We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Wyndham (WYN) Rides on Acquisitions, Stiff Competition Hurts
Read MoreHide Full Article
Wyndham Worldwide Corporation’s diversified product portfolio, strong loyalty program, strategic acquisitions and effective marketing efforts position the company for growth, whereas heightened competition remains a potential threat to the top line.
The company recently reported mixed first-quarter 2018 results, wherein earnings surpassed the Zacks Consensus Estimate while revenues lagged the same. Adjusted earnings of $1.33 per share increased 31.7% year over year including the benefit of the new income tax. Without such benefit, earnings grew 10% on the back of higher revenues in all the three operating segments, hurricane-related insurance recoveries and Wyndham’s share repurchase program, partly offset by higher interest expenses.
Notably, the company outpaced the Zacks Consensus Estimate in each of the trailing four quarters, delivering a positive average earnings surprise of 4.65%. Over the past 30 days, the consensus estimate for earnings for the current year has moved up 0.8% to $7.33.
However, considerable international presence makes the company vulnerable to various macro-economic conditions in many regions. Also, we note that shares of the company have gained 12.5% in the past year, underperforming the industry’s growth of 21.4%.
Acquisitions to Strengthen Domestic and Global Footprint
Wyndham Hotel Group is constantly trying to expand globally through acquisitions. In January 2018, the company announced a definitive merger agreement with La Quinta Holdings Inc., a midscale hospitality company. This buyout is expected to help Wyndham significantly improve the hotel management business and strengthen its brand presence internationally.Moreover, in 2017, Wyndham’s Hotel Group completed the acquisition of AmericInn hotel brand and its management company, Three Rivers Hospitality. The acquisition has added 200 hotels across 21 states, predominately in the Midwestern U.S., Ohio Valley and Mountain states.
Loyalty and Rewards Program to Boost Occupancy
In order to survive in a competitive industry, Wyndham is continuously devising new ways to enhance guest experience and raise occupancy. These efforts include emphasis on marketing campaigns, digital experiences, websites, on-property amenities, travel perks and marketing partnerships. Notably, Wyndham Rewards offers one of the most generous reward program payouts in the industry.
Currently, there are about 56 million members in Wyndham Rewards. In 2017, the company made Wyndham Rewards points redemption available to nearly 100 Wyndham Vacation Ownership properties, to generate new marketing opportunities between the two businesses. On completion of La Quinta’s acquisition, Wyndham plans to expand this program to 13 million members of the La Quinta Returns Loyalty Program.
Increased Competition Remains a Concern
The hotel industry is highly competitive, as major hospitality chains with well-established and recognized brands are continuously expanding their global presence. Wyndham is continuously facing intense competition from both large hotel chains like Hyatt (H - Free Report) and Marriott (MAR - Free Report) , and smaller independent local hospitality providers. Increasingly, the company also faces competition from new channels of distribution in the travel industry. Additional sources of competition include large companies that offer online travel services as part of their business model such as Alibaba (BABA - Free Report) , search engines such as Google, and peer-to-peer inventory sources that allow travelers to book stays on websites that facilitate the short-term rental homes and apartments from owners, thereby providing an alternative to hotel rooms such as Airbnb and HomeAway. Unless Wyndham counters these competitions with appropriate strategies, these may pose concern to the company’s future profitability.
Moreover, the hotelier has considerable international presence, making it vulnerable to the economic conditions in the region. Despite immense growth potential, a sluggish economy in Brazil, uncertainty in Africa and macroeconomic factors in Venezuela are likely to keep revenues under pressure. Limited supply growth in certain Southern China markets, continued government austerity in Beijing and a drop in the number of visitors from Mainland China to Hong Kong owing to continued political disruption, are hurting China sales. Also, the company expects soft demand in the oil producing regions — that mainly include parts of Texas, Louisiana, Oklahoma and West Virginia — to continue hurting RevPAR.
