Motley Fool  Aug 8  Comment 
WYND earnings call for the period ending June 30, 2018.
Benzinga  Jun 4  Comment 
Wyndham Hotels & Resorts Inc (NYSE: WH) spun off from Wyndham Worldwide on Thursday, liberating it from a range-bound stock and providing fresh room to run, according to Stifel Nicolaus. The Rating Analysts Simon Yarmak and Alexander Fraser...


Wyndham Worldwide Corporation (NYSE:WYN) is one of the leading providers of hospitality products and services in the world. It is the world's largest hotel franchiser and largest vacation exchange network, and largest vacation ownership company in the entire world. Ironically, despite its size, Wyndham has relatively little exposure to important emerging markets such as China and India. For instance, over 90% of its properties are located in Europe and North America, thereby showing a remarkably low level of expansion into emerging markets.

Unlike its competitors in the lodging industry, roughly half of all Wyndham's revenues come from franchise fees, property management fees, and membership and exchange fees, making Wyndham an extremely diversified hospitality company. These fees are typically fairly stable and insulate the company from the temporary downturns that often plague the hospitality industry. Wyndham has recently divested a number of under performing hotels. This along with its efforts to re-brand properties in its vacation exchange network under the Wyndham name should increase profitability in the near term.


Wyndham Worldwide was created on July 31, 2006 when Cendant Corporation spun off its Cendant Hospitality division. This move was part of an October 23, 2005 decision by Cendant Corporation to split itself into four companies along the lines of Real Estate, Travel Distribution, Hospitality, and Vehicle Rental Companies. Wyndham Worldwide consists or three core operating segments; the Hotel Group Division, Vacation Ownership Division, and the Vacation Exchange and Rental Division.

Business Drivers

Product Lines

Wyndham Hotel Group Division

Wyndham operates its hotels through a franchise model. Wyndham signs a 15 to 20 year contract in which Wyndham offers individual franchise owners use of its brand name, central reservation system, training infrastructure, operational support and information, quality assurance inspections, pre-opening assistance, prototype construction plans, and national conferences. In return, the individual owner pays Wyndham royalty fees that are a percentage (approximately 8%) of room sales. Wyndham typically applies half of this revenue towards marketing and reservation costs leaving the other half as profit.

Currently, Wyndham is the largest lodging franchiser in terms of number of franchised hotels in the world with nearly 6,500 franchised hotels and over 539,000 rooms over six continents. With 92% of its hotel rooms in North America the company is enjoys major economies of scale within the US. It accounts for 10% of US hotel room inventory. Locations are well distributed among several franchisees, with no single franchisee controlling over 2% of the companies hotels. Wyndham operates its hotels under ten brands catering to various segments of consumers.

Wyndham predominantly caters to the economy sector, accounting for 19.5% of all hotel room nights sold in the country's economy and midscale segment. Currently, Wyndham is making a push into the luxury segment of the market.

Wyndham predominantly caters to the economy sector, accounting for 19.5% of all hotel room nights sold in the country's economy and midscale segment. Currently, Wyndham is making a push into the luxury segment of the market.

Vacation Ownership Division

The Vacation Ownership or Timeshare industry is a $12 billion industry that has experienced double digit growth over the past twenty years. Timeshares, entail the purchase of shared ownership of furnished vacation accommodations by customers. These rights to use a property are called Vacation Ownership Interests (VOIs).

The average profile of a timeshare owner that of a 53 year old with an annual income of $85,000. The growth of the timeshare industry is largely dependent on the baby boomers . Another important demographic are senior citizens who assume large monthly payments unwittingly by signing poorly described contracts presented by unscrupulous brokers. Wyndham Vacation Ownership provides the following services: marketing and sales of VOIs, consumer financing for purchasers of VOIs, property management services, and the development and acquisition of vacation ownership resorts. Wyndham owns the largest vacation ownership business in terms of vacation ownership units, owners (750,000), and resorts. Wyndham operates through two brands; Wyndham Vacation Resorts and Trendwest.

Wyndham Vacation Resorts are located in or near attractions such as Disney World, Las Vegas, Hawaii, Myrtle Beach, and Colonial Williamsburg. Wyndham Vacation Resorts account for 72 resorts with 13,300 units, and approximately half a million owners at an average price of $16,000.

