Wyndham split should allow ‘sharper focus’ on core
Wyndham split should allow ‘sharper focus’ on core
03 AUGUST 2017 9:55 AM

Wyndham Worldwide plans to spin off its hotel and timeshare business units into separate companies, reflecting increased opportunities to raise capital and possibly pursue M&A activity.

PARSIPPANY, New Jersey—Wyndham Worldwide plans to split its company into two separate publicly traded businesses: Wyndham Hotel Group on one side, and its timeshare businesses, Wyndham Vacation Ownership and Wyndham Destination Network, on the other.

During the company’s second-quarter earnings call with analysts Thursday morning, Wyndham Worldwide Chairman and CEO Stephen Holmes said the company is “confident that a spinoff of the hotel business … is the best structure to retain shareholder value. … allowing each company to retain sharper focus on its core business, facilitating capital raising … and positioning each company to make changes necessary to respond to the market.”

On the hotel side
Wyndham Hotel Group will retain its 18 global brands and will become a new publicly traded pure-play hotel company following the planned split, Holmes said. Current Wyndham Hotel Group President and CEO Geoff Ballotti will retain his role in the organization.

The split is expected to be completed in the first half of 2018, subject to the Wyndham Worldwide Board of Directors’ approval. Holmes said the new company’s names and details regarding capital structure will be released in the coming months.

Holmes said more potential for mergers-and-acquisition activity in the future is something he’s excited about.

“Eleven years ago (when Wyndham Worldwide spun off from Cendant Corporation), I had high hopes and aspirations for M&A … but the market didn’t provide us that opportunity with the multiple we were trading at,” he said. “Both (the new companies) will have significant free cash flow and hopefully a multiple more indicative of its value and will be able to be more aggressive and more active in the M&A landscape.”

He said the hotel company will remain focused on being an asset-light, franchise-focused organization. As of 30 June 2017, Wyndham Hotel Group had 705,700 guestrooms open in more than 8,000 hotels globally, with 150,800 guestrooms in the pipeline.

On the timeshare side
The new company formed from Wyndham Worldwide’s timeshare businesses will include the company’s Wyndham Vacation Ownership—which represents vacation-ownership properties—and Wyndham Destination Network—which represents timeshare exchange and vacation rentals—businesses, including timeshare exchange company RCI.

With the announcement of the planned split, Holmes also said the company will “explore strategic alternatives to fully realize their potential” for its European rental brands.

The new timeshare company will be headed by Michael Brown, who was named CEO of Wyndham Vacation Ownership earlier this year.

Holmes pointed out both companies in the future will continue to share what he calls the “blue thread of Wyndham,” meaning both companies will participate in cross-business programs like Wyndham Rewards.

Q2 hotel performance
While talk surrounding the proposed split dominated the conversation during the company’s earnings call, Holmes and EVP and CFO Tom Conforti pointed out that revenue and revenue-per-available-room growth were positive for Wyndham Hotel Group in the second quarter.

Revenue reached $345 million in the quarter, up from $334 million in the same quarter last year, according to a news release.

Second quarter domestic same-store RevPAR increased 2.8% compared with the second quarter of 2016. In constant currency, global systemwide, same-store RevPAR increased 3.3%.

Holmes also reiterated the Hotel Group’s recent brand news highlights, including:

In terms of unit growth, Wyndham Hotel Group notched a 3.3% year-over-year net room increase to 705,700 in the second quarter of 2017. The development pipeline increased to nearly 1,230 hotels and more than 150,800 guestrooms—an 18% year-over-year increase—of which 57% are international and 67% are new-construction.

Systemwide, Wyndham Hotel Group’s average occupancy for the second quarter was 57.9% and average daily rate was $68.09.

Wyndham Worldwide’s stock was up 37.7% year to date as of press time. The Baird/STR Hotel Stock Index was up 23.8% for the same time period.

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