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
Image: Bigstock
Wyndham (WYN) Rides on Acquisitions, Stiff Competition Hurts
Wyndham Worldwide Corporation’s diversified product portfolio, strong loyalty program, strategic acquisitions and effective marketing efforts position the company for growth, whereas heightened competition remains a potential threat to the top line.
The company recently reported mixed first-quarter 2018 results, wherein earnings surpassed the Zacks Consensus Estimate while revenues lagged the same. Adjusted earnings of $1.33 per share increased 31.7% year over year including the benefit of the new income tax. Without such benefit, earnings grew 10% on the back of higher revenues in all the three operating segments, hurricane-related insurance recoveries and Wyndham’s share repurchase program, partly offset by higher interest expenses.
Notably, the company outpaced the Zacks Consensus Estimate in each of the trailing four quarters, delivering a positive average earnings surprise of 4.65%. Over the past 30 days, the consensus estimate for earnings for the current year has moved up 0.8% to $7.33.
However, considerable international presence makes the company vulnerable to various macro-economic conditions in many regions. Also, we note that shares of the company have gained 12.5% in the past year, underperforming the industry’s growth of 21.4%.
Acquisitions to Strengthen Domestic and Global Footprint
Wyndham Hotel Group is constantly trying to expand globally through acquisitions. In January 2018, the company announced a definitive merger agreement with La Quinta Holdings Inc., a midscale hospitality company. This buyout is expected to help Wyndham significantly improve the hotel management business and strengthen its brand presence internationally.Moreover, in 2017, Wyndham’s Hotel Group completed the acquisition of AmericInn hotel brand and its management company, Three Rivers Hospitality. The acquisition has added 200 hotels across 21 states, predominately in the Midwestern U.S., Ohio Valley and Mountain states.
Loyalty and Rewards Program to Boost Occupancy
In order to survive in a competitive industry, Wyndham is continuously devising new ways to enhance guest experience and raise occupancy. These efforts include emphasis on marketing campaigns, digital experiences, websites, on-property amenities, travel perks and marketing partnerships. Notably, Wyndham Rewards offers one of the most generous reward program payouts in the industry.
Currently, there are about 56 million members in Wyndham Rewards. In 2017, the company made Wyndham Rewards points redemption available to nearly 100 Wyndham Vacation Ownership properties, to generate new marketing opportunities between the two businesses. On completion of La Quinta’s acquisition, Wyndham plans to expand this program to 13 million members of the La Quinta Returns Loyalty Program.
Increased Competition Remains a Concern
The hotel industry is highly competitive, as major hospitality chains with well-established and recognized brands are continuously expanding their global presence. Wyndham is continuously facing intense competition from both large hotel chains like Hyatt (H - Free Report) and Marriott (MAR - Free Report) , and smaller independent local hospitality providers. Increasingly, the company also faces competition from new channels of distribution in the travel industry. Additional sources of competition include large companies that offer online travel services as part of their business model such as Alibaba (BABA - Free Report) , search engines such as Google, and peer-to-peer inventory sources that allow travelers to book stays on websites that facilitate the short-term rental homes and apartments from owners, thereby providing an alternative to hotel rooms such as Airbnb and HomeAway. Unless Wyndham counters these competitions with appropriate strategies, these may pose concern to the company’s future profitability.
Moreover, the hotelier has considerable international presence, making it vulnerable to the economic conditions in the region. Despite immense growth potential, a sluggish economy in Brazil, uncertainty in Africa and macroeconomic factors in Venezuela are likely to keep revenues under pressure. Limited supply growth in certain Southern China markets, continued government austerity in Beijing and a drop in the number of visitors from Mainland China to Hong Kong owing to continued political disruption, are hurting China sales. Also, the company expects soft demand in the oil producing regions — that mainly include parts of Texas, Louisiana, Oklahoma and West Virginia — to continue hurting RevPAR.
Wyndham carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>