Wyndham Results Hurt By Cost of Choice Hotels' Hostile Bid

15.02.2024 - 19:37 / skift.com / Sean Oneill / Patrick Scholes / Geoff Ballotti

Ever since Wyndham said ‘No’ to Choice Hotels’ offer last year to buy it, executives have been sandbagged by work related to preventing the hostile merger.

Wyndham said Thursday it has spent $75 million related to the deal so far. Costs include negotiating with and then rebuffing Choice Hotels, answering antitrust queries from the U.S. Federal Trade Commission ($15 million alone), and answering queries from four U.S. state attorney generals.

“It’s a tremendous effort,” said Geoff Ballotti, president and CEO. “Our record fourth quarter could’ve been better both domestically and internationally without the noise.”

Executives described the regulatory review as a “distraction.” They called out as burdensome requests from attorney generals from Washington, Colorado, Kansas, and Vermont, who are pursuing investigations.

Executives cited one request from attorneys that asked the company to list every bid it has ever provided for any franchise service in the past five years, including detailed notes on all aspects of those bids.

The hotel operator reported full-year results that suggested the Choice Hotels merger proposal may have distracted Wyndham’s leadership and led to an underperformance against the company’s potential.

Ballotti said that uncertainty among potential franchisees about a potential merger had created “a more challenging sales environment.”

Some owners have moved more slowly on committing to deals, he said.

Choice Hotels’s sales team has also taken unspecified actions, presumably badmouthing Wyndham’s brands, to make the deal landscape more “competitive,” he alleged.

Analysts are watching the dynamic closely.

In the past three months of 2023, the company has awarded only three new contracts for the ECHO Suites Extended Stay by Wyndham brand. That pace represented a sharp falloff in deal flow, considering that the company had gathered about 260 commitments earlier in the year after debuting the brand a year ago.

“We wonder if the proposed merger has stalled new signings,” noted Patrick Scholes and Greg Miller at Truist Securities in a report.

Despite the distractions, Wyndham notched several records in its expansion in the final quarter of 2023.

“We’re thrilled with the tremendous success in selling through this uncertainty,” Ballotti said.

What am I looking at? The performance of hotels and short-term rental sector stocks within the ST200. The index includes companies publicly traded across global markets, including international and regional hotel brands, hotel REITs, hotel management companies, alternative accommodations, and timeshares.

The Skift Travel 200 (ST200) combines the financial performance of nearly 200 travel companies worth more than a trillion dollars into a single number.