The battle of the budget hotel brands is heating up as Choice Hotels, the owner of brands like Cambria Hotels and Comfort Inn, has proposed a $7.8 billion acquisition of Wyndham Hotels & Resorts, the owner of brands like La Quinta and Ramada. With Wyndham’s debt factored in, the deal values the company at nearly $10 billion. This potential tie-up has been the talk of the hotel industry for months, especially as competitors like Marriott and Hilton enter the more affordable end of the hotel market where Choice and Wyndham have a significant market share.
The announcement by Choice Hotels comes after months of engagement with Wyndham regarding a potential deal. However, talks stalled and Wyndham decided to disengage from further discussions with Choice. The potential acquisition has garnered attention due to the value it could bring to both companies’ franchisees, shareholders, associates, and guests.
Choice Hotels CEO, Patrick Pacious, expressed his confidence in the combination of the two companies, stating that it would significantly accelerate both Choice’s and Wyndham’s long-term organic growth strategy. He highlighted the benefits that the transaction would bring to franchisees, including access to Choice’s world-class reservation platform and proprietary technology, which would drive cost savings and greater investment returns. Additionally, the combined company’s rewards program would provide greater value and access to a broader selection of options for value-driven leisure and business travelers.
The potential merger between Choice and Wyndham makes sense in a competitive market where other hotel companies are signaling the need to compete in more affordably priced territory. Hilton’s new premium economy Spark brand, for example, has been seen as a competitor to Choice and Wyndham. Having a larger combined company would help Choice and Wyndham defend their market share and compete with other major hotel brands.
Choice Hotels also mentioned the importance of a robust rewards program, stating that the combined company’s program would be on par with the world’s largest loyalty programs. Hilton has been vocal about using its Spark brand as an affordable entry point into its Hilton Honors ecosystem. By offering a competitive rewards and loyalty program, the combined Choice-Wyndham company could attract and retain more customers.
From a traveler’s perspective, the potential merger could offer several benefits. The combined company’s expanded reach would provide more options for customers to stay within the Choice-Wyndham ecosystem while traveling. This would prevent loyalty customers from trying the competition in cities where the company doesn’t have a presence and potentially losing them to another hotel brand. Additionally, the combined company’s rewards and loyalty program, on par with Marriott and Hilton, would offer best-in-class program benefits, further enhancing the value for travelers.
Although the deal between Choice and Wyndham is not certain, it has already generated positive interest from Wall Street. Shares of Wyndham’s stock briefly surged in pre-market trading following the announcement. The potential acquisition could have a significant impact on the budget hotel market and the overall hotel industry, as major players continue to compete for market share and cater to the needs of cost-conscious travelers.
In conclusion, the battle of the budget hotel brands has intensified with Choice Hotels proposing a multi-billion-dollar acquisition of Wyndham Hotels & Resorts. The potential merger would create a larger combined company with a competitive rewards program and expanded reach. This move comes as other major hotel brands, such as Marriott and Hilton, enter the more affordable end of the market. While the deal is not certain, it has already garnered interest and could have a significant impact on the hotel industry. Travelers could benefit from a broader selection of options and enhanced loyalty program benefits.