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North America

Choice Hotels Addresses Failed Wyndham Merger

Alan Woinski and Kim Woinski

March 19th, 2024

Exterior of a five-story hotel

Skift Take

Choice Hotels commented on their Wyndham hostile takeover implosion and said it was challenged by a ‘difficult’ administration and a regulatory body that Choice said was ignorant of hotel industry pricing structures, among other reasons.

Last week, JP Morgan said their JPM Gaming & Lodging Management Access Forum had them coming away refreshed by the general better macroeconomic environment allowing for companies across their coverage universe to talk about more industry-specific events, company-level strategic priorities, and recent trends. That is opposed to last year’s high-level macro-related topics outside of management’s control, which were the hot topics, as were Ukraine or the China macro in the two years before that. JPM said they believe the most evenly positive fireside chats in the lodging space came from Hyatt and Travel + LeisureHyatt is making good progress on increasing its asset light mix and sees a better environment for asset sales to help accelerate the improving mix, which complements RevPAR fundamentals and room growth/development that is tracking at least in line with its 2024 targets. Travel + Leisure still has sound timeshare fundamentals and believes a lower interest rate environment will improve interest income related to EBITDA while capital return is consistent. For new hotel development and transactions of large-scale assets, JPM believes the interest rate environment approval will support these and the early and late-stage pipeline normalizing may result in a lower mix of conversion activity as net new development unit growth accelerates.

Choice Hotels comments on their Wyndham hostile takeover implosion included that it was challenged by a ‘difficult’ administration and a regulatory body that was less than educated on the hotel industry pricing structures, and a previously strained relationship with the Asian Hotel Owners Association may have impacted progress. CHH said if WH were to engage at some point in the future, they would be willing to listen to proposals. Given the commentary by WHCHH may be waiting by the phone for a long time.

Choice Hotels also disclosed 13.6% of Wyndham shares outstanding were validly tendered and not withdrawn, not including the 1.8% stake CHH has/had. As for whether that is higher or lower, we can tell you that the exchange offer notifications we saw from various brokerage houses were misleading. If you were not completely up to speed on what was going on, you may not have known it was a yes or no question. The notification made it sound like you had to pick one of the selections, not that you had a choice not to tender your shares. Regardless, we are not reading as much into that as others as we never thought CHH had a chance to get this done at the offer they gave.

Barclays said they believe lodging M&A is picking up and further acceleration is in the cards. History suggests asset-light deals are accretive and perform well post-transactions but with a fair amount of dispersion and influence from several factors. Barclays believes brand M&A will pick up as major C-Corps look to offset the damage to US construction pipelines from post-Covid delays, high-interest rates, and sluggish US hotel starts in 2023, as well as for longer-term benefits of scale, consumer choice, and network effects for their loyalty programs. Investors seem to prefer Hilton’s organic growth strategy over M&A, but Marriott’s history of accretive M&A and deal-supplemented rooms growth has also been approved by investors.

Wells Fargo took a look at an underappreciated part of the value proposition in C-Corp multiples – loyalty programs. They believe it is clear that strong programs drive network effects, a key factor for valuations. They see the most opportunity in Hyatt. They believe Hyatt’s program offers the best value for entry-level and low-tier members, Hilton is best for mid-tier members, and Marriott is best for road warriors at 50+ nights. Among Choice and WyndhamWF gave the nod to Wyndham. While CHH stock is well on the road to recovery, they are taking a lot of hits from the analyst community. WF upped price targets for H to $170 from $160; HLT to $196 from $181, and MAR to $250 from $234.

Hilton’s Investor Day was today and they modestly upped guidance on certain things. RevPAR guidance was maintained but adjusted EBITDA and some other metrics were modestly raised. We expect to see another round of higher price targets from analysts following today’s event.

