PARSIPPANY, New Jersey—With the recent hiring of hotel industry veteran Mike Brown as president and CEO of its vacation ownership business, Wyndham Worldwide may be closer to spinning off that business into its own public company, according to Wyndham CEO Steve Holmes.
Brown previously served as COO of Hilton Grand Vacations, and was “heavily involved” in spinning that business off from Hilton, Holmes said during a first-quarter earnings call with analysts. It’s that experience, in part, that makes Brown the right person to lead Wyndham Vacation Ownership, Holmes said.
“Questions have been raised in the last couple of earnings calls about a possible separation of the company,” Holmes said. “I said that the board had asked me to maintain optionality by getting a CEO qualified to run a public company. We are confident that with the hiring of Mike Brown, we have found that person. The board wants to maintain its optionality because we remain dissatisfied with our valuation relative to our peers. The board continues as always to actively consider all alternatives on the future of our company.”
Brown also has experience working for Marriott International on both the hotel and timeshare businesses, Holmes said.
“He really understands this business … (and) all of those factors together just give us a level of comfort that this is somebody who can get there quickly,” Holmes said.
Also important to Wyndham’s strategy is the connection of its businesses to its loyalty program, Wyndham Rewards, which Holmes said should be in place before any decision is made to spin off WVO. That loyalty program connection has been dubbed the “blue thread.”
“Having that interconnection to the hotel group … is a lot easier to do when you’re one company,” Holmes said. “So we certainly want to have all that in place before we make any decision to spin off.”
As of press time, Wyndham Worldwide was trading at $99.89 per share, up 30.6% year to date. The Baird/STR Hotel Stock Index is up 21.1% for the same period.
Q1 2017 results
On the call with investors, Wyndham executives discussed first-quarter performance, which Holmes said was “right in line with our expectations.”
Wyndham Hotel Group reported a year-over-year increase of 2.2% in total systemwide same-store revenue per available room in Q1 2017 to $31.73; domestic same-store RevPAR grew 1.7% in the same period, according to the news release.
Average daily rate decreased 1.6% year over year to $64.04 in Q1 2017, while average occupancy increased 1.9% to 49.5% for the quarter.
Revenues for the quarter were $298 million, compared to $295 million in Q1 2016, while adjusted earnings before interest, taxes, depreciation and amortization grew 2% to $85 million. The company cited “higher franchise fees and growth in the Wyndham Rewards credit card program, partially offset by lower occupancy at the company’s owned hotel in Puerto Rico due to consumer concerns about the Zika virus.”
During the first quarter, Wyndham Hotel Group saw a net room increase of 3% to approximately 699,800 rooms at 8,100 properties, according to the news release. Its development pipeline grew to 1,130 hotels and 143,100 rooms, of which 59% were international (including two new Wyndham Grand properties in South America) and 68% were new-construction.
In the company’s Q4 2016 earnings call, Wyndham reported a 2.9% increase in net rooms, and predicted room growth of between 3% and 5% in 2017.