Wyndham Worldwide Corporation (WYN - Analyst Report) has recently acquired substantially all the assets of The Resort Company LLC (“TRC”), an established vacation rental and property management company plus owner of Steamboat Resorts. The financial terms of the deal were not disclosed.
TRC is known for its rental offerings across 28 mountain destinations in Colorado. Names like Lion Square Lodge and Montaneros in Vail, The Lodge at Steamboat, and Trailhead Lodge at Wildhorse Meadows and Dulany in Steamboat Springs are part of its claim to fame.
Parsippany, New Jersey-based Wyndham has been on an acquisition spree over the last several quarters. In February 2010, the company acquired a European vacation rental business, Hoseasons Holdings Ltd, which is a strategic fit in the company’s European rental business.
In June 2010, the company acquired the Tryp brand, which provides significant growth opportunities and presence in Europe and Latin America. In September 2010, Wyndham purchased ResortQuest, a vacation rental firm in the U.S. On December 1, 2010, Wyndham acquired James Villa Holidays, a vacation rental specialist in the U.K.
Wyndham is a dominant player in vacation rental business and seeks further inorganic growth. This fee-for-service business reduces the capital requirement, resulting in a higher free cash flow. Wyndham believes that these above-said acquisitions will facilitate its expansion in the $10 billion U.S. serviced vacation rental market, which currently lacks a significant player.
Apart from the U.S., U.K. remains another bright spot for Wyndham's vacation properties. The company has acquired about 30 European rental brands since 2000.
The recent TRC acquisition will increase Wyndham's global vacation rental collection by approximately 1,000 units to nearly 94,000 properties in 500 destinations worldwide. Additionally, this acquisition would double Wyndham’s presence in the western U.S. ski market. Hence, we view the deal as strategically positive. Going forward, we expect Wyndham to benefit from its repositioning as a more fee-for-service based business.
Wyndham’s primary competitors include Starwood Hotels & Resorts Worldwide Inc. (HOT - Analyst Report) and Marriott International Inc. (MAR - Analyst Report). Wyndham currently retains a Zacks #1 Rank, which translates into a short-term Strong Buy rating. We are maintaining our long-term Outperform recommendation on the stock.