While managing hotels is a small part of Wyndham Hotel Group’s business compared with its franchising efforts, securing more management contracts is an important piece of the company’s expansion efforts, according to President and CEO Geoff Ballotti.
LOS ANGELES—Wyndham Hotel Group’s two latest brand acquisitions could point to similar purchases in the future as the Parsippany, New Jersey-based company focuses on building its management contract business.
President and CEO Geoff Ballotti conceded that the management side of the business won’t ever match the footprint of Wyndham’s franchising business. But management contracts are an important part of the company’s growth, he said during a media luncheon at the recent Americas Lodging Investment Summit.
While the vast majority of Wyndham’s properties are controlled via franchising agreements, the company’s December 2016 acquisition of Fën Hotels shows its commitment to growing its management contract business, he said.
“Managed hotels are very important to raising the image, the consumer perception, of the entire company,” Ballotti said, singling out Wyndham Grand assets in Clearwater, Florida, and Orlando, Florida, as primary examples of the billboard effect. “The halo effect that draft off the Wyndham name is a big step. I have never been more convinced that (management contracts) will help better define Wyndham.”
Wyndham added 26 management contracts—primarily in Central and South America—with the acquisition of Buenos Aires-based Fën Hotels and its Esplendor Boutique Hotels and Dazzler Hotels brands. The February 2015 deal to acquire Dolce Hotels and Resorts added 24 management contracts to Wyndham’s roster.
Ballotti also pointed to the addition of hotels from the Hospitality Properties Trust and FelCor Lodging Trust portfolios as signals that Wyndham means business in the management contract sector. That side of the business, he noted, helps better position the Wyndham Grand and Wyndham Hotels brands in the upper upscale and upscale chain scale segments, respectively.
Growth is the goal
The company’s decision to pursue management contracts through the acquisition of management companies was made with overall growth in mind, Ballotti said.
“It was a conscious decision that we made to grow Wyndham, our image and brand position, and that managing hotels would be a major part of the mission,” he said. “To have a management presence with great operators opens up our ability to put our brands in that part of the world.”
Growth will continue throughout the portfolio of parent company Wyndham Worldwide, Ballotti said. The company’s hotel portfolio had 7,930 properties and 689,800 rooms as of 30 September 2016—a 2.7% net room increase year over year and the equivalent of two hotels every day of the year, Ballotti said.
“We’ve been saying goodbye to a lot of rooms that did not meet our quality standards,” he said, adding that he expects the final 2016 numbers (to be released 15 February) to be close to the 43,000 rooms that exited the system in 2015. “Over 90% of the guestrooms that are leaving us are below the quality standards.”
Wyndham Hotel Group has 17 hotel brands in its portfolio: Esplendor, Dazzler, Dolce Hotels and Resorts, Wyndham Grand, Wyndham Hotels and Resorts, Wyndham Garden Hotels, Tryp by Wyndham, Wingate by Wyndham, Hawthorn Suites by Wyndham, Baymont Inn & Suites, Microtel Inn & Suites by Wyndham, Ramada, Days Inn, Super 8, Howard Johnson, Travelodge and Knights Inn.
“If we keep positioning our brands, making them more relevant than they’ve ever been, there’s always room for more brands,” Ballotti said, adding that there are regions in the world in which the company would like to strengthen its position.
The CEO touched on a variety of other topics during the hourlong session—including the company’s Wyndham Rewards loyalty program.
In 2016, each of the company’s 16 brands (before the Fen acquisition) improved their J.D. Power & Associates, TripAdvisor and internal review scores in the same year for the first time, Ballotti said.
“We’re raising our quality level as we work hard to raise our brand positionings,” he said.
That includes its positioning among its most loyal customers, he added.
“The other big transformational move for us was our investment in loyalty two years ago,” Ballotti said, noting that during the ensuing two years the company’s Wyndham Rewards program went to the top of the U.S. News & World Report hotel loyalty program rankings. “Loyalty has never mattered more to us.”
Ballotti said Wyndham’s single-tier approach to its loyalty program is what guests are looking for because, with it, they know exactly what they need to earn their perks. The simplicity of it also appeals to owners, who get paid for redeemed loyalty stays when their occupancy reaches 95%.
“Loyalty has become so complicated, so difficult, so confusing, but most importantly so devalued,” he said.