As part of the Americas
Lodging Investment Summit’s Patron sponsorship program, ALIS organizers asked Wyndham’s
Chip Ohlsson eight timely questions as we prepare for the 22nd
annual event January 23-25, 2023, at the JW Marriott/Ritz-Carlton Los Angeles
L.A. LIVE. Following are his responses.
ALIS: How has
inflation and the threat of a recession affected the U.S. hotel franchising and
kicked off our high-demand summer season with the strongest Memorial Day we’ve
ever experienced, and saw guests book earlier, travel further, stay longer, and
spend more on hotel rooms at our hotels than they did in 2019. We grew our
development pipeline to a record 208,000 rooms as of June 30, 2022 showing why
Wyndham is one of the most resilient businesses in the lodging sector.
may be talk of a threat of recession, but our demographic is the middle-class
guest who prefers experiences over tangible goods, and they are still hitting
the road. For fall, we’re seeing people planning ahead, with a pickup in
bookings occurring 60+ days in advance.
continued to launch new hotel development programs such as “Women Own the Room”
to target women’s advancement in hotel ownership and a new program for black
owners called BOLD (Black Owners and Lodging Developers).
We also welcomed new
properties to the company with the recent expansion of Registry Collection Hotels
through our new strategic alliance with Palladium Hotel Group.
ALIS: Most forecasts show supply
growth checking in at about 1% each year for the next two or three years. How
do you see it playing out based on Wyndham’s pipeline?
grew our development pipeline this past quarter by 2% sequentially and by 9%
versus prior year. This marks the eighth consecutive quarter of sequential
pipeline growth as we awarded approximately 125 new contracts domestically and
over 60 contracts internationally, which in total account for more than 22,000
new rooms. The number of domestic contracts signed was approximately 75% higher
than what we awarded both last year and back in the second quarter of 2019.
Importantly, during the second quarter, we awarded contracts to develop another
22 hotels for our recently launched new construction extended-stay brand, known
as Project ECHO, which brings the total number of contracts awarded for this
brand to 72 as of June 30th since its launch in March.
overall system grew by 1% sequentially and by 3% versus prior year. We opened
more rooms than last year, and once again improved our retention rate as
terminations were 200 basis points lower than last year. These results were in
line with our expectation and positioned us solidly on track to achieve our
full year net room growth outlook of 2% to 4%.
In the U.S., we grew our
system size by 2% year-over-year and by 10 basis points sequentially, opening
another 6,300 rooms in the second quarter.
ALIS: What’s the message to hotel
owners, investors, and developers from the lending community in general as 2023
OHLSSON: Being a franchisee of a large company offers owners the
opportunity to simplify the operations of their hotels and help reduce costs by
leveraging negotiated discounts with suppliers and approved lenders. These
lenders are less risk averse in uncertain times which is why partnering with a
large franchise company is the best option.
Specifically, one of the
pillars that our Women Own the Room and BOLD programs are built on is
delivering comprehensive financial solutions. While women make up 70% of the
tourism and hospitality workforce, they only make up 10% of hotel development
roles. Black employment in the hotel industry represents nearly 20% of all team
members in the industry, yet less than 2% of hotel owners are Black. Through
these hotel development programs we can connect women and black entrepreneurs with
approved lenders to explore securing the financing needed for them to continue
on the path of hotel ownership.
on your portfolio and what you’re seeing throughout the industry, what segments
are the most sought after for development and franchising opportunities? Why?
continue to see an uptick in requests for our economy and midscale brands with
brands like Days Inn and Wingate. Owners who didn’t have access to capital
during the pandemic are now converting and doing full renovations of their
hotels to help maximize their investment.
We are seeing an increase in
the demand for extended stay accommodations with interest from both guests and
developers. We saw this as an opportunity to debut a new economy extended-stay
hotel brand. Currently operating under the working title “Project ECHO,” the
all new-construction brand fills whitespace within the larger Wyndham Hotels
& Resorts portfolio while expanding the company into a segment that has
seen record growth and resiliency.
hotels are another product that we’re seeing demand for. We currently have nearly
50 deals in our development pipeline as owners look to capture both the
transient and extended stay market.
The all-inclusive segment is
also attractive. Within the last year we have aligned with Playa Hotels &
Resorts to launch our first brand entirely dedicated to the all-inclusive
segment – Wyndham Alltra. We also recently announced a strategic relationship
with Palladium Hotel Group to bring 14 all-inclusive hotels to our Registry
Collection brand and another hotel to our Trademark brand.
has the labor shortage affected the hotel development process? Is it something
that the industry will deal with long term?
has been an industry-wide challenge as it was before the pandemic even began. However,
because of the segments where we have the majority of our hotels–economy and
midscale–our owners are less impacted. Labor runs ~12% of gross operating
revenue in our economy segments vs. ~35% of gross operating revenue for overall
US Industry. We initiated new ways to help optimize the ROI for owners by
reducing the breakfast requirement and instituting on demand housekeeping at
some of our other brands. Wyndham puts owners at the center of everything we
do, and in response to this challenge we launched a guide on best practices to
assist franchisees and provide them with solutions.
the status of the shortage of materials and the supply-chain issues and their
effect on development? How much time have these issues added to the development
issues are impacting all major industries and it’s something that must be
considered during development and renovations. That’s why having the right franchise
partner is essential. Another benefit of being part of the world’s largest
hotel franchising company is the unprecedented access to already established
relationships with approved vendors. We work with suppliers to help mitigate
through negotiated agreements, which in turn provides cost-effective solutions
for our franchisees. Leveraging our approximately 9,000 hotels worldwide, we can
utilize our scale to help our owners receive their goods in a timely manner and
obtain favorable costs.
ALIS: What’s the most
under-estimated challenge the hotel industry faces, and why?
OHLSSON: The cost to capture new
guests. For independent properties and smaller hotel companies, the rising
costs can be daunting. This is where a larger, branded franchise company can
help owners to reduce their costs to acquire new guests. Our Wyndham Rewards
program now has over 95 million enrolled members. Our loyalty members spend two
times more than non-members on average and nearly one out of every two
check-ins in the US are asking for their Wyndham Rewards points at check-in.
It’s the reason independents and small hotel companies come to us and it’s the
reason Wyndham Rewards is routinely rated the #1 hotel rewards program. Our
central reservation systems also deliver $7 out of every $10 to U.S.
ALIS: What’s the most
under-estimated opportunity for the hotel industry, and why?
OHLSSON: Understanding the shift in mindset of today’s traveler and
what they want – EXPERIENCES. We have seen measurable success and
tremendous opportunity ahead in attracting our nation's 150 million Gen Z,
millennial, and Gen X travelers, who collectively have $350 billion of
disposable income to spend. These next generation consumers are the most eager
to vacation with nearly 40% identifying “budget-friendly” as a key
consideration. This younger demographic now represents our number one segment
from a demand standpoint. We believe that continuing to expand our marketing
funnels to cast a wider net to target these younger consumers with data-led
engagement strategies and closed user group loyalty incentives will allow us to
continue to grow member enrollments.