Segment will make up a third of group Ebitda in 5-10 years, from a fifth now
Wyndham Worldwide Corp projects that its hotel unit will be a larger part of its business in the next five to 10 years, as it seeks to grow in China, India and a host of other global hotspots.
Wyndham projects that hotels would make up a third of its earnings before interest, taxes, depreciation and amortisation as early as 2015, chief executive Stephen Holmes said on Tuesday at the Reuters Travel and Leisure Summit.
Currently, hotels make up 21 per cent of Ebitda.
‘Brands are not as prolific outside the US as they are inside the US, so there’s tremendous opportunity for growth,’ Mr Holmes said.
Wyndham is the No 2 hotel company in the world as measured by number of rooms, according to Smith Travel Research. The company also has a vacation exchange and rentals business as well as a timeshare unit.
Wyndham said in 2008 that it would shrink its timeshare unit, cutting 4,000 jobs in the process. The segment accounted for roughly half of the company’s revenue in 2009. This year, the timeshare segment will provide a smaller percentage of the revenue, Mr Holmes said.
Growth in the lodging segment could come through adding more hotels or a new brand to its portfolio. Wyndham said in recent quarterly calls that it was looking for brands to acquire.
The number of new hotels in the United States is expected to tick up this year, but that growth is expected to be muted compared to earlier years. There is also a dearth of hotel rooms in areas that are starting to see travel demand grow.
Mr Holmes said last year that Chinese tourism officials told him there would 200 million additional travellers entering the leisure market.
‘Two hundred million – they do not have enough hotel rooms to service that population growth.’
India presents an array of challenges, but Mr Holmes see that country as holding tremendous potential for the company.
‘The infrastructure in India still has a ways to go. that is the biggest challenge to that market,’ he said. ‘We’re active in that market and we hope to see growth there.’
Like many hotel operators, Wyndham does not own any of its properties. It franchises and manages hotels owned by others.
But many properties, including a handful run by Wyndham, have gone into foreclosure in the past year. Mr Holmes said that the seizure of the credit markets was a source of concern for him.
The number of hotels changing hands last year fell to a 10-year low as buyers and sellers haggled over their worth. When a hotel changes hands, there is an opportunity for a company such as Wyndham to change the brand on the property.
‘Clearly, the decrease in transaction volume . . . is (a) dampener of growth for us,’ Mr Holmes said.
Investors have bet heavily on Wyndham’s shares since last March. The stock has risen nearly seven-fold since then, outpacing the S&P 500 which is up 60 per cent.
Some of that rise is attributable to the company’s decision to shrink its timeshare unit, said FBR Capital Markets analyst Patrick Scholes who rates the stock an ‘outperform’.
The CEO also said that Wyndham’s share price could run higher, given that its valuation remained below its peers.
‘We still have a tremendous amount of running room,’ Mr Holmes said. ‘We’re gaining momentum.’
Source: Business Times, 25 Feb 2010