NORTH BETHESDA, Maryland—Choice Hotels International, Inc. issued an investor presentation and infographic disputing the claims made by Wyndham Hotels & Resorts, Inc. in connection with Choice’s proposal to acquire Wyndham. The presentation has been filed with the U.S. Securities and Exchange Commission.
Patrick Pacious, president and CEO of Choice Hotels, said, “We are disappointed Wyndham is pushing this disinformation campaign. Their take on the antitrust risk on our proposed combination is misleading and further reflects the board’s apparent entrenchment. Wyndham’s characterization of the lodging industry’s competitive landscape and relevant regulatory criteria is incorrect. Our pro-competitive combination is well positioned to obtain approval, and we remain committed to completing it for the benefit of both companies’ franchisees, shareholders, and guests.”
The presentation includes:
- Wyndham is hinging its argument on a version of the lodging industry: Wyndham segments hotels based on STR chain scales, but STR chain scales are not meaningful under antitrust law. Wyndham overlooks that Choice and Wyndham account for only 10 percent of U.S. room revenue. There is competition between hotel brands for guests and franchisees and existing brands regularly move up and down STR chain scales. Wyndham did not include independent hotels, which comprise approximately 45 percent of the market. Wyndham’s definition of the market is contradicted by legal and regulatory precedent and has already been rejected by antitrust enforcers in their approval of the Marriott-Starwood combination.
- Wyndham’s constrained market definition includes nine other major competitors, including Marriott, Hilton, and IHG. While Wyndham implies that even the biggest hotel companies would be unable to compete with the combined company for franchisees, these companies’ brands are competing.
- Combining Choice and Wyndham would help franchisees reduce costs, improve profitability, and counteract market players and OTAs. By combining the two companies, franchisees could be positioned to compete against larger hotel brand rivals. They would also compete with leading OTAs, which currently account for more than half of online hotel bookings and have a marketing spend that is 10 times larger than Choice and Wyndham combined.
- Combination could provide guests with expanded lodging options and an enhanced rewards program. The combined company would offer a fulsome suite of participating properties across hotel types and locations. This combination could also expand benefits and rewards for guests by creating an enhanced rewards program. A Choice-Wyndham combination would not change competition for guests because franchisees would continue to control pricing.
- Choice is proceeding along the expected path of regulatory review. Choice is making progress on the regulatory process with the U.S. Federal Trade Commission (FTC). Choice expects to continue cooperating with the FTC during the Second Request process, which Choice expects to commence on January 11.
Moelis & Company LLC, Goldman Sachs & Co. LLC, and Wells Fargo are serving as financial advisors to Choice and Willkie Farr & Gallagher LLP, and Axinn, Veltrop & Harkrider LLP are serving as legal advisors.
