Wyndham is focusing on retaining its position in the economy lodging market while also expanding into higher-end properties that generate larger franchise fees. This shift in strategy comes after rival Choice Hotels abandoned its hostile takeover attempt, leading to an increase in development deal signings for Wyndham. The company aims to maintain a strong presence in economy hotels while growing its market share in premium properties.
Wyndham’s executives are pursuing a two-pronged strategy to achieve their goals. President and CEO Geoff Ballotti stated that the company is actively moving into higher chain scales while continuing to lead in the economy segment. Since going public in 2018, Wyndham has seen a shift in its portfolio mix towards more upscale properties. The company recorded a 3.7% increase in net rooms added to its system size in the quarter and grew its development pipeline by 8% year-over-year. The growth was more focused on higher-end chain scales.
The shift towards more premium brands in Wyndham’s portfolio mix is a deliberate strategy by management. The company’s domestic pipeline is expected to bring in higher average revenue per available room (RevPAR) and higher franchise fees compared to its current system. Wyndham is also investing more of its own money in financing these deals to secure them. This strategy has been successful in penetrating upper chain scales and higher RevPAR markets, according to Chief Financial Officer, Michele Allen.
Following Choice Hotels’ abandonment of their takeover bid, Wyndham saw a quick increase in development deal signings. Owners who were previously uncertain about committing to deals with Wyndham have since agreed to sign, leading to a rise in signings for both new construction and conversions. The company reported a positive trend in their conversations with potential partners and is optimistic about the growth in its development pipeline.
In the first quarter of 2024, Wyndham generated a net income of $16 million, a decrease from $67 million in the same quarter a year ago. This drop was primarily attributed to transaction-related expenses resulting from the unsuccessful hostile takeover attempt by Choice Hotels. Despite the drop in net income, the company generated $305 million in revenue and an adjusted EBITDA of $141 million in the quarter.
Overall, Wyndham’s focus on expanding into higher-end properties while maintaining its presence in the economy lodging market is driving growth in development deals and the company’s overall portfolio mix. The increase in development pipeline and successful conversions following the end of the takeover bid by Choice Hotels indicates a positive outlook for Wyndham’s future growth and market positioning. Despite some financial challenges in the first quarter of 2024, the company remains optimistic about its strategic direction and potential for long-term success.
