In a year marked by increased M&A and consolidation within the ranks of the hospitality industry, the latest deal of consequence is Wyndham Hotel Group's plans to acquire the Minnesota-based AmericInn brand and its management company, Three Rivers Hospitality, from Northcott Hospitality for $170 million.
The deal, while not transformative, bulks up Wyndham's presence in not only the midscale space, but, likely more important, its visibility in the Upper Midwest of the U.S., states such as Minnesota, Wisconsin, Iowa, Michigan and North and South Dakota.
Once the deal closes, likely in October, Wyndham will pick up 200 hotels with approximately 11,600 rooms in 21 states.
According to Wyndham Hotel Group CEO Geoff Ballotti, Wyndham had had off-and-on talks with AmericInn as far back as 2008, "but the family wasn’t looking to sell then," Ballotti said.
Acquiring AmericInn makes Wyndham 20-brands strong, and giving it a firmer grasp in the midscale space; the economy segment, which includes such brands as Super 8 and Microtel, is where Ballotti said they are most distributed in the Upper Midwest. Adding AmericInn gives Wyndham a broader footprint in the region in the midscale space.
Wyndham acquired the Super 8 brand, which was born in Aberdeen, S.D., in 1993, and is now the largest economy brand in North America and China, where it has more than 1,000 hotels.
"In the Upper Midwest, we are dominant in economy and growing in midscale," Ballotti said. Wyndham currently has 1,500 midscale hotels and this deal would take them up to 1700 "of real quality construction, amenities and services," he said.
Buy or Build
Debating whether to launch or acquire a brand is a process all global hotel companies go through. Hilton, for one, made a splash when it announced last year its Tru brand, with its first opening in Oklahoma City. The midscale brand has more than 425 hotels in various stages of development, Hilton says. In the case of Wyndham, acquisition won the day, likely because Wyndham already has strong brands in the segment. This was a complement and as much a regional play as a brands play.
"It takes a long time to establish the awareness and equity of a new brand and this brand has been around for more than 35 years," Ballotti said. The AmericInn brand is popular with what Ballotti called "blue-collar business" and leisure, alike.
Ballotti, who is on the road in Minnesota this week meeting with current AmericInn franchisees to, as he said, "prove themselves," is buoyant over the prospects of folding in AmericInn. "The brand is exceptional quality with a story that fit for us in the Upper Midwest," Ballotti said. "There is a lot of excitement about what Wyndham can add to [the brand's] scale, distribution, sales and marketing loyalty and technology—everything that comes along with being in our family."
Many of AmericInn's existing franchisees also own Wyndham brands.
Bulking up the quality of Wyndham's brands was at the forefront of the deal, according to Ballotti, who is known to be very hands-on when it comes to quality control issues. "We have been talking a lot about our focus on quality and have got zeroed in on improving the quality of all of our brands," he said.
Eighty-five percent of AmericInn hotels, according to Ballotti, are rated four stars or above on TripAdvisor. "They get exceptional guest-satisfaction scores. The brand has a great service ethos and promise," Ballotti continued, noting guests' "love for the breakfast," and new brand additions like triple sheeting and Serta Perfect Sleeper mattresses.
According to the press release of the announcement, AmericInn's current U.S. pipeline stands at 23 hotels, a number that could now be boosted under the auspice of Wyndham.
"We are under penetrated in areas like North and South Dakota, and we are looking to grow in states like Illinois and Nebraska," Ballotti said. "Now that the brand is plugged into our franchise sales system, we will see the power and scope and [likely] expansion outside of the heartland."
One of the major benefits AmericInn franchisees will have is plugging into the Wyndham Rewards loyalty program, a robust program, which counts more than 50 million members. Ballotti noted AmericInn's Easy Rewards program, which has around 600,000 members and has a "strong following," he said. "Franchisees are asking how soon can we join the loyalty program," Ballotti added, the answer likely sometime in 2018.
The acquisition also included the management arm of Northcott Hospitality and it's still unclear what Wyndham will do with it once the deal closes. "We’ve been growing with our management company business in the U.S. over the past few years," Ballotti did say.
AmericInn is the latest addition to Wyndham Hotel Group’s portfolio of brands following last month’s launch of The Trademark Hotel Collection, a new concept for upper-midscale-and-above independent hotels. Late last year, the company acquired Fen Hotels and its Dazzler Hotels and Esplendor Boutique lifestyle brands, expanding its presence and management business in Latin America.