In its continuing efforts to acquire Wyndham Hotels & Resorts, Choice Hotels International Inc. has issued an investor presentation disputing what it calls the “false and misleading antitrust 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 and is also available at createvaluewithchoice.com.
“We are disappointed Wyndham is pushing this disinformation campaign,” said Patrick Pacious, president/CEO, Choice Hotels. “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.”
Highlighted claims from Choice in the presentation include:
- Wyndham is hinging its argument on a manipulated version of the lodging industry, fabricated to drive unsubstantiated antitrust concerns: Wyndham arbitrarily 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% of U.S. room revenue. Wyndham willfully ignores the intense competition between hotel brands for guests and franchisees, and the fact that existing brands regularly move up and down STR chain scales. Wyndham further ignores independent hotels, which comprise approximately 45% of the market. Wyndham’s overly narrow definition of the market is contradicted by clear legal and regulatory precedent and has already been rejected by antitrust enforcers in their approval of the Marriott-Starwood combination.
- Wyndham’s improperly constrained market definition still 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 already competing today. Wyndham is focused on the past, ignoring the many new and legacy competing brands that are rapidly growing in the STR midscale and economy segments. A Choice-Wyndham combination would leave the combined company well-positioned to compete in this increasingly competitive landscape.
- Combining Choice and Wyndham would help franchisees reduce costs, improve profitability and counteract dominant market players and OTAs: By combining the two companies, franchisees would be better positioned to compete against larger, well-capitalized hotel brand rivals. They would also compete more effectively 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. Together, Choice and Wyndham would drive top-line growth for franchisees through increased brand marketing spend and expand customer reach with a more robust rewards program.
- Combination would 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, providing more opportunities for guests to earn and redeem points. This combination would also expand benefits and rewards for guests by creating an enhanced rewards program on par with the leading hotel rewards programs. Importantly, 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: Despite Wyndham’s refusal to engage, Choice is making progress on the regulatory process with the U.S. Federal