy a Companion Certificate on a Delta First, Delta Comfort, or Delta Main round-trip flight to select destinations each year after renewal of your Card. The Companion Certificate requires payment of government-imposed taxes and fees of between $22 and $250 (for itineraries with up to four flight segments). Baggage charges and other restrictions apply. Delta Basic experiences are not eligible for this benefit.
- $240 Resy Credit: When you use your Delta SkyMiles® Reserve American Express Card for eligible purchases with U.S. Resy restaurants, you can earn up to $20 each month in statement credits. Enrollment required.
- $120 Rideshare Credit: Earn up to $10 back in statement credits each month after you use your Delta SkyMiles® Reserve American Express Card to pay for U.S. rideshare purchases with select providers. Enrollment required.
- Delta SkyMiles® Reserve American Express Card Members get 15% off when using miles to book Award Travel on Delta flights through delta.com and the Fly Delta app. Discount not applicable to partner-operated flights or to taxes and fees.
- With your Delta SkyMiles® Reserve American Express Card, receive upgrade priority over others with the same Medallion tier, product and fare experience purchased, and Million Miler milestone when you fly with Delta.
- Earn 3X Miles on Delta purchases and earn 1X Miles on all other eligible purchases.
- No Foreign Transaction Fees. Enjoy international travel without additional fees on purchases made abroad.
- $650 Annual Fee.
- Apply with confidence. Know if you're approved for a Card with no impact to your credit score. If you're approved and you choose to accept this Card, your credit score may be impacted.
- Terms Apply.
- See Rates & Fees