• Sun. May 19th, 2024

Wyndham CEO Touts Brand Recognition, Low-Renovation Costs as Differentiators Amid New Competition


May 1, 2023
The Wyndham Torreón, located in the city of Torreón in the Mexican state of Coahuila, was converted to the Wyndham Hotels & Resorts flagship brand in the first quarter of 2023. (Wyndham Hotels & Resorts)


The global hotel brand companies are flocking to the extended-stay space as well as lower-priced segments, following pandemic-era travel trends that have somewhat insulated Wyndham Hotels & Resorts, among others, from macroeconomic strife and helped its hotels to recover more swiftly from an unprecedented drop in demand.

Examples of this include the upper-midscale, extended-stay brand Hyatt Studios, which Hyatt Hotels Corp. announced April 18, and a soon-to-launch, yet-unnamed lower-midscale, extended-stay brand that Hilton President and CEO Chris Nassetta teased on an earnings call with analysts last week.

Wyndham has a bit of a head start on those brands, having launched its economy, extended-stay brand Echo Suites in March 2022, and with 12 of its 24 brands — and a bulk of its hotel rooms — in the economy to midscale segments.

Echo Suites is Wyndham’s second extended-stay hotel brand, behind the midscale Hawthorn Suites, which it acquired in 2008. It’s also an all-new-construction brand, with an average development timeline of 18 months, according to Ballotti.

The brand launched with 120 hotels signed — that number is 205 as of the end of the first quarter — and broke ground on its first hotel in September 2022. Ballotti said he expects construction to begin on another two dozen hotels this year, and projects the Echo Suites brand will begin to contribute to Wyndham’s systemwide room count by next year.

“We said we’d have 100 open in the first five years. … We’re expecting 300 in the first 10 years, and we feel very good about both of those numbers based on where we are,” he said.

Still, hotel industry financial analysts, who in general are positive regarding Wyndham’s performance and development prospects, say that one of the key risks for the company is the introduction of new competition in its core segments.

On Wyndham’s first-quarter earnings call last week, Stephen Grambling, senior equity research analyst at Morgan Stanley, said “there’s lots of talk … [of] some competitors moving into various areas that at least on the surface may have overlap with some of your brands, either in the extended-stay or economy and midscale segments.”

In commentary after that call, Michael Bellisario, senior hotel research analyst and director at Baird, said risks for Wyndham “include competition from other major global brand companies, the sustainability of brand equity and customer loyalty in today’s competitive market,” as well as “exposure to a more price-conscious traveler.”

Hyatt President and CEO Mark Hoplamazian said he expects the first Hyatt Studios hotel to break ground this year and open in 2024.

Ballotti’s answer to questions regarding the shifting competitive landscape for his company’s brands: “We’re not seeing any impact” or “slowdown” in developer interest or conversion signings for Wyndham brands.

He attributed this in large part to brand awareness, as well as lower costs to convert hotels to Wyndham’s hotel brands.

“Our renovation and [property improvement plan] costs generally run three to five times less than many of our larger brand peers,” he said, adding “we have the most recognized brands in the economy space” that are performing at historic revenue per available room index.

“We know these owners, and we know what’s important to them — and what’s most important to them is their cash outlay. What’s also important is a very flexible relationship with their brand and their cash-on-cash return,” he said.

“We have plenty of owners that are building new-construction Microtels, for example, right now … along with competitive economy and competitive midscale and upper-midscale brands, and they’ll tell you that their Microtels deliver best-in-class cash-on-cash returns. And certainly we have thousands of owners who will tell you that there’s no better cash-on-cash return right now than their Super 8s and their Days Inns.”

Costs to operate and the technology stack at Wyndham hotels are also lower than that of many competitors, Ballotti said.

He added that a “low percentage” of hotels converting to Wyndham brands require financing, and brand conversions were up 7% domestically and 3% globally year over year in the first quarter.

“We opened more domestic economy and we opened more midscale conversion rooms than we did last year. We’re pleased with the progress and we’re not seeing any signs of a slowdown there,” Ballotti said.

The performance of Wyndham’s hotel brands through the COVID-19 downturn, and others, are incentive for hotel owners looking to build, he added.

Wyndham Chief Financial Officer Michele Allen called this factor resistance to “any economic gravity.”

“Our brands, really all the last three downturns, outperformed — by 300 basis points post-9/11 … by more than that after the [Great Recession] … and throughout COVID 25% better than the overall industry from a RevPAR standpoint,” Ballotti said.

Read more news on Hotel News Now.

Leave a Reply

Your email address will not be published. Required fields are marked *