Affordable hotels and a focus on resilient, on-the-road business travel segments like infrastructure accounts throttled Wyndham back to pre-pandemic performance levels. Maintaining focus on its strengths sets it apart from direct competitor Choice Hotels.
Wyndham Hotels’ heavy focus on economy and mid-priced hotels that cater to leisure travelers and essential workers vaulted the company back to pre-pandemic performance levels last year. The company reported its global revenue per available room — the industry’s key performance metric — fully recovered to 2019 levels in the fourth quarter and was at 97 percent of 2019 levels for all of 2021.
While the U.S. drove a bulk of this recovery, it was still able to achieve this global figure in light of more travel restrictions abroad.
“(Last year) once again demonstrated the strength of our brands, the resiliency of the leisure traveler, and the benefits of the select-service economy and midscale segments,” Wyndham CEO Geoff Ballotti said on an investor call Wednesday. “Many of our franchisees reported the best year they’ve ever experienced since owning their hotel.”
Wyndham reported a fourth quarter profit of $48 million compared to a $7 million loss for the same period in 2020. The company made $244 million last year compared to a $132 million loss in 2020.
Wyndham may not have the most glamorous brand portfolio with options like Days Inn, La Quinta, and Microtel often found in leisure markets or on the side of a highway. But these types of hotels are filling up during the pandemic a lot faster than a Westin or Hilton in the middle of San Francisco.
Developers appear to be taking note: Wyndham’s 133 new construction hotel signings last year was 32 percent higher than what was seen in 2019.
Even during January of this year, when Omicron began to impact hotel performance in the U.S., Wyndham still outperformed pre-pandemic performance levels there by 3 percent. Leisure travel might be driving a bulk of the travel industry’s recovery, but Wyndham’s focus on courting the infrastructure and construction sector for business travel revenue is also helping to fill up hotels.
The company reported 10 percent more revenue from infrastructure accounts in the fourth quarter than the same time in 2019. The sector accounts for more than half of Wyndham’s newly negotiated business travel accounts and represents a bulk of the company’s U.S. business travel demand.
“It’s a trend that we expect to continue, given the recent passage of our nation’s $1.2 trillion infrastructure bill,” Ballotti said.
A New Extended Stay Brand
Unlike Wyndham’s direct competitor Choice Hotels, the company is putting more stock in its main business line like economy and mid-priced hotels rather than going after higher-end segments. While Wyndham has launched higher-end brands over the last year, Ballotti noted it would be more selective in its growth there while emphasizing more opportunity with affordable brands.
Ballotti also indicated Wyndham plans to launch an economy-priced extended stay brand later this year. The company already offers the higher-end Hawthorn Suites extended stay brand, which had a 50 percent increase in its development pipeline last year.
The extended stay sector garnered significant interest during the pandemic due to its resiliency of demand: These hotels generally cater to essential workers in healthcare or infrastructure who can’t work remotely to do their jobs. Marriott rolled out improvements to its higher-end line-up of extended stay brands like Residence Inn and Element earlier this year.
Wyndham leaders, while not providing too many specifics or what the new brand would be named, indicated this lower-priced option would compete more in the arena of Extended Stay America, which Blackstone and Starwood Capital jointly acquired last year for $6 billion.
“Our developers are asking for an economy extended stay brand, our franchisees are asking for it, and most importantly, our corporate accounts are asking for it,” Ballotti said.
The new brand would also cater to people who are relocating between cities or working on a longer-term assignments — similar residential uses that Extended Stay America focuses on. Ballotti once again referenced the company’s reliance on infrastructure business travel demand, noting that there are 10 million construction workers who travel each week.
“We feel millions of more essential workers [will be] hitting the road with the coming infrastructure bill and keeping that industry-wide extended stay average … occupancy up in the high 70s and 80 percent range,” he added. “These are our customers. These are our business accounts.”