Wyndham Hotel Group Is Still in Deal-Making Mode

Don’t expect Wyndham Hotel Group to stop looking at making more deals in 2018 and beyond. After starting the year with the January announcement of a $1.95 billion acquisition of La Quinta Holdings, the company will continue to examine whatever new opportunities for more scale come along, whether through acquisitions or organic growth opportunities.

“We’re looking at every deal that presents itself, and will continue to do it,” said Wyndham Hotel Group CEO Geoff Ballotti during Wyndham Worldwide’s fourth-quarter and full-year 2017 earnings call Wednesday. However, Ballotti added, “We’re most excited about our organic growth in North America.”

In 2017, the hotel group saw its North American pipeline grow by 15 percent, and it saw increases in pipeline growth for its Hawthorn Suites by Wyndham, Wingate by Wyndham, and Trademark Collection brands.

“There’s great opportunity for organic and acquisition opportunities as they present themselves,” Ballotti said.

On the Agenda for 2018

Opportunity is an operative buzzword for parent company Wyndham Worldwide as it heads into the second quarter of 2018 with the intention of completing the spinoff of its timeshare and vacation rental business from the hotel division, as well as finalizing its acquisition of La Quinta Holdings and selling off its European vacation rental business.

Wyndham Worldwide CEO Stephen P. Holmes said the company has made “outstanding progress” on its plans to separate the company into two publicly traded entities: a hotel company and a combined timeshare and vacation rental company.

He also said the Wyndham has received “considerable interest from potential buyers” who are interested in buying the company’s European vacation rentals business, which reportedly could sell for up to $1 billion.

Holmes said of the spinoff, “Nothing is standing in the way of us getting this done by the second quarter,” adding that the company would prefer to have its European vacation rental business sold and its acquisition of La Quinta Inns & Suites completed by that time, too.

The Numbers

Wyndham starts 2018 with a positive balance sheet. U.S. tax reform helped the company more than beat its estimated profits in the fourth quarter of 2017, to the tune of $426 million. Total cash flow for 2017 was $799 million, up 2.2 percent from last year’s $782 million.

Chief Financial Officer David Wyshner said he expects the new tax rates to increase the company’s free cash flow by about $100 million annually.

In total, net income in the fourth quarter was $449 million, up from $164 million during the same time last year. For the full year, net income was $819 million, a 50.3 percent increase from $545 million a year earlier.

Despite the challenges of contending with three major hurricanes, an earthquake, and wildfires in the third quarter of 2017, Wyndham Worldwide still had stronger-than-projected earnings both in the fourth quarter and full year, Holmes said. Those events negatively impacted fourth-quarter revenues by $15 million, net income by $10 million, and earnings before interest, taxes, depreciation, and amortization by $16 million.

The hotel group in particular saw $332 million in revenues in the fourth quarter, up 5 percent from $316 million in the same period a year earlier. Fourth-quarter revenue per available room grew 4.5 percent in the U.S. and 4.6 percent internationally from the prior year, and average daily rate increased 5.1 percent to $67.01 in the fourth quarter.

Fourth-quarter hotel occupancy, at a rate of 52 percent, however, remained flat compared to the same period in 2016. Per-room revenue growth, said Wyshner, was driven primarily by the company’s economy brands. Full-year occupancy was 55.1 percent, average daily rate was $68.24, and revenue per available room was $37.63 — all slight increases from 2016.

The company also touted growth in its Wyndham Rewards loyalty program membership, saying the program now counts a total of 55 million members, with an anticipated 13 million members to be added once the La Quinta deal closes. Holmes referred to the program as the “blue thread” that will continue to connect both companies after the spinoff is completed in the second quarter.

As of Dec. 31, the company had a total of 728,000 hotel rooms in more than 8,400 properties worldwide.

For 2018, the company anticipates generating revenues in the range of $5.3 to $5.4 billion, and having adjusted net income of $702 to $722 million from continuing operations, which excludes the company’s European vacation rentals business and the impact of its purchase of La Quinta.