The budget hotel industry has been hit with a wave of excitement as Choice Hotels launched a hostile bid for Wyndham Hotels & Resorts. Choice Hotels, known for brands like Comfort Inn and Radisson’s Americas operation, made a $7.8 billion offer for Wyndham earlier this year. However, Wyndham repeatedly rejected their advances. While Choice initially preferred a negotiated agreement, they have now decided to take the hostile route and appeal directly to Wyndham shareholders.
Choice CEO Patrick Pacious expressed his disappointment in Wyndham’s refusal to explore a transaction, stating that it left Choice with no choice but to take their proposal directly to Wyndham’s shareholders. Choice made efforts to address Wyndham’s concerns, including adding significant regulatory protections for their shareholders, but Wyndham publicly rejected their last proposal without any engagement.
Wyndham’s leadership has portrayed any Choice takeover as too drawn out, peppered with risk, and too much of a lowball offer. Despite this, Wyndham noted that they would carefully review and evaluate the offer to determine the best course of action for their shareholders. They highlighted that the current offer seems unchanged from Choice’s previous highly conditional offer, which failed to address the serious concerns repeatedly expressed by Wyndham.
The interest in Wyndham stems from the belief that the budget hotel segment is the future of the industry. This segment is expected to drive a bulk of development and guest demand. Hilton has already entered this space with its premium economy Spark brand, which is expected to grow through the conversion of existing hotels. Marriott also expanded into the budget hotel segment with its acquisition of Mexico-based City Express and the launch of Four Points Express by Sheraton overseas. Hyatt is following a similar path with its introduction of the Hyatt Studios extended-stay brand.
Rumors have circulated that IHG Hotels & Resorts might also be interested in acquiring Wyndham. However, IHG has been focusing on the luxury and lifestyle segment with brands like Regent and Six Senses, making it unlikely that they would want to add more budget brands to their portfolio. IHG has previously been involved in rumored mergers with Accor and was reported as the original buyer for Starwood before Marriott took over at the end of 2015.
The importance of owning a budget brand, if not several, in today’s hotel industry cannot be overstated. Lower-cost options are essential to cater to travelers who are cost-conscious. Additionally, budget brands are an effective way to attract younger travelers to loyalty programs. Starting with affordable options like Spark or Four Points Express can create a long-term relationship that extends to higher-end brands like Waldorf Astoria or St. Regis.
A Choice-Wyndham merger would create a compelling low-cost powerhouse to compete against Marriott, Hilton, and IHG. Many travelers simply want an affordable place to stay and are not concerned about loyalty program perks. The question now is whether the hostility between Choice and Wyndham will subside, leading to a successful merger, or if Wyndham will remain a “runaway bride” and reject the offer.
In conclusion, the budget hotel industry is buzzing with the news of Choice Hotels’ hostile bid for Wyndham Hotels & Resorts. This move highlights the growing importance of the budget segment in the hotel industry and the desire to create a strong low-cost competitor in the market. Whether or not this bid is successful, the budget hotel sector will continue to play a significant role in meeting the needs of cost-conscious travelers and attracting new guests to loyalty programs.