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Wyndham (WYN) Strong on Various Initiatives Despite Risks

WYN MAR H HLT

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On Nov 21, we issued an updated research report on hospitality company, Wyndham Worldwide Corporation (WYN - Free Report) .

Wyndham posted mixed results for third-quarter 2016 on Oct 26, wherein earnings beat the Zacks Consensus Estimate while revenues missed the same.

Prospects

Wyndham boasts a significant presence in most of the hospitality markets in the U.S. and abroad.

The demand for hotels is growing in the U.S. on the back of an improving economic environment and the strong demand is likely to increase pricing power going ahead. Meanwhile, Wyndham is also generating room-rate gains in the domestic upscale and midscale segments with an increase in occupancy.

Moreover, the company is consistently trying to enhance its presence worldwide and has expansion plans for the Asia Pacific, Europe, Middle East, Africa and Indian Ocean region. Development in these lucrative and relatively untapped markets should help the company boost its business further.

Wyndham derives a substantial chunk of revenues from its vacation ownership business – Wyndham Vacation Ownership (WVO) – which is gaining popularity among millennials of late. Presently, increasing the number of new owners is Wyndham’s most important strategic initiative at WVO.

Along these lines the company is making great progress as WVO brought more owners into the system in the third quarter than any other quarter since the downturn in 2010. In addition, the company is looking forward to opening at least three new sales centers next year that will further support these efforts and boost this segment.

Also, Wyndham Loyalty and Rewards Program coupled with other initiatives to increase occupancy should drive growth. Interestingly, the company foresees great prospects for its revised loyalty program as over seven million people have joined the program since its relaunch. Notably, Wyndham Rewards members stay 12% longer than nonmembers and generate 64% more in revenue compared to the company’s franchisees.

Thus, going forward, the company’s diversified product portfolio, strong loyalty program and effective marketing efforts are expected to spur growth.

WYNDHAM WORLDWD Price and Consensus

Concerns

Notably, bringing in new owners as part of WVO expansion strategy is proving to be costly and taking more effort, as reflected in the company’s decreasing Volume per Guest. Owner tour flow is also getting dampened by the company’s focus on new owners as well as more targeted marketing efforts.

On the other hand, a sluggish economy in Brazil, uncertainty in Africa, macroeconomic headwinds in Venezuela and an economic slowdown in China may keep revenues under pressure. Also, Wyndham has a significant number of vacation rental properties in Europe, where the economic/political conditions are expected to be challenging post Brexit. Moreover, significant currency headwinds are affecting most of the hoteliers including Hyatt Hotels Corporation (H - Free Report) , Hilton Worldwide Holdings (HLT - Free Report) , Marriott International, Inc. (MAR - Free Report) , etc. and might restrict Wyndham’s revenue growth too.

Wyndham currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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