Drawing on exclusive data from the TOPHOTELPROJECTS database, we analyse how Wyndham Hotel Group and its construction pipeline have been affected by Covid19.
After several months of the Covid19 crisis raging on, it’s time to look at how some of the industry’s largest players have been impacted.
Here, we examine how Wyndham Hotel Group has dealt with the sudden drop in consumer demand, explore what effect the crisis is having on the growth of its portfolio, and consider what it all means for the company’s future prospects.
Hotel project pipeline review
One of the world’s largest hotel groups, Wyndham has spent the last few years growing the geographic footprint of its brands, diversifying and reaching a wider target market than ever before. Moreover, the company has shown little inclination to slow down in recent times, and currently has 139 hotels in its project pipeline.
Projects in progress
Nevertheless, Wyndham has not been immune to the effects of the Covid19 crisis, which has had a huge impact on the hotel industry. This is perhaps reflected in the fact that 15 of its projects are currently on hold, while a further five have been cancelled, as of 13 May 2020.
When Wyndham announced its Q1 results on 5 May, a 2% growth in system-wide room count and a 4% year-on-year growth in its development pipeline to 189,000 rooms was reported. The company added that its pipeline consisted of 1,500 hotels in total.
In Q1, 2020, the group opened 58 new hotels with a total of 6,200 rooms, despite the crisis. This represented a year-on-year decline of 47%, as newbuild openings were delayed in China and conversion volumes were materially lower in the US during March.
In an accompanying earnings call, CEO Geoff Ballotti noted that the pandemic is delaying the opening of some hotels, even when projects are completed, since the owners are waiting for travel demand to return first.
Wyndham’s focus on hotel conversions could prove to be an advantage moving forward, as cash-strapped independent hotels look to boost business by joining a reputable brand. To this end, the group has initially earmarked $30 million to support development activities, with the potential to increase this amount further in future.
“Converting independent hotels to our brands has always been an important part of Wyndham’s consistent rooms growth through both up and down cycles,” Ballotti reflected during the same earnings call. “As this industry recovers from Covid19, we believe conversions will become an even more important growth vehicle for us.”
Wyndham’s share-price development
Before the crisis hit, Wyndham’s share price hovered around the $60 mark for many months. On 19 February, the stock stood at $59.96, before dropping to $21.88 by 18 March. Over the following week, the price rebounded somewhat, only to drop down to $26.29 on 3 April.
Since then, Wyndham’s stock has been steadily recovering and reached a value of $38.97 on 5 May. This perhaps reflects the reopening of hotels in China, alongside signs of recovery in Europe and some US states.
During the earnings call, Ballotti expressed confidence in Wyndham’s prospects, not least because the company is present in a lot of markets perceived to be less affected by the crisis, such as smaller metropolitan areas, and operates primarily in the economy and midscale sectors.
“Our brands…have been outperforming the higher-end, full-service hotels,” he added. “With over 90% of our hotels in our system in the select-service space, these hotels are less labour-intensive and typically operate at higher margins than full-service hotels.”
Wyndham’s messaging throughout Covid19
Once it became evident that the crisis would have a devastating impact on the hospitality industry, Wyndham quickly took mitigating measures to protect staff and guests from infection, as well as to secure the company’s cash-flow and support franchisees.
These measures included closing hotels where needed, cutting capital expenditures and allowing hotel owners more flexibility with certain brand standards and fees. This resulted in the group realising cash savings of about $255 million in Q1 2020, the company reported on 4 May. At the same time, Ballotti stated his belief that the company’s “asset-light business is well-positioned for a quick recovery when travel demand returns”. And in the accompanying earnings call, chief financial officer Michele Allen noted that the company could leverage past experience in growing net rooms through lodging cycle downturns by igniting its conversion engine, as seen during the 2008 financial crisis when Wyndham grew its system by 3%.
Allen also predicted that conversion rates would remain slow in the near-term but accelerate as soon as travel begins to return. And Ballotti pointed out that travellers will in future be looking for brands they can trust not only for quality, but for cleanliness and safety.
On 30 March, the company issued a statement responding to the extraordinary challenges presented by Covid19. “We remain confident in the strength and resiliency of our business and we are committed to the health and safety of our team members, owners and guests,” the company said. “The travel industry will inevitably rebound, and when it does, Wyndham will be there, ready to welcome the everyday traveller to its approximately 9,300 hotels around the world.”
With more than 9,000 hotels around the world, Wyndham Hotels & Resorts has an extraordinary global footprint unlike any other.