Soho House shares continue on a roller coaster ride. The latest was the up part of the ride yesterday as chairman Ron Burkle said he thinks confidential information was leaked from a special committee process. He sent a note to shareholders which coincided with the stock being at the lows saying he learned last Friday that a leak showing they were considering taking the company private had shocked him. The stock surged 10% even though he said he is not currently part of a bid to take the company private.

Bradford Allen announced its investment arm has acquired the Aloft Glendale at Westgate, a 100 key hotel in Glendale, AZ. This marks the firm’s second acquisition in the Westgate Entertainment DistrictCushman & Wakefield represented the seller, HCW Hospitality & Development, in the transaction. Since launching its hospitality platform in 2022, Bradford Allen has acquired six hotels totaling 800 keys.

A dual-branded Hilton property in downtown Raleigh, NC is nearing completion. The 261 room building will house both a Homewood Suites and a Tempo hotel. Construction was supposed to begin in 2020 but Covid delayed groundbreaking until 2021. The opening is now expected in July. CN Hotels is developing the hotels with McKibbon Hospitality working with them and will manage once open. The property will have the highest rooftop bar in the Triangle with the Urban Oakalso run by McKibbon. The hotel was originally to be a Hilton Garden Inn and Homewood Suites but CN asked Hilton to switch to the new Tempo flag. This is the fifth hotel partnership between CN and McKibbon.

Construction of the Hampton Inn in Beamsville in Ontario, Canada should be getting underway in 14 months. Groundbreaking is expected in May 2025 with an opening by August 2026. Approval for the 100 room hotel that will include a swimming pool, fitness center and meeting space was given in July 2023.

Olympia Hospitality announced the opening of Hotel Ursa on the campus of the University of Maine in Orono, Maine. The hotel has 95 guest rooms and is located at the center of the campus. The hotel was developed through a historic rehabilitation of two original buildings on campus, Coburn Hall and Holmes Hall. They were joined by a third building, Polaris Hall, a new building that offers contemporary guestrooms. The hotel offers MajorMinor, a café and bar. Hotel Ursa was developed by Radnor Property Group and Harrison Street.

Red Roof announced the opening of Red Roof Inn Haltom CityTexas. The hotel is owned by SYB Hospitality LLC which renovated the property, including enhancing the entry façade, updating guest room bathrooms and adding new bedding, guest room furniture, lobby furniture and ice and vending machines.

An extensive renovation project at the Radisson Plaza Hotel and Suites in Kalamazoo, MI that initially began in 2020 has finally been completed. Renovations focused on guest rooms, meeting and event spaces and lobby areas. All 340 guest rooms have been refreshed as has the 10,500 square foot The Kalamazoo Room event space.

Midas Hospitality has purchased the bankrupt but nearly finished Downtown Brooklyn hotel at 291 Livingston Street for about $34.9 million. Midas bought the project from a limited liability company linked to Aview EquitiesHello Livingston Extended was the LLC that bought the land for $14.8 million in 2018 with plans to build a 46,000 square foot hotel and luxury residential project but ran out of funding. The property was 95% done and would require about $6 million to complete.

The English Hotel, a boutique hotel in Las Vegas’ Arts District, is set to expand next year. The hotel opened in 2022 with 74 rooms and is set to add another building across the street from its original location which will have 120 hotel-condo units. The units will be a mix of studios, one and two-bedroom units with the owners having the option to put the units into the hotel pool, branded with The English Hotel. The developer is Z life Co. Construction should begin by the end of this year and will take 12 months to complete. The expanded hotel will continue to be affiliated with the Marriott hotel brand. The expansion is part of Z Life’s Midtown mixed-use apartment and condo project.

