On Sep 30, 2014, we issued an updated research report on Wyndham Worldwide Corporation (WYN).
On Jul 24, the company posted strong second quarter 2014 results with earnings and revenue beating the Zacks Consensus Estimate. Adjusted earnings of $1.17 per share were up 19.4% year over year led by higher revenues. Net revenue grew 7.2% year over year to $1.34 billion in the quarter, owing to solid revenue growth in all the three operating segments. Given the strong results, the company also increased its earnings and EBITDA guidance for 2014.
With the economy beginning to improve gradually, the U.S. hotel industry has started to grow. Wyndham continues to generate room-rate gains in the domestic upscale and mid-scale segments with an increase in occupancy.
Moreover, Wyndham is also consistently trying to expand its presence worldwide. A significant portion of the company’s properties is situated outside the U.S. including Asia, Middle East, Europe and Latin America. This gives the company wide international exposure. Moreover, these expansions would help the company to gain market share in the hospitality industry, thus boosting its business.
Additionally, the company’s marketing efforts to increase traffic are worth mentioning. Wyndham is launching new prototype hotels that aim at enhancing overall guest experience, while reducing development costs for franchisees. Other marketing efforts like an umbrella advertising campaign and podium presentations are being executed by the company to build consumer awareness of its powerhouse brands and loyalty program.
However, we cannot ignore the fact that the company is facing troubles in the regions where it operates. A deteriorating political situation and a sluggish economy in Brazil and Chile are weighing on demand in these regions. Moreover, the political turmoil in Thailand, visa restrictions and concerns about the corona virus in Saudi Arabia and Vietnam’s dispute with China further add to the woes. Given its significant presence in Europe, the current sluggishness in Eurozone may limit the growth of the vacation rental business.
In fact, other hoteliers like Marriott International Inc. (MAR), Hyatt Hotels Corporation (H) and Starwood Hotels and Resorts Worldwide Inc. (HOT) are also facing troubles in these regions.
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