Shares of leading global hospitality company, Wyndham Worldwide Corporation , have outperformed the Zacks categorized Hotels & Motels industry in the last six months. While the stock has surged 30.4%, the industry gained 12.8% in the said period.

In fact, propelling the growth trajectory forward is Wyndham’s announcement of the acquisition of Minnesota-based AmericInn hotel brand and its management company, Three Rivers Hospitality, from Northcott Hospitality. As a result, AmericInn will be a part of Wyndham Hotel Group, which is one of the three hospitality business units of Wyndham.

Inside the Headlines

The $170 million deal, which is subject to regulatory and government approval, and the satisfaction of other customary closing conditions, is a huge positive for Wyndham. The acquisition of AmericInn is expected to add 200 hotels across 21 states, predominately in the Midwestern U.S., Ohio Valley, and Mountain states. Moreover, AmericInn’s U.S. pipeline currently consists of 23 hotels, reflecting ongoing expansion efforts.

Particularly, this agreement is expected to bolster Wyndham Hotel Group’s existing portfolio of more than 1,500 midscale hotels as well as significantly increase its footprint in Midwestern US. Also, management believes that investing in the midscale segment is most opportune at the moment as the global middle class is expected to more than double over the next ten years.

Remarkably, Wyndham Hotel Group has the highest number of hotels in the world to its name now. Being a leading hotel brand franchisor and hotel management services provider, the company's global portfolio consists of more than 8,000 hotels across 79 countries. In fact, Wyndham Hotel Group's portfolio of brands will grow to 20 with the addition of AmericInn.

Rationale Behind

Given the improving economic indicators in the U.S., the demand for hotels has started to grow. Meanwhile, Wyndham is generating room-rate gains in the domestic upscale and midscale segments with an increase in occupancy. The strong demand witnessed over the last two years is likely to increase pricing power in the near term.

Wyndham Hotel Group seeks to grow its worldwide management operations and distribution system as it looks for new development opportunities and tactical brand acquisitions globally.

Last year, it completed the buyout of Fen Hotels, significantly expanding its presence in Latin America. Before that, the company had acquired Dolce Hotels and Resorts, a leading provider and manager of group accommodations across seven countries in Europe and North America.

Our Take

We are particularly positive on the company’s prudent acquisitions, which strengthen its portfolio across all segments. This coupled with its strong developmental pipeline, consistent expansion plans and large international exposure should continue driving growth, going forward.

Zacks Rank and Stocks to Consider

Wyndham Worldwide currently has a Zacks Rank #3 (Hold). Better-ranked stocks in the Hotels & Motels Industry include Choice Hotels International, Inc. (CHH Quick QuoteCHH - Free Report) , Extended Stay America, Inc. and Hilton Worldwide Holdings, Inc. (HLT Quick QuoteHLT - Free Report) . While Choice Hotels sports a Zacks Rank #1 (Strong Buy), Extended Stay and Hilton hold a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

In the trailing four quarters, Choice Hotels, Extended Stay and Hilton have pulled off an average positive earnings surprise of 5.02%, 21.11% and 9.89%, respectively.

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