BERLIN—When trying to expand into new markets, you can either knock on the door and wait for an answer or kick it down and rush in. Eric Danziger prefers the latter.
Though Wyndham Hotel Group’s president and CEO would never consider himself a particularly brash or aggressive person, he hopes to kick his way into several new markets as the company continues its unprecedented global expansion.
Wyndham added more gross rooms to its development slate last year than during any year in the company’s history. As of 31 December 2012, the group had approximately 930 hotels and 110,700 rooms in the pipeline, of which 59% were new construction and 56% were outside the United States.
More recently, the group executed a handful of portfolio transactions that expanded its presence by what Danziger called “quantum leaps.”
Wyndham made its first splash when it struck a deal with Colony Capital to rebrand 56 former Jameson Inn properties in the United States. Only a few weeks later, the company signed on to rebrand and manage eight hotels in the U.S. for FelCor Lodging Trust.
“It’s infinitely better for the owners and the brand if you go into a country in a significant way instead of one followed by another one followed by another one because the hotels can get up to speed a little bit faster,” he told HotelNewsNow.com earlier this month during a break at the International Hotel Investment Forum.
Going forward, Danziger will focus more of his energy outside of Wyndham’s domestic base—as made evident by the group’s 20 February announcement that it would rebrand 43 of Grand City Hotels’ properties in Germany under various Wyndham flags.
“That is the large growth opportunity,” Danziger said of portfolio deals outside of the U.S. “Coming into Germany, instead of knocking on the door and coming in with one (hotel), we sort of kicked down the door and ran in. … We’re going to do a good job because we’re going to have critical mass.”
When asked if similar portfolio deals were in the works, the chief executive said, “Our job is to always have things percolating. … How many of them is hard to predict, but I’m very optimistic you will see more portfolio transactions in our future.”
But the company’s bread and butter still remains one-off deals, Danziger noted.
“The bread and butter of a company like ours is the one-off. We do about one-and-a-half hotels a day around the world with our company. So that is important.”
As of 31 December, Wyndham had more than 7,340 hotels and 627,400 rooms in its portfolio.
Global growth
The ability to execute larger transactions in Europe, China and the Middle East is as much a result of the loosening financial environment as it is a desire to invest in well-known multinational chains, Danziger said.
Five years ago, Wyndham would have been hard-pressed to strike such a large deal with a group such as Grand City, he said. But as the travel industry has become broader and more global in nature, investors have become more mindful of meeting the needs of outbound travelers.
“Hotels elsewhere around the world want to be positioned with a brand that has visibility and understanding by those local constituents so when they travel they choose a brand that’s familiar,” Danziger said.
Wyndham’s executive team recognized that shift and four years ago made a conscious effort to expand the group’s global portfolio.
The road since has been thoughtfully navigated, Danziger said. Wyndham’s team has had to turn down one-off deals in previously uncharted locales because they lacked the necessary support system and footprint to ensure success. Expansion has been more deliberate, with new Wyndham flags rising in clusters.
The brands being waved depends on the destination, Danziger said. The group’s Hawthorn Suites probably would never work in a market that doesn’t use extended-stay brands, he offered as an example. Likewise, Super 8 has proven a success in the Middle East, filling the void of roadside inns required to support a burgeoning base of travel.
Cash sways conversions
Danziger said he’s willing to grease the skids with various incentives for the right hotels in the right markets.
That was the case in the FelCor transaction, where Wyndham offered a $100-million guaranty over the 10-year term of the agreement with an annual guaranty of up to $21.5 million that ensures a minimum annual net operating income for the eight hotels.
“Here’s how I looked at it,” Danziger said of the deal. “We aren’t real estate buyers. So if a brand wants to be in Boston, San Diego, Philadelphia, Santa Monica (California), New Orleans, Charleston (South Carolina), and so on, your choices are a couple: One is you buy your way in. We don’t want to do that.
“I have always regarded (grade) A locations that let’s just say are C- physical plants as wonderful opportunities for us to go, spend money to make them B+, A- hotels, because that’s infinitely easier to perform for your brand than if you have an A hotel in a C location. So the ability to put our brand in eight key strategic markets at one time and to have executed a plan that goes from a C physical plant to an A- or B+, they don’t come around very often. …
“I think it’s ultimately fair for that kind of strategic effort to make the owner feel like you are behind that and the risk on their part is minimized because of what you’re willing to say backing up your story,” Danziger explained.
Would he offer similar incentives again?
“I wouldn’t do that deal if these hotels were in Omaha (Nebraska), San Jose (California) and all that,” he said. “These are eight major cities and destinations—and we are managing those hotels, so you’re a little in control of your own destiny.”