Skift Take
Eight things jumped out at us from Wyndham annual financial filing. One surprise was that it has introduced an AI risk disclosure. That is something we expect will become commonplace in travel company filings.
Wyndham is the world’s largest hotel franchisor, and we found a handful of noteworthy details in its annual 10-K filing.
1. Wyndham essentially hasn’t grown in property count over the past five years.
Five years ago, as of December 2018, it had 9,177 hotels. At the end of last year, it just had one more hotel.
How is that possible? Wyndham has seen hotels leave its system, and it has added ones. Over time, the mix has shifted to hotels with more rooms, expanding the total number of rooms under management. The group managed nearly 809,000 rooms five years ago. It now manages 7.7% more, at 871,794.
Wyndham plans to grow its system by between 3% and 4% in 2024.
It has an ambition to speed up to a “3% to 5% pace” annually by 2026. It thinks it can do this by getting better at retaining franchisees, even though it already has leading retention rates. It also thinks it can speed up its growth by “expanding into adjacent market segments [with new brands] and new geographies.”
2. Wyndham is becoming more global.
When the U.S.-based company went public in 2018, about 70% of its hotels were U.S.-based.
By the end of last year, however, only 57% of Wyndham’s hotels were U.S.-based.
3. But going global can require investment.
In September 2022, Wyndham completed its acquisition of the Vienna House hotel brand. It disclosed the price for the 41 franchised European hotels as being $44 million.
The company’s 10-K revealed a bit more color. Vienna House’s trademark was valued at $28 million, while its 20-year franchise agreements were valued at $16 million.
4. Argentine inflation hurt Wyndham in 2023.
Expanding internationally can involve the occasional snafu. A case in point is Wyndham’s growth in Argentina. Inflation in Argentina has spiked recently, hitting 211% in December.
Wyndham incurred foreign currency exchange losses related to Argentina of $14 million last year.
Doesn’t Wyndham hedge against foreign currency exchange risks? Yes, but last year it lost $3 million on those contracts across the currencies it hedges against (Canada’s, China’s, Europe’s, Britain’s, and Argentina’s). The losses on both fronts were unusually unlucky for the company compared to recent years’ performance.
5. Wyndham has added a risk warning about its use of artificial intelligence to its disclosures.
For the first time, Wyndham has included a risk disclosure about its use of AI technology. I expect other hotel groups to add similar language to their financial filings as time goes on.
“We may use artificial intelligence in our business, and challenges with properly managing its use could result in reputational harm, competitive harm, and legal liability,” its filing said.
Possible problems the filing highlighted:
- Rivals may adapt AI more quickly.
- The AI tools it taps could introduce errors, affecting operations and strategy.
- AI could result in cybersecurity incidents that could compromise the security of guest data.
- AI may present “emerging ethical issues.” So its use of the AI might someday hurt its brand reputation or introduce legal liability.
- “The rapid evolution of AI, including potential future regulation of AI, may also result in additional costs associated with compliance with emerging regulations.”
6. Wyndham is more asset-light than its competitors.
A lot is made by the major hotel groups about their desire to sell their assets and only manage brands. But Wyndham is far ahead on the path than some of its comparably-sized rivals. As of the end of 2022, it had sold the two remaining hotels it had owned, fully exited from managing select-service hotels, and had “exited from substantially all of its U.S. full-service management business.”
The company has a tiny remaining business of managing full-service hotels overseas, but this segment “no longer meets the quantitative thresholds to be considered a reportable segment.”
One quirk of its having to staff full-service hotels overseas is that about 1,200 of its employees work outside of the U.S., or 52% of its workforce worldwide.
7. Wyndham is slowly morphing to look more like an online travel company than a hotel operator.
Now that Wyndham is essentially out of the business of running or owning hotels, it spends a lot of time on marketing its brands and advertising to get guests to choose its properties.
Last year, it spent $127 million — or 9% of its revenues — on advertising expenses.
It licensed its name to timeshare properties owned by Travel + Leisure Co., receiving $90 million in fees.
8. Wyndham’s loyalty program has grown fast in member count.
As of year-end, Wyndham Rewards had “over 106 million” enrollees. Membership has grown 7% a year for the past 3 years. That put it ahead of Choice, Hyatt, IHG, and Accor.
But the program’s size is relatively small compared with Marriott’s and Hilton’s. It ended the year with guests having earned about $117 million of rewards, compared with Hilton guests having earned $2.7 billion in rewards and Marriott guests having earned an astonishing $7 billion in rewards.
Wyndham’s co-branded credit card seems to be underperforming its potential for a group that served “140 million guests” last year. It only received $3 million in revenue from its credit card partner. That’s a tiny fraction of what Marriott and Hilton collected for their co-branded cards.
What do you think? Tell me. I’m at [email protected] and on LinkedIn.
Accommodations Sector Stock Index Performance Year-to-Date
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.
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