Wyndham Hotels & Resorts released its third-quarter 2023 earnings results Wednesday, about a week after Choice Hotels International made a public bid to acquire the company for $90 per share, or some $7.8 billion, an offer Wyndham’s board of directors unanimously rejected within hours.
In an earnings call with analysts Thursday morning, Wyndham President and CEO Geoff Ballotti said its shareholders are being “overwhelmingly undervalued,” since Choice’s stock fluctuations in recent days make its $90 per share bid closer to $86 per share, confirming some experts' speculations. “Choice has not offered our shareholders any protection against potential continued downward volatility,” he added in the call.
Wyndham executives reiterated the company’s rejection of Choice’s proposal on the call, saying as it stands, the deal would cause “irreparable damage to our business and erosion to Wyndham shareholder values” especially since Choice’s platform has “no organic growth, a less-vibrant loyalty program and virtually no international capabilities.”
Minutes before Wyndham’s earnings report went live Wednesday, Choice released a statement calling on the company to return to the negotiating table, though Choice did not raise its bid price.
“We respect Wyndham's desire to achieve the best outcome for its shareholders, but that can't happen if Wyndham unilaterally ends our discussions,” said Choice President and CEO Patrick Pacious in the Wednesday statement. “Both companies' shareholders have expressed to us their understanding of the tremendous value this combination could deliver.”
Ballotti, in the earnings report, said the company’s strong third-quarter results support his belief that Wyndham shareholders are currently in the best hands, noting that the company’s standalone growth prospects offer “superior, risk-adjusted returns” to its shareholders.
In its earnings report, Wyndham posted 3% global RevPAR growth in the third quarter of 2023, as compared to the same period last year, with RevPAR growing 1% in the U.S. and 6% internationally. The company also reported that it returned $134 million to shareholders in the third quarter.
Wyndham also reported third-quarter growth in its development pipeline, which increased 12% year over year to a record 237,000 rooms, with both ongoing domestic and international organic net rooms growth. The company saw an 8% increase in hotel contracts awarded to franchisees in the third quarter, which drove its development pipeline to a record 1,930 hotels, Ballotti shared.
In Q3, Wyndham signed over 230 hotel contracts, including 60 new construction projects for its Echo Suites extended stay brand.
Development growth is expected to continue for the remainder of the year and beyond, Ballotti said, as Wyndham focuses on continued system expansion of the Echo Suites brand, further improvements in franchisee retention and multi-year benefit from the U.S. infrastructure bill.
Currently, approximately 69% of Wyndham’s pipeline is in the midscale and above segments, while some 80% of the pipeline is new construction, the earnings report detailed.
While Wyndham has rejected Choice’s acquisition offer as it stands, Ballotti said the company is “open to any and to all avenues to create value for our shareholders,” in the earnings call. Some industry players, though, are concerned about what a merger could mean for franchisees.
