Geoff Ballotti, (l.) on stage at the Caribbean Hotel & Resort Investment Summit with Hotel Investment Today Editor Jeff Weinstein Reaction to rumors about Choice-Wyndham dealBy Jeffrey Weinstein | May 23, 2023Share Reports surface about Choice Hotels being in discussion to acquire rival Wyndham Hotels, which would create a powerhouse in the economy and midscale segments. There was a news-driven buzz at the Caribbean Hotel & Resort Investment Summit in Miami on Tuesday after The Wall Street Journal reported that Choice Hotels International is in discussions to buy Wyndham Hotels & Resorts and its 24 brands, which undoubtedly would create a juggernaut in the economy space.While on stage at the event, Wyndham CEO Geoff Ballotti, not surprisingly, didn’t offer much more than acknowledging awareness of the rumor. Representatives from Choice at the same event also did not comment on the report.The WSJ report curiously added that the companies are not yet in serious discussion and that it wasn’t clear whether Wyndham is interested in a deal. The alternative for Choice would be more of a direct and hostile takeover bid through Wyndham shareholders.Wyndham had a market value of $5.9 billion as of Monday's close, while Choice has a market capitalization of $5.8 billion.Truist Securities analyst C. Patrick Scholes weighed in on the report, stating while “never say never,” he does not think a merger is likely. He said such a deal would run directly counter to Choice’s stated strategy of wanting to move more upscale, that it is still digesting its Radisson Americas acquisition and how the WSJ article states there were not serious discussions, which he said sounded like “they were walking back their original article.”Scholes also cited potential antitrust concerns as the combined entity would account for ~376,000 midscale rooms (72.7% of U.S. rooms) and 339,000 economy rooms (48.3% of U.S.).He also said Wyndham’s strong management does not mean a change in direction is truly needed.When considering why the merger would work, Scholes said it would give Choice significant share of economy and midscale rooms, give them immediate international exposure and, of course, would provide a huge bump in net unit growth. It would also strengthen Choice’s position in the lower end of the chain scale as the likes of Marriott and Hilton start to develop “downscale” brands.