Choice Hotels Claims Wyndham Merger Would Have ‘Clear Path to Completion’

Choice Hotels on Wednesday called on Wyndham Hotels & Resorts to return to merger talks while publicly responding to concerns Wyndham executives had raised about “execution risk” — including questions about regulatory scrutiny.

Meanwhile, Wyndham issued a statement saying its board of directors remains confident that its “standalone growth prospects offer superior, risk-adjusted returns. It once again rejected the hostile merger, which would value Wyndham at $7.8 billion (plus debt),

One issue in dispute is whether U.S. antitrust watchdogs would balk at consolidation. Choice Hotels has a 16% share of the branded U.S. economy hotel market, while Wyndham has 36%, the FT reported.

Executives at Choice said they had received advice that a merger would receive regulatory approval. (Choice is paying for legal advice from Willkie Farr & Gallagher.)

“Independent hotels comprise nearly two-thirds of the economy segment and close to 40% of the midscale segment,” said Choice Hotels.

On Wednesday, data from CoStar’s STR came up with a somewhat different figure, saying that “half of U.S. economy-class hotel rooms are unbranded.”

Choice Hotels executives also noted that major hotel groups such as Hilton, Hyatt, and Marriott have this year announced new brands to compete in the premium economy and midscale segments. This fresh rivalry would add to the competitive landscape already featuring Best Western, Extended Stay America, G6 (Motel 6), Oyo, Red Roof Inn, and Sonesta.

Choice Hotels’ comments came on the same afternoon that Wyndham executives issued a release reiterating their disinterest in talks. It also came a day ahead of Wyndham’s earnings call.