ALIS Executive Suite Q&A: Chip Ohlsson, Chief Development Officer, Wyndham Hotels & Resorts

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 22^nd 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 development segments?

 

OHLSSON: We 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.

There 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.

We have 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?

 

OHLSSON: We 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 30^th since its launch in March.

Our 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 approaches?

 

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.

ALIS: Based on your portfolio and what you’re seeing throughout the industry, what segments are the most sought after for development and franchising opportunities? Why?

 

OHLSSON: We 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.

Dual-brand 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.

ALIS: How has the labor shortage affected the hotel development process? Is it something that the industry will deal with long term?

 

OHLSSON: Labor 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.

ALIS: What’s 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 process?

 

OHLSSON: Supply-chain 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. franchisees.

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.