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Wyndham CEO: We didn’t need a Radisson takeover to fuel growth

July 27, 2022
5 min read
Wyndham Hotel
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The executive team at Wyndham Hotels & Resorts isn’t losing sleep over the fact their competitors at Choice Hotels plan to acquire Radisson’s Americas division.

When Choice last month announced a deal to acquire Radisson Hotel Group Americas for $675 million, hotel industry chatter speculated whether this was some great loss for Wyndham. After all, Michele Allen, Wyndham’s chief financial officer, indicated on an investor call in April the company was exploring potential brand takeovers.

It would appear Radisson did not get far in Wyndham’s takeover exploration process.

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“Our teams stay very close to everything that's out there both domestically and internationally, including Radisson, which we've looked at multiple times over the years,” Wyndham CEO Geoffrey Ballotti said Wednesday on a company earnings call. “It's just never been a strategic fit for us over the years.”

A big reason for not pursuing a deal is that it wouldn’t pass Wyndham’s requirements for any type of merger or acquisition. Allen earlier in the call noted Wyndham’s M&A expectations are that a takeover target has to be “creative from an earnings and a net room growth perspective” and complement the company’s existing brand portfolio and geographic footprint.

In short: Any kind of acquisition has to bring something to the table that Wyndham doesn’t already have. Radisson’s Americas division didn’t provide this kind of “bolt-on” opportunity most hotel executives say they want these days.

Country Inn & Suites, Radisson’s best-known brand in the U.S., directly competes with Wyndham’s La Quinta, which Ballotti said is double the size. Radisson’s higher-end offerings like its namesake brand and Radisson Blu compete with Wyndham and Wyndham Grand, which also have larger footprints than the Radisson offerings.

“Again, having looked at it before in the past, it's never been for us strategically,” Ballotti reiterated. “[Radisson’s offerings are] not brands that we've ever felt we could grow more quickly than our brands, which compete with Radisson in those segments.”

This doesn’t mean other deals aren’t likely to happen. But, like Marriott’s leadership team, Wyndham’s executives appear to be after smaller, regional brands instead of hefty transformative deals (a la Marriott’s 2016 takeover of Starwood Hotels & Resorts, which brought in brands like Sheraton, W and Westin).

Marriott executives at the Americas Lodging Investment Summit last year noted they were more likely these days to pursue smaller deals that expanded their geographic reach. The company previously did this via acquisitions of brands such as Protea, a hotel brand largely in sub-Saharan Africa, and AC Hotels, which was initially concentrated in Europe.

“Nothing is off the table,” Allen said. “If it meets our criteria, we believe that consolidation in the industry is inevitable, and size and scale matter.”

Growth mode

Wyndham’s biggest strength this earnings season won’t be its level of profitability this quarter — The company’s $92 million profit is impressive, but Hilton reported a $367 million profit earlier in the day.

But it does have a major bragging point: The company’s Memorial Day Weekend performance was the best for that holiday weekend in the history of Wyndham, Ballotti said. Hotel demand for the company over the July 4th holiday in the U.S. exceeded 2019 levels and further plays into Wyndham's strength as a hotel company largely catering to drive-to and leisure travel segments.

"Our guests are staying longer and spending more at our hotels than they did in 2019 and, importantly, our booking windows continued to increase," Ballotti added. "Consumer intent to travel and their willingness and ability to spend remains healthy."

Further, the company’s continued expansion with new contracts awarded for more hotels is something analysts from Truist Securities noted they don’t expect to see from many other companies this earnings season."

Wyndham awarded 185 new hotel contracts in the second quarter, up from 165 in the first three months of this year and beating out the 154 new contracts signed in the second quarter of 2021.

Seeing that the general trend in the hotel industry is a decline in the development pipeline, it is impressive Wyndham is gaining strength and is a formidable player when it comes to appealing to hotel owners considering a brand to link up with.

Further, the company demonstrated it is increasingly appealing to hotel owners operating in higher-end segments of the industry instead of the economy segment travelers might typically associate with Wyndham. About 80% of Wyndham’s roughly 208,000-room development pipeline is in the midscale and higher segments of the hotel industry.

“The big tailwind for us is going to be on the network growth side,” Ballotti said. “We think that the reason for that is our franchisee engagement, given all the support that we've shown our franchisees and small business owners throughout this pandemic, has never been higher.”

Featured image by Courtesy of Wyndham Hotels & Resorts
Editorial disclaimer: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airline or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

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    For a limited time, earn 80,000 bonus ThankYou® Points after you spend $4,000 in purchases within the first 3 months of account opening

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  • 80,000 Points are redeemable for $800 in gift cards when redeemed at thankyou.com
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