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Wyndham's Hotel Group Announces Acquisition of Fen Hotels

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Shares of hotel company Wyndham Worldwide Corporation had been underperforming the Zacks categorized Hotels & Motels industry by recording a dip of 12.8% since the beginning of year to Oct 26, while the industry grew 4.7%.

The company’s better-than-expected third-quarter results, as declared on Oct 26, however, changed the story. After reporting the said results, shares of the company outperformed the industry by recording growth of 16.6% till today, compared with the industry’s growth of 13.7%.

Recently, the company announced another news that has the potential to impact its performance further – the acquisition of Latin America's leading Fen Hotels by Wyndham Hotel Group.


The said acquisition is expected to add 26 management contracts across locations like Argentina, Peru, Costa Rica, Uruguay, Paraguay, Bolivia, and the U.S. including two new Fen-built Wyndham Grand hotels opening in Montevideo, Uruguay, and Asunción, Paraguay. Notably, Wyndham Hotel Group's portfolio of brands will grow to 18 with the addition of Fen Hotels' Esplendor Boutique Hotels and Dazzler Hotels.

Wyndham Hotel Group, one of three hospitality business units of Wyndham Worldwide, currently has the highest number of hotels in the world to its name. Being a leading hotel brand franchisor and hotel management services provider, the company's global portfolio consists of nearly 8,000 hotels and approximately 689,800 rooms across 75 countries.

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 Dolce Hotels and Resorts, a leading provider and manager of group accommodations across seven countries in Europe and North America.

Latin America is slated to witness major economic growth, as is reflected in its increasing infrastructure projects, foreign investments and a growing consumer spending ability. With the purchase of Fen Hotels, Wyndham is poised to leverage Latin America’s upsurge in accommodation demand as the target company has 22 existing hotels in six countries and a strong developmental pipeline throughout the region.


Our Take

Traditionally after an acquisition, the shares of the acquirer witness a fall in price as the company incurs additional expenses for the purchase, and on-going operations are affected to an extent. However, long-term effects on the share price are generally expected to be favorable. We expect the case to be the same for Wyndham Worldwide as Fen Hotels will help it increase market share and add to its top line.

However, the company is susceptible to greater foreign exchange headwinds and political uncertainty that comes with increasing international presence, similar to other hoteliers like Marriott International, Inc. (MAR - Free Report) , Hyatt Hotels Corporation (H - Free Report) and Hilton Worldwide Holdings, Inc. (HLT - Free Report) .
Wyndham Worldwide 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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