Buoyed by strong third-quarter results, Wyndham Hotels & Resorts executives are standing firm in their rejection of a bid by Choice Hotels International to acquire the company.
In a news release timed alongside the reporting of Wyndham's third-quarter earnings, Choice urged Wyndham executives to return to the negotiating table over its latest offer, publicly announced Oct. 17, of $90 a share — representing a total price in cash, stock and debt assumption of $9.8 billion.
Wyndham officials previously responded to that offer by calling it "underwhelming, highly conditional and subject to significant business, regulatory and execution risk."
Choice President and CEO Pat Pacious said in the company's release that there has been "positive feedback" from Wyndham shareholders and franchisees since the company went public with its offer.
"We respect Wyndham's desire to achieve the best outcome for its shareholders, but that can't happen if Wyndham unilaterally ends our discussions," Pacious said. "Both companies' shareholders have expressed to us their understanding of the tremendous value this combination could deliver."
Wyndham executives contend that the brand's growth strategy holds more potential for long-term value to shareholders, and presented its third-quarter earnings results as Exhibit A.
"We recently announced our Board of Directors unanimously rejected an unsolicited stock-and-cash proposal by Choice Hotels to acquire our company. Our Board of Directors, together with our financial and legal advisers, closely reviewed Choice's latest proposal and determined, for multiple reasons, that it is not in the best interest of our shareholders. They remain confident that our stand-alone growth prospects offer superior, risk-adjusted returns to Wyndham shareholders," Wyndham President and CEO Geoff Ballotti said in the company's earnings release.
"Supporting that belief are our third-quarter results, which were highlighted by continued growth in global [revenue per available room], ongoing domestic and international organic net room growth and another 8% increase in hotel contracts awarded to franchisees driving our development pipeline to a record 1,930 hotels. Our economy brands gained market share domestically amidst a backdrop of normalizing U.S. leisure demand, and international occupancy continued to recover," Ballotti said.
Year over year in the third quarter, Wyndham grew its rooms portfolio by 3% and grew its development pipeline 12% to more than 1,930 hotels and a record 237,000 rooms. It also signed more than 230 new-construction projects for its extended-stay brand ECHO Suites, the firm's 24th brand, which soft-launched in March.
Wyndham stated that approximately 69% of its hotels in development are in the midscale and above segments, 58% is international and 80% is new-construction, of which approximately 34% has broken ground.
Wyndham's global portfolio also grew RevPAR in the third quarter by 3% year over year, "reflecting a 1% decline in the U.S. and growth of 16% internationally" — a figure it says is skewed by a record-breaking 2022 for RevPAR as COVID-19-related travel restrictions eased, according to its earnings release. Compared to 2019, RevPAR was 9% higher in the third quarter.
For full-year 2023, the company projects between 2% and 4% rooms growth and RevPAR growth of between 4% and 6% — no change from its guidance issued in the second quarter.
Wyndham ended the third quarter with a cash balance of $79 million, approximately $710 million in total liquidity and $2.2 billion in outstanding long-term debt.
At publication time, Wyndham stock was trading at $73.18 a share, up 2.6% year to date.