Wyndham revenue up, net income down in Q1 2019

Wyndham Worldwide threw its hat in the M&A ring earlier this year with the $1.95 billion purchase of La Quinta Holdings’ hotel operations, and now Wyndham is reaping the rewards.
Wyndham Hotels & Resorts' acquisition of La Quinta played a large part in its 55 percent rise in revenue. Photo credit: Wyndham Hotels & Resorts

Wyndham Hotels & Resorts continues to see the consequences of its $1.9 billion purchase of La Quinta more than a year ago. Revenues rose 55 percent to $468 million in the first quarter of 2019, while net income fell from $39 million to $21 million and adjusted net income dipped from $55 million to $51 million.

Wyndham attributed these numbers to its 2018 acquisition of La Quinta, higher interest expense, the timing of marketing expenses and the absence of hurricane-related insurance proceeds. The marketing expenses by themselves resulted in a $12 million drop in adjusted net income.

“An almost $2 billion acquisition like La Quinta will always take some time to bear fruit and integration costs at the start are typically high, but La Quinta’s hotels are now operating on the same platforms as Wyndham’s other hotel brands,” Nick Wyatt, head of tourism at data and analytics company GlobalData, said in a statement. “This means large costs have already been incurred without significant damage to the company’s finances and this bodes well.

Wyndham’s significant rise in revenue can also be traced back to the La Quinta acquisition. When the brand’s $169 million in incremental revenue is removed from the company’s total revenue, Wyndham came in a few million dollars lower than last year.

Adjusted earnings before interest, taxes, depreciation and amortization for Q1 2019 rose from $92 million to $111 million, though $33 million of this quarter’s total comes from La Quinta. When the company’s 2018 acquisitions and divestitures are removed, Wyndham’s adjusted EBITDA decreased 13 percent in constant currency. The company again pointed to the timing of marketing expenses, which it said suppressed growth 16 percent.

“We remain enthusiastic about our prospects for growth, the synergies we expect from the La Quinta acquisition, and our leading presence in the economy and midscale segments of the lodging industry,” CEO Geoffrey A. Ballotti said in a statement.

The company’s global revenue per available room rose 7 percent, but just 1 percent in constant currency and excluding 2018 acquisitions. U.S. RevPAR increased 13 percent overall and 1 percent when 2018 acquisitions and divestitures are removed. Wyndham’s room count rose 3 percent year-over-year, not counting 2018 acquisitions and divestitures.

Its pipeline rose 23 percent to approximately 181,000 rooms. Of that number, 25,000 are in La Quinta properties. Fifty-four percent of the company’s pipeline is international, and 73 percent is new construction.