Trendwest operates under two names; WorldMark and WorldMark South Pacific consisting of 69 resorts with 4,000 units and 250,000 owners. These resorts are primarily drive to resorts located at close proximity to owners, in areas such as the west coast, Canada, Mexico, and the South Pacific.

Wyndham offers financing to purchasers through its consumer financing business. This reduces initial cash required to purchase a timeshare thereby significantly expanding the market for its Vacation Ownership properties. Wyndham also makes a profit by earning the interest spread that exists between the interest charged on loans to timeshare buyers (13%) and Wyndham's actual cost of money (4%).

Although the timeshare industry was traditionally considered lower value than lodging, timeshare has averaged a CAGR growth of 15.9% as compared to 5.7% for lodging.

Vacation Exchange and Vacation Rental Division

The Vacation exchange and rental industry is valued at $36 billion. Presently, Vacation Exchange accounts for 70% and Rental 30% of the divisions revenues.

Through vacation exchange, an owner or timeshare owner lists his vacation property on an exchange and indicates a time interval and destination that the owner would like to visit. The exchange company rates the owner's property and finds a similar property at the destination desired. Wyndham operates in this sector through ownership of Wyndham Resort Condominium International (RCI) Global Vacation Network. This network has access to 55,000 properties including hotel rooms and suites, villas, apartments, homes, luxury clubs and boats. The network operates exchanges through RCI Weeks and RCI points (which allow owners to exchange points for travel related services). Revenues for this business are derived from annual membership dues and exchange fees from members.

Wyndham also operates in the Vacation Rental industry. The company markets properties of individual owners and inventory from its RCI business. Currently the business has relationships with 35,000 property owners, concentrated in North America and Europe. Wyndham makes over 1.4 million vacation rental bookings a year with fees ranging from 25% to 50% of the gross rent charged.

Trends and Forces

Strength of the Hospitality Industry

The travel industry ranks third amongst retail industries in America. The hospitality sector of the travel industry occupies an important position. The wellness of the hospitality industry is greatly affected by the performance of the US economy. The U.S. economy performed solidly in 2006 (3.2% growth) and is expected to continue this performance in 2007 and 2008 with real GDP growth expected to register at 2.6% and 3.2%, respectively.

Emerging Markets

Wyndham has a weak international presence with over 90% of its properties located within the US. The growth of emerging markets, particularly, Asia (China and India) will play an important role in the company's future expansion. Wyndham has struggled to expand in Asia because of the lack of an established franchising industry in the region. Wyndham's competitors have expanded in the region through greater involvement in the running of hotels in the form of management contracts. These contracts allow competitors to specialize in every aspect of the management of the hotel (including the daily operations). Unfortunately, Wyndham does not follow this model of expansion, leaving the company handicapped in the emerging world because of its inexperience as a hotel micro-management company. Wyndham is currently pursuing a strong push into the Asian markets which will determine greatly the company’s outlook in the future. Whether Wyndham Worldwide is able to capitalize on this growing international segment remains to be seen. However, the one thing that is undeniable is the growth of these emerging marets.

Aging Baby Boomers

A recent study concluded that the average vacation ownership customer was 52 year old with a median income of $81,000. With rising life expectancies, aging Baby Boomers have more time and money to invest in leisure. In recent years, baby boomers have increasingly switched to a new form of vacationing centered around "sight-doing" as opposed to "sight-seeing." This entails spending a longer time in a particular vacation destination in order to truly experience the culture. This new trend will bolster growth for timeshares and related industries of extended stay.


Wyndham competes with global players, such as Marriott, Hilton, Intercontinental and Starwood. Unlike Starwood and Hilton, Wyndham has little exposure to hotel ownership because of its franchise model. Wyndham is less centered upon corporate customers than its competitors, making the company less affected by corporate volatility. Conversely, Wyndham has a smaller geographical footprint than these competitors, and its weak position in Asia has puts it at a significant disadvantage.

In the vacation ownership or timeshare industry, Wyndham competes with Disney Vacation Club, Hilton Grand Vacations Company LLC, Marriott Ownership Resorts, Inc. and Starwood Vacation Ownership, Inc. Wyndham is moving into the high end industry as it rebrands 14 properties under the Wyndham name.

The vacation exchange and rental industry is dominated by world leading Wyndham Resort Condominium International (RCI) and InterActive Corporation's Interval International (II) which together dominate 70% of the market.

The private facilitation of vacation exchanges though the Internet could be detrimental to RCI. Websites like Ebay could pose a grave threat in the future.


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