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Dissecting The Deal

Wyndham CEO Ballotti Details Benefits Of Adding La Quinta Brand To Portfolio

Thursday, July 12, 2018
Dennis Nessler
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When Wyndham Worldwide agreed to acquire La Quinta Holdings, Inc. earlier this year for $1.95 billion it represented the largest transaction the lodging industry has seen in quite some time, not to mention the most significant deal ever for the 30-year-old brand behemoth.

Wyndham Hotel Group President and CEO Geoff Ballotti talked at length at the NYU Hospitality Industry Investment Conference last month about the aforementioned deal and why it made sense for the Parsippany, NJ-based company to add the midscale brand and its 900-plus properties.

“Our thesis was really simple, this was very complementary to the Wyndham Hotels & Resorts brand portfolio and our business. There was significant upside for the franchisees and now the owner of the real estate [CorePoint Lodging Inc.]. We have a very strong partnership with CorePoint, which remains in place today,” he said.

Ballotti further touted the impact of the deal, which officially closed last week, as well as the financial benefits. ”We are looking at an incredibly transformative, accretive acquisition. Including synergies we’ll now be able to say we acquired La Quinta at a multiple below where we’re trading today and below where our peers are trading in the industry,” he noted.

The deal resulted in a spin-off of the real estate—which included some 300-plus of the brand’s more than 900 properties—from La Quinta into CorePoint Lodging. Both Wyndham Hotels and CorePoint recently went public on the New York Stock Exchange.

”It was that spinoff, because we are a pure-play asset-light business, that made this acquisition possible. We don’t own real estate and the acquisition of La Quinta with the spinoff of CorePoint made this a pure-play, select serve, fee-based business,” said Ballotti.

Before going public in recent years, La Quinta was previously owned by Blackstone. During the “Anatomy Of A Transaction” panel discussion, Tyler Henritze, senior managing director and head of real estate U.S. acquisitions, Blackstone, talked about the evolution of the company following Blackstone’s purchase in 2005 when it took the company private.

“It was a real challenge to try and separate the real estate from the brand. We brought in Mit Shaw, as a board member and then ultimately as Chairman of the Board, and [CorePoint Lodging CEO] Keith Cline. They just did an amazing job in terms of executing this and they created enormous value for shareholders,” he said.

Henritze also weighed on the most recent deal. “As a current shareholder I think this was really a win/win in terms of a good outcome for Wyndham and a great outcome for La Quinta,” he said.

Ballotti weighed in on some of the benefits of adding La Quinta to Wyndham’s existing portfolio of 20 brands. “It makes us a much larger player in the upper midscale space. We are the largest in the U.S. economy [segment] and now we can say in the midscale and upper-midscale market. There are scale benefits. When you think about the importance of loyalty and why we need a brand, there is nothing more important for us to continue to strengthen our loyalty program and it’s what was most important to La Quinta owners,” he said.

Meanwhile, being part of the Wyndham family of brands should offer plenty of benefits to La Quinta owners as well, according to Ballotti. He noted that properties can immediately plug into the company’s cloud-based CRS and PMS systems. Ballotti also noted the company is beginning to cross-sell owners on the Wyndham platform.

Ballotti further stressed the impact of combining both the rewards programs from La Quinta and Wyndham, which include some 15 million members and 60 million members, respectively. “It’s a powerful combination for those two rewards programs to come together,” he said.

The CEO praised the La Quinta management team for the quality of the brand’s properties, noting that some 80 percent of the 907 hotels in the portfolio are rated with four or five stars on TripAdvisor. He added that there are currently 259 executed pipeline deals as well. “It’s a strong pipeline and it has since accelerated since we announced the deal,” said Ballotti.

He further touted the brand’s growth trajectory. “La Quinta has had great growth over the last five years. Their portfolio of franchisees have increased by over 30 percent and the pipeline has increased by nearly 70 percent. RevPAR has grown significantly and the RevPAR index more importantly continues to climb,” he said.

Ballotti noted that the integration of the La Quinta brand into Wyndham’s brand portfolio is “well underway. We’re very excited about being able to now add to the owners and franchisees, and most importantly CorePoint moving forward, and grow this brand both domestically and internationally,” he said.
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Dennis Nessler    Dennis Nessler
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