When news broke earlier this week that Choice Hotels International was making a public offer for Wyndham Hotels & Resorts, of course it called to mind the last time a deal of this scope was on the table — when Marriott International made its offer for Starwood Hotels & Resorts Worldwide, back in 2015. Feels like forever ago, doesn’t it?
While the customary dance between these two companies — and who knows, maybe others will enter the fray — plays out, I’ll add two cents to the conversation because we all can’t help but compare the deals and speculate about how this might play out.
Not a Hostile Bid Yet
It’s important to note that while this process definitely is playing out on the public stage, it hasn’t reached hostile territory just yet. As long as the process plays out formally through the companies’ boards of directors, it’s in bounds. Bids become hostile when the acquiring entity goes straight to shareholders to ask for a vote in their favor. That hasn’t happened … as of publication time, at least!
Marriott’s deal for Starwood never entered hostile territory, either. That process, if you remember, brought in the third player, a consortium led by Beijing-based Anbang Insurance Group, who played in for a few hands, eventually dropping out. When Marriott presented its final offer for Starwood, it was in a unified voice with Marriott, with both companies’ executives encouraging their shareholders to support the deal.
The most recent hostile bid attempt in the hotel space that comes to mind is the 2017 bid by Ashford Hospitality Trust for FelCor Lodging Trust. In that case, Ashford mounted a hostile takeover bid fo $1.28 billion, which kicked off months of back-and-forth negotiations between the companies, played out in public letters and SEC filings. The hostile part of that proposal of course came with Ashford’s plan to place directors on FelCor’s board who would support the deal. Meanwhile, the parry brought in, yes, a third party — this time the eventual winners through mutual agreement of the Boards, RLJ Lodging Trust.
Don’t Ignore the Midscale Footprint
A lot of the chatter surrounding a proposed Choice and Wyndham combined company focuses on the assumption that both are economy powerhouses.
But we’re ignoring the whole story if we think both Choice and Wyndham are “just” economy players.
Both companies have done a lot in recent years to strengthen and grow their midscale benches.
In fact, should the deal happen and we combine all open rooms and brands today (not really how this works, but you’ll get the picture), a combined Choice-Wyndham company would have more rooms open in the midscale and upper midscale segments than it would in economy.
This is the crux of the argument by AAHOA members that a combined company would excessively “dominate the economy and limited-service segment.”
While parties certainly raised monopoly concerns over a combined Marriott and Starwood, ultimately of course they weren’t the only players in the hotel franchise multiverse, so it didn’t become a deal-breaker.
But the brands in both companies were more spread out across the chain scales, and we can’t forget that the overall global hotel brand landscape looked different in 2015 and 2016 too, with more players overall.
Long story short, this is a deal that is playing out the way they've always played out. There's back and forth, there's intrigue, there's dispute. More players may enter before halftime. But it certainly gives us all something to talk about.
Interested in more analysis of the possible deal? Check out this podcast conversation between Hotel News Now's Sean McCracken and Truist's C. Patrick Scholes where they talk about possible scenarios, how these types of activities typically pan out and more.
What are your two cents? Email me, or find me on Twitter or LinkedIn.
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