Wyndham Worldwide owes strong Q4 to tax return, successful acquisitions

Tax cuts have had a major positive impact on Wyndham Worldwide's Q4 results—as expected. Photo credit: Getty/Cbies.

Wyndham Worldwide is in a big rush to expand, and by all means. The company is walking a tightrope as it spins off its hotel and vacation ownership business, while also integrating 200 AmericInn hotels to its portfolio and preparing to add nearly 900 more thanks to its $1.95-billion acquisition of La Quinta Holdings. Wyndham also cited tax reform as a boon to its business, during the company's fourth-quarter earnings call. 

Stephen Holmes, chairman and CEO of Wyndham Worldwide, said the company delivered results for the end of the year that were higher than earlier predicted. The company's net revenue for the quarter increased to $1.25 billion from $1.19 billion at the same time last year. EVP and CFO David Wyshner deemed 2017 a “darn good year,” thanks in part to a $426-million net gain as a result of the Tax Cuts and Jobs Act of 2017.

The impact of tax reform was abundant. Without it, Wyndham said it was expected to generate a profit of $140.7 million, down slightly from $164 million in 2017. With the reform, Wyndham reported a profit of $449 million, something Wyshner said would be put toward reinvesting in the company.

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“It doesn’t change the way we approach leverage. What it does is create an opportunity to invest more of an opportunity to invest in our business over time, and the La Quinta acquisition is an example of that,” Wyshner said. Domestic revenue per available room was up 4.5 percent year-over-year, while the company’s global RevPAR rose 4.6 percent. 

La Quinta has yet to be included on Wyndham's balance sheet, as the deal has yet to be concluded.
Photo credit: La Quinta Holdings. 

La Quinta was absent from inclusion on Wyndham’s balance sheet, as the acquisition of the company has not yet closed and Holmes was unsure when it will. Also absent from this quarter’s report was Wyndham’s European vacation rentals business, which is now classified as “discontinued.”

Even without La Quinta’s nearly 900 hotels joining Wyndham’s portfolio, the company’s net system size increased 4 percent in Q4 2017, hampered slightly by natural disasters that were mostly offset by the company’s earlier acquisition of AmericInn. Wyndham Hotel Group’s revenue grew 5 percent in Q4 year-over-year, and the company’s global pipeline grew 7 percent.

Wyndham’s destination network business’ RevPAR increased 5 percent, mostly as a result of higher pricing within Wyndham’s RCI business where exchange revenue per member was up 7 percent. Wyndham Vacation Ownership’s revenue also rose 4 percent to $734 million, though it would have rose 6 percent had the hurricanes not diverted $13 million from the organization’s wallet.

“It has been a busy time for us,” Holmes said. “Our board and our senior leadership team are particularly pleased and impressed that our entire organization has continued to deliver robust results during a period of significant change, and we are confident that the actions we are taking are positioning our businesses well for both near and long term growth and success.”

Despite its many acquisitions, Wyndham's hotel business is still chugging along with openings of its own. Photo credit: Wyndham Worldwide.

Looking ahead, Wyshner said the impact of last year’s natural disasters is expected to be minimal in 2018. For Wyndham Hotel Group, Wynsher is forecasting room growth between 2 and 4 percent, as well as an increase in global RevPAR between 2 and 3 percent. Wyndham Vacation Ownership’s revenue growth is expected to increase between 5 and 7 percent, as well.

When asked how much cost Wyndham may have left attached to the spinoff between Wyndham’s hotels and vacation ownership businesses, Geoff Ballotti, president and CEO of Wyndham Hotel Group, said costs remain in the $50-million range, with overall costs expected to be finalized at around $300 million. Holmes was adamant that the spinoff will assist with consolidation in both the hotels and timeshare front.

“One of our goals as we establish these companies as standalone businesses is that they will have the capacity to be inquisitive; we think that is important to fuel shareholder value and growth,” Holmes said.

Amid the greater consolidation happening within Wyndham Worldwide, Ballotti doesn’t want anyone to forget how much the company is building on its own.

“We’re looking at every deal that presents itself, and we will continue to do so, but what we’re most excited about is our organic growth, particularly in North America,” Ballotti said. “We saw our pipeline grow 15 percent, and what really excites us in terms of the organic side is that we’re growing in the markets that we’re looking to grow in.”