Wyndham to Separate Hotel, Timeshare Businesses

Geoff Ballotti, the current CEO, will lead the hotel company, and Michael Brown, current CEO of the group’s Vacation Ownership division, will lead the timeshare operation.

Geoff Ballotti, CEO of Wyndham Hotel Group
Geoff Ballotti, CEO of Wyndham Hotel Group

Wyndham Worldwide will spin off its hotel business, thus creating two separate publicly traded companies, Wyndham announced late last week.

Wyndham Hotel Group will become a new publicly traded, pure-play hotel company and will remain headquartered in Parsippany, N.J. Wyndham Vacation Ownership, based in Orlando, Fla., will be the world’s largest publicly traded timeshare company and will be teamed with Wyndham Destination Network, home to RCI, the world’s largest timeshare exchange company.

Wyndham reportedly “will … explore strategic alternatives for its European rental brands.”

We will work with the leadership of our European rental organizations, which have outstanding brands in their regional markets, to explore options to fully realize their future growth potential,” Stephen Holmes, chairman & CEO, Wyndham Worldwide, said in a prepared statement.

The new entities will operate under names that have yet to be determined. They intend to enter into long-term agreements to retain their affiliation with the Wyndham Rewards program and will continue to collaborate on key other initiatives.

In the transaction, the new hotel company’s stock will be distributed pro rata to existing Wyndham Worldwide shareholders. The transaction is scheduled to close in the first half of 2018.

Following the transition, “both companies will have significant scale and leadership positions within their industries, strong cash flows, rich portfolios of trusted brands, and the existing relationships in place to drive attractive growth and shareholder value,” according to Wyndham’s announcement.

C-Level Leadership Remains Stable

The two companies will have separate boards, though Holmes will serve as non-executive chairman of both boards.

Geoff Ballotti, the current CEO of Wyndham Hotel Group, will lead the hotel company as president & CEO, and Michael Brown, current CEO of Wyndham Vacation Ownership, will lead the timeshare company as president & CEO.

Wyndham Vacation Ownership had more than $2 billion in gross timeshare sales in 2016 and is the world’s largest developer and marketer of vacation ownership products. It operates a portfolio of more than 220 resorts in the U.S., Canada, Mexico, the Caribbean, South America and the South Pacific.

The hotel company will inherit 18 brands and more than 8,100 hotels—more than any other company in the world—comprising about 705,700 guestrooms in more than 80 countries and having generated 2016 revenues of $1.3 billion. In addition, a further 150,800 guestrooms are in the pipeline.

A Smart Move, Says Arm’s-Length Expert

Timeshare companies have proven to be robust performers during the past 12 months,” with Marriott Vacations Worldwide posting gains in excess of 54 percent and Hilton Grand Vacations up more than 38 percent since they began trading in December 2016, Peter Nichols, National Director of the National Hospitality Group at Marcus & Millichap, told Commercial Property Executive.

Given that standalone timeshare and hotel brand businesses are trading at higher multiples than the combined Wyndham companies, Nichols calls the Wyndham bifurcation a “smart business move” that will let each business unit to focus on its core strengths.

He noted that the hotel and timeshare businesses “are quite different in nature. By breaking into two companies, they lose a modest level of diversification, but the move allows the companies to really focus on their areas of expertise.”

Finally, Nichols suggested, this transition “may increase Wyndham’s aggressiveness in growing its hotel side, since its focus will be narrower.”