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Choice moving past failed Wyndham merger attempt

The company’s Q1 report showed strong performance, due in part to integration of Radisson Americas

Choice moving past failed Wyndham merger attempt

CHOICE HOTELS INTERNATIONAL appears to be moving on from its failed attempt to acquire Wyndham Hotels & Resorts, according to statements from its executive team during the company’s first quarter earnings call May 8. The quarter saw overall positive performance for the company, including record growth in its pipeline and $63.7 million adjusted net income, a 9 percent rise over the same period of last year.

The main portion of the call was dedicated to reporting the highlights of the quarter. For example, Choice’s EBITDA during the quarter grew to $124.3 million, a first quarter record and a 17 percent increase compared to the same period of 2023. Its global pipeline as of March 31 increased 10 percent to a company record of more than 115,000 rooms, including a 36 percent increase in the global pipeline for conversion rooms. Its domestic rooms pipeline increased by 11 percent since Dec. 31, highlighted by a 59 percent increase for conversion rooms.


In March, the company's board of directors approved an increase in the number of shares authorized under its share repurchase program by 5 million shares. The company has repurchased 1.5 million shares of common stock for $196.6 million year-to-date through April 30. Patrick Pacious, Choice’s president and CEO, emphasized the company’s successful assimilation of Radisson Hotels Americas, which it acquired in 2022, and its relaunch of Park Inn by Radisson announced at its recent 68th Annual Convention in Las Vegas.

"These impressive results demonstrate that we are unlocking the revenue synergies from the Radisson Americas acquisition, which has meaningfully enhanced our growth profile and opened new incremental earnings streams,” Pacious said. “Looking ahead, we are confident that our versatile business model with multiple drivers positions us well to deliver continued earnings growth and create shareholder value."

Choice also spent much of the first quarter pursuing an acquisition of Wyndham despite constant refusals of the deal by the Wyndham board of directors. In March, the company finally abandoned the deal after Wyndham stockholders failed to tender stock for the acquisition.

A question for Wyndham stockholders         

During the question and answer section of the call, the subject of Wyndham came up several times. First, Scott Oaksmith, Choice’s chief financial officer, addressed the fate of the Wyndham stock Choice bought during the takeover attempt.

“At the end of March, we still own about 1.3 million shares of the Wyndham stock, which was valued at around about $110 million. But as we discussed, we're not long-term holders of the stock and the proceeds of those sales will be available along with our outstanding debt capacity and free cash flow to execute our share repurchase program,” Oaksmith said. “So, we'll be unwinding those shares over time and the initial share buybacks in April were mainly funded with debt.”

Pacious responded to a question regarding what is Choice’s investment strategy now that it is no longer focused on Wyndham.

“Over the years, we've looked at opportunities where we can find sort of a transformational acquisition, where the leverage levels would be closer to the high end or slightly above with a path to get that back down below. That's where we've looked at that opportunity,” Pacious said. “Our capital allocation strategy is unchanged. We're going to continue to invest in our brands and in our business.”

Finally, Pacious was asked if Choice would make another bid for Wyndham if, for example, that company’s stock was still standing at $75 a share. One of Wyndham’s arguments against the merger was that it expected its shares to rise to $90 without the merger. Pacious also addressed whether concerns over the merger’s chances of being approved by the Federal Trade Commission would factor into a decision to make a second bid for the company.

“I think if you look at the press release we put out when we pivoted away from trying to acquire the business, the strategic rationale still makes sense. So that's really a question for the Wyndham shareholders to answer,” Pacious said. “I think the other aspects you mentioned around regulatory, as we said in our press release, we felt very confident about the progress we were making on that front. So, this is more back to – we really got no price discovery, and we had laid out a $90 offer, we felt that was a full premium value for the value that could be created. And you don't see a lot of opportunities to create over $2 billion in value creation for shareholders on both sides. And so, it's really a question which should be answered by the Wyndham shareholders in the future.”

Other highlights from the first quarter report are:

  • Total revenues were $331.9 million for first quarter, a 0.3 percent decrease compared to the same period of 2023.
  • Royalty, licensing, and management fees totaled $105.5 million for first quarter compared to $107.5 million for the same period of 2023. The first quarter domestic effective royalty rate increased 4 basis points to 5.03 percent compared to the same period of 2023.
  • Domestic RevPAR decreased 590 basis points for the three-month period ending March 31, compared to the same period of 2023, in part reflecting the timing of Easter weekend and tougher year-over-year comparisons. Domestic RevPAR increased 8.2 percent for the quarter compared to the same period of 2019.
  • The company's domestic upscale, extended stay, and midscale portfolio reported a 1.2 percent increase for hotels and 0.9 percent increase for rooms since March 31, 2023. The domestic extended stay hotels portfolio grew by 17.4 percent driven by increases in each of the segment's brands. The company's total domestic system size increased to over 6,200 hotels and over 494,000 rooms during the quarter.

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