The Jekyll Island Club Resort in Jekyll Island, GA unveiled a $25 million transformation. The reimagining touched every part of the resort, including its grounds, accommodations, and culinary establishments reflecting the styles of the Gilded Age and Roaring Twenties. The redevelopment includes guest rooms in the resort’s American Queen Anne-style clubhouse, Crane CottageCherokee Cottage, and San Souci. The riverside pool, select dining areas, and public spaces were all enhanced to connect guests with the resort’s history. Future design initiatives will enhance the resort’s meeting spaces along with The Wharf at the Island Club and Eighty Ocean restaurant. An oceanfront sky terrace at the Ocean Club is nearing completion. The resort is owned by Pebblebrook Hotel Trust and is part of the Noble House Hotels & Resorts management portfolio.

The Flat Iron Hotel in Asheville, NC will open this spring. Indigo Road Hospitality Group has opened its reservation system for overnight guests at the property, allowing guests to book for any of its 71 guest rooms and six suites for as early as April 26. The new adaptive reuse boutique hotel inhabits the Flat Iron building. The opening dates have not been announced for the culinary and beverage concepts at the hotel.

The Sandpearl Resort in Clearwater Beach, Florida completed a renovation of all its guestrooms and suites. As part of the renovation, guestrooms and living spaces received new flooring, carpets and rugs, paint, couches, furnishings, and other decorative appointments. The Sandpearl Resort is part of the Opal Collection Hotels & Resorts.

The Newport Harbor Island Resort has undergone a renovation and plans to open next month. Nestled in Newport, Rhode Island on Goat Island, the resort is owned by Pebblebrook Hotel Trust and operated by Davidson Resorts. The $50 million renovation took the former Gurney’s property to new heights with refreshed guestrooms and suites, a modern spa, new culinary experiences, meeting spaces, and a 22-slip marina.

Best Western Hotels & Resorts announced the opening of the Best Western Doswell Hotel located in Doswell, Virginia. Owned by Nandit Mehta, the property recently underwent a $1.3 million renovation. The refreshed property features 50 guestrooms, a modern lobby and breakfast room, and a new fitness center.

The SureStay by Best Western Livingston Merced County has opened in Livingston, California. The recently renovated hotel is owned by Tushar Pateland offers 76 guestrooms and a guest laundry facility.

Maguire Capital GroupMadison Realty Capital, and Newbond Holdingsnabbed an $81.5 million distressed loan on the 153-key Fifth Avenue Hotel in Manhattan. The firms bought the senior loan from Santander Bank and City National Bank of Florida. The loan matured and is in default. Columbia Pacificholds a mezzanine loan on the property. The hotel is owned by Flaneur Hospitality.

Cronheim Hotel Capital secured an $11,000,000 loan for affiliates of Concord Hospitality to refinance the existing note on the 127-room Courtyard located at Houston International Airport.

Peachtree Group, formerly Stonehill, closed approximately $660 million in credit investments since December 1, 2023, with an additional $350 million anticipated closing over the next 30 to 45 days. The credit investments primarily encompass originations for hotels, multifamily, industrial, and student housing.

RobertDouglas announced it represented, as an exclusive advisor, The Mirbeau Companies, developer and operator of Mirbeau Inn & Spa Resorts and the Mirbeau Wellness brand, in arranging a strategic capital partnership with EPR PropertiesEPR is providing $77 million in convertible mortgage financing to recapitalize Mirbeau’s existing portfolio as well as $47 million of forward funding commitments to finance the brand’s expansion regionally and nationally.

Alan Woinski and Kim Woinski

March 19th, 2024

Companies: Choice Hotels International, Hilton Garden Inn, Hilton Hotels & Resorts, Hyatt Hotels Corporation, Midas Hospitality, Mirbeau Wellness, Noble House Hotels & Resorts Ltd., Opal Collection, Peachtree Group, Pebblebrook Hotel Trust, Radisson, Red Roof Inn, Soho House and Co Inc., Tempo by Hilton, The Indigo Road Hospitality, Wyndham Hotels & Resorts

Locations: Arizona, California, Florida, Georgia, Houston, Michigan, New York City, North Carolina, Ontario, Rhode Island, Virginia

Photo credit: The exterior of a Cambria hotel.  Choice Hotels International

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