SAN DIEGO — The topic was on every attendee’s mind as the 2018 La Quinta Conference kicked off: How would La Quinta change after its upcoming merger with Wyndham Hotel Group? As he took to the stage at the opening general session, President and CEO Keith Cline acknowledged what he called the “elephant in the room,” but also sought to ease any concerns from the gathered owners and managers.
“Many of you are wondering, ‘Why now, and why Wyndham?’” Cline said as the session began. “A year ago, we announced our intention to separate La Quinta’s real estate business from its franchise and management businesses. One of the key reasons for this separation was to enable greater strategic clarity, and allow us to take advantage of opportunities that would naturally flow from each side of our business.”
The merger, he said, would help grow both the La Quinta footprint and its brand overall, with La Quinta as Wyndham Hotel Group’s’ flagship midscale and upper-midscale brand. As part of Wyndham, La Quinta will have access to new channels of distribution and the Wyndham Rewards loyalty program, Cline continued, as well as Wyndham’s technology, digital, loyalty and distribution platforms. “All of this sounds like a significant opportunity for the future growth of our brand,” he said.
Why Now, Why Wyndham?
In July, La Quinta formally announced that it would be spinning its real estate business off into a separate REIT, CorePoint Lodging, from its franchise and management businesses. Once the spin-off is completed, CorePoint will consist of 316 properties and approximately 40,500 rooms, all of which will also be included in the acquisition.
From there, Cline said, the team began looking for a partner for the consolidated franchise/management division. “We took that very seriously, realizing that our owned hotels, hotels that will now be part of CorePoint Lodging, were going to be the largest franchisee of whoever [our partner] is.”
As the teams began negotiating, Cline said that he was attracted to the similarities between his own company’s culture and that of Wyndham. “As we talked to [Wyndham Hotel Group President and CEO] Geoff [Ballotti] and the rest of his team, it was very clear to us that they had an extraordinary commitment to doing the right thing,” he said. “When they were talking to me, it became clear at a certain point that they realized that they weren't just talking to the person they were buying it from, but they're also talking to the largest franchisee internationally.”
Transitions, said Rajiv Trivedi, EVP of franchise and CDO, are inherently difficult. Similar conversations to those whispered on the trade show floor were held in 2006 when Blackstone acquired La Quinta, he recalled, especially in terms of maintaining the corporate culture. “Ultimately, leadership is responsible for continuing that culture,” he said. “Based on my interactions, and based on the interactions that I have seen Geoff have with franchisees, he actually embraces our culture more than I do.” And just as La Quinta adjusted to a new normal after the Blackstone acquisition, Trivedi said, the company will adjust again to its new role as a brand under a larger umbrella when the deal is finalized in the next quarter.
Competition and Cooperation
La Quinta's position as Wyndham's flagship midscale and upper-midscale brand, Cline said, will give Wyndham an “entry point at scale into a part of the lodging chain scale where they don't have anything.” At the same time, Trivedi said, La Quinta would be a complementary brand to Wyndham’s product rather than competition to its existing flags. “This brand does not conflict with any segment of other brands that they own,” he said. “This brand provides an opportunity for them to introduce to their guests a new segment." La Quinta will sit in between Wyndham's Tryp and Wyndham Garden brands, Cline said, giving the company "a 900-hotel chain with a massive pipeline” of 250 hotels that they can leverage.
For it first 50 years, La Quinta’s presence has been limited to the Americas, with few plans to grow globally. The partnership with Wyndham is likely to change that, and could take La Quinta in a decidedly different direction over the next decade. “Wyndham has their infrastructure everywhere—Asia, Europe, South America, Pacific Rim and other places,” Trivedi said. “This is the only brand that may not have [a presence in] many of those markets. The La Quinta brand brings a tremendous opportunity for international growth as we go into the future.”
While the future roles of La Quinta’s leadership remains up in the air, Trivedi said that he will remain with the company under a new title—President of La Quinta brands. Still, he insisted, his responsibilities would remain largely the same post-merger. “We want to make sure that we provide the same growth with new construction that we had in the past,” he said. “We want to make sure that we provide the same consistency in product. We want to make sure we can continue to provide resources to our franchise partners that make them successful.”
As the merger nears completion, Cline said that the La Quinta team is trying to be “extraordinarily transparent” about the process to their franchisees—“to the extent that we can, obviously. We're in that interesting position now where we have merger, we have a deal, but it's not consummated yet so you have to be very careful that they're not managing any part of our business. We're just working on integration right now, planning for what that could look like, and I think everyone's moving forward as fast as possible to to make all the things happen to close the deal.”