CorePoint Lodging, a REIT that owns midscale and upper-midscale La Quinta by Wyndham hotels, said in its second quarter earnings call that its properties’ transition to a new technology package from Wyndham Hotels & Resorts led to higher than expected revenue loss.

COREPOINT LODGING, A REIT that owns midscale and upper-midscale La Quinta by Wyndham hotels, is selling off properties in an effort to change the course of declining revenue and value. The company blames the revenue drop in large part on the transition to a new technology package by its properties’ managing company under Wyndham Hotels & Resorts.

Though RevPAR either remained flat or declined across the entire midscale and upper-midscale hotel chain scales in the second quarter, according to STR, CorePoint Lodging leadership mostly blames its struggles on disruption caused by the transition of its hotels’ technology platforms to Wyndham’s system, which made changes that impact revenue management, the call center and corporate and group bookings.

Wyndham, doing business as LQ Management, manages CorePoint Lodging’s 301 hotels, which by the time this article is published, may be decreased by at least 27 properties.

Wyndham Hotels & Resorts in May 2018 acquired the La Quinta brand from La Quinta Holdings, which owned and franchised more than 1,200 hotels. As part of the deal, Wyndham acquired La Quinta Holdings’ franchise and management businesses. The corporate-owned portfolio spun off into CorePoint Lodging, and Wyndham signed on as property manager.

“We believe these modifications and other problems related to implementation of the transition of our hotels, contributed to our lower occupancy and average daily rate as well as the loss in market share,” said Keith Cline, CEO of CorePoint in an Aug. 13 earnings call.

EBITA was $46 million in 2Q19, down 34 percent from a year ago quarter.

Cline said he expects the “disruption” to continue and to negatively impact its business through the end of this year.

CorePoint Lodging on July 30 informed LQ Management it is in default of its management agreement, Cline said. LQ Management has not admitted fault and CorePoint is in “discussion with them to resolve these matters,” he said.

Wyndham issued a statement in response to Cline’s comments.

“As CorePoint said on the call, many factors contributed to their performance in the second quarter, including market softness that started before the systems migration and the location of some of their properties,” the statement said. “We continue to work closely with CorePoint to optimize their portfolio performance.”

Other factors that impacted earnings were disruptions at several hotels because of storm damage and declining business in properties in oil markets.

CorePoint had identified 78 “non-core” assets it planned to put on the block. As of Aug. 13, it had 27 hotels under sales agreements. The deals could generate $100 million for the REIT.

In other sales activity, CorePoint sold six hotels for $24 million in first six months of 2019, ending June 30. Then seven hotels sold for $29 million before Aug. 13.

Some of the proceeds went to paying down debt. CorePoint also repurchased 2.2 million shares of stock for $25.7 million.

The sale of assets will likely lower CorePoint’s revenue as the 12 properties already sold generated $20 million in revenue over the past 12 months and the remaining 65 hotels earned $75 million the first six months of this year.

As for the hotels it’s keeping, CorePoint had, in the first half of the year, spent $47 million on capital improvements. “Approximately $7 million related to repositioning expenditures, which were a part of our 54-hotel renovation program started in 2016,” Cline said. “In addition, approximately $14 million related to hurricane-restoration costs from storms in 2017 and 2018.”

The REIT expects to spend another $7 million on repositioning its earmarked portfolio and on hurricane-damage repairs. Occupancy and RevPAR increased in the hotels involved in the upgrades, Cline said.

At the end of the second quarter, CorePoint Lodging reported it had 308 hotels. Of those, 184 are La Quinta Inn & Suites, three of which are exterior corridor, and 124 are La Quinta Inns, which include 85 exterior corridor hotels, according to documents filed with the SEC.

After June 30, the end of the quarter, CorePoint sold seven hotels, bringing its inventory to 301 by the Aug. 13 earnings call.

Overall, for the second quarter ending June 30, CorePoint Lodging reported total revenue of $219 million, down 6 percent from the year-ago quarter, according to its quarterly earnings report filed on Aug. 14 with the SEC. Net income loss was $19 million compared to a $48 million loss in the second quarter of 2018.