Wyndham Worldwide is spinning off its hotel business into two separate, publicly-traded entities. Wyndham Hotel Group, which is headquartered in Parsippany, N.J., will become a pure-play hotel company, while Wyndham Vacation Ownership, which is based out of Orlando, Fla., will become a publicly-traded timeshare company. Wyndham Vacation Ownership will be combined with the Wyndham Destination Network unit, which also owns timeshare company RCI. The spinoff is expected to conclude during the first half of 2018.
Wyndham currently operates or franchises eight brands consisting of 8,100 hotels, and all of them will be under the Wyndham Hotels Group umbrella by the middle of next year. Once the company’s hotel and timeshare businesses have finished separating they are expected to form license agreements allowing them to jointly run loyalty programs under Wyndham Rewards, as well as cross sell properties under the same distribution system.
Meanwhile, Wyndham has some decision-making to sort out as the corporate names of both entities have yet to be decided. However, the leadership for both companies have been decided, with Geoff Ballotti, current president and CEO of Wyndham Hotel Group, retaining his position after the spinoff and heading the new company. Michael Brown, current CEO of Wyndham Vacation Ownership, will be president and CEO of Wyndham’s timeshare company, while Stephen Holmes, current chairman and CEO of Wyndham Worldwide, will become non-executive chairman of the boards for both companies.
“After a comprehensive review process, the board of directors has determined that a spin-off of the hotel business and the combination of Wyndham Vacation Ownership with RCI is the best structure to unlock shareholder value and enable strong growth across the businesses,” Holmes said in a statement. “We will work with the leadership of our European rental organizations, which have outstanding brands in their regional markets, to explore options to fully realize their future growth potential.”
Spinning Into Control
This year's Q2 results have generated a lot of talk around hotels spinning off one business from another, with La Quinta revealing its aspirations to return to its roots as a REIT through its own spinoff. Separating hotel and time share businesses have become a trendy thing for hotel companies to do over the past few years, specifically, with Wyndham following similar moves from Hilton, Marriott and Starwood.
At first blush it would seem these companies are trying to get out in front eyes normally reserved for Airbnb, but in Wyndham’s recent Q2 results the company showed off major growth in its timeshare business, which consists of more than 220 properties across the globe and grew 6 percent to $750 million. RCI alone commands 4,300 properties of its own, and will also be counted in the spinoff. Overall, revenues in the Wyndham Destination Network reached $405 million in Q2 2017 compared to $384 million in the same period last year, an increase of 5 percent.
Comparatively, Wyndham’s hotel group reported revenues were $345 million in Q2 2017, compared to $334 million in Q2 2016 — a modest gain but, not a loss. Second-quarter domestic revenue per available room for hotels was up 2.8 percent compared to the same period last year, while global RevPAR was up 3.3 percent. In terms of development, Wyndham’s system currently consists of 705,700 rooms, a 3.3 percent net room increase compared to Q2 2016, while the company’s development pipeline was up 18 percent year-over-year with nearly 1,230 hotels, 57 percent of which were international and 67 percent were new builds.
The spinoff isn’t the only aspect of Wyndham’s timeshare business that is going through changes, with RCI acquiring London startup Love Home Swap at the tail end of July. The startup was acquired for $53 million in cash, and allows travelers to book time to stay in other people’s homes while simultaneously listing their own properties for potential bookings.
The deal draws comparisons to Accor’s purchase of Onefinestay in 2016 as more hotel companies look for avenues to profit from the sharing economy. Currently, hotel companies have looked for differentiation as they test the waters of the sharing economy, with Onefinestay focusing on higher-end properties while Love Home Swap comes packaged with a home-trading conceit, but according to Gordon Gurnik, president of RCI, this venture is not something the company would have been bashful about trying in the past.
“Since first pioneering the vacation exchange concept more than 40 years ago, RCI has continually found new ways to evolve and grow its own business while also propelling the exchange industry further,” Gurnik said in a statement. “Through this acquisition we expand the exchange options we offer travelers and strengthen our footprint in key growth markets across the globe.”
Airbnb is currently valued at $31 billion, so hotels have their ears to the ground looking for the next big startup that can compete with the home sharing giant, or at least put up a fight. Regardless, Wyndham is calling for a strong end of the year, forecasting revenues of approximately $5.80 billion to $5.95 billion, as well as adjusted net income of $631 million to $652 million.