Wyndham (WYN) Closes Acquisition Of AmericInn For $170M

Leading global hospitality company, Wyndham Worldwide Corporation (NYSE:WYN) recently completed the buyout of Minnesota-based AmericInn hotel brand and its management company, Three Rivers Hospitality, from Northcott Hospitality.

Consequently, AmericInn became a part of Wyndham Hotel Group, which is one of the three hospitality business units of Wyndham. In fact, Wyndham Hotel Group currently has the highest number of hotels in the world to its name and is a leading hotel brand franchisor and hotel management services provider.

We note that the latest acquisition has further bolstered the hospitality giant's footprint of more than 8,100 hotels across 79 countries and strengthened its position as a midscale segment leader in the United States. Also, Wyndham Hotel Group's portfolio of brands has now grown to 20 with the addition of AmericInn. Going forward, the company anticipates to fully integrate the brand by mid-2018.

Deal Details

The $170 million deal, announced in July, is a huge positive for Wyndham. This is because it expands the company's North American portfolio by 200 hotels across 21 states and nearly 12,000 rooms, predominately in the Midwestern U.S., Ohio Valley, and Mountain states.

Markedly, AmericInn’s U.S. pipeline currently consists of 23 hotels, reflecting ongoing expansion efforts. In fact, Wyndham Hotel Group aims to take its latest brand addition from a renowned Midwestern name to a national player with potential for growth beyond U.S. borders in the long run.

As a result, AmericInn owners will be allowed an access to unrivaled sales, marketing, and distribution channels. Also, guests can explore excellent vacation experiences at more than 30,000 hotels, condo-style suites and homes worldwide through the superlative Wyndham Rewards loyalty program.

Meanwhile, in line with its asset-light strategy, Wyndham Hotel Group allocated Champion Hotels the rights to procure AmericInn's owned portfolio that took possession of the 10 owned hotels, simultaneously with the closing.

Rationale Behind

Given the improving economic indicators in the United States, the demand for hotels has started to grow. Although the increasing supply growth is expected to limit occupancy levels, overall demand conditions in the United States is anticipated to remain positive on the back of firming group travel, going forward.

In the meantime, Wyndham continues to generate room-rate gains in the domestic upscale and midscale segments with an increase in occupancy. The strong demand witnessed over the past two years is likely to increase pricing power, moving ahead.

Wyndham Hotel Group also seeks to grow its worldwide management operations and distribution system as it looks for new development opportunities and tactical brand acquisitions globally.

To this end, the company completed the buyout of Fen Hotels, significantly expanding its presence in Latin America. Before that, it had acquired Dolce Hotels and Resorts, a leading provider and manager of group accommodations across seven countries in Europe and North America.

Notably, the acquisition of AmericInn is expected to strengthen Wyndham Hotel Group’s existing portfolio of more than 1,500 midscale hotels as well as significantly increase its footprint in Midwestern U.S. Also, management believes that investing in the midscale segment is most opportune at the moment as the global middle class is anticipated to more than double over the next 10 years.

Spin-Off of Hotel Group

On Aug 3, 2017, Wyndham announced its plan to spin off the company's hotel business — Wyndham Hotel Group — resulting in two separate publicly traded companies. The transaction is expected to be completed in the first half of 2018.

In fact, the company believes that the spin-off of its Hotel Group business and the combination of Vacation Ownership segment with RCI is the best structure to unlock shareholder value and enable strong long-term growth across the businesses.

Bottom Line

Wyndham’s shares have surged 57.3% over the past year compared with the industry’s growth of 29%.



Yet, lingering political uncertainties in key international markets along with currency headwinds remain concerns for Wyndham as well as most of the other hotel chains including Marriott International, Inc. (NASDAQ:MAR) , Hilton Worldwide Holdings (NYSE:H) and Hyatt Hotels Corporation (NYSE:H) .

Nevertheless, we are particularly positive on the company’s prudent acquisitions, which strengthen its portfolio across all segments. This coupled with its strong developmental pipeline, consistent expansion plans and large international exposure are expected to continue driving growth in the long haul.

Furthermore, the plan to spin-off its Hotel Group segment is anticipated to increase the fit, focus and strategic flexibility of both the post spin-off companies, facilitate prospective capital raising and position them to better respond to developments in their respective markets.

Currently, Wyndham carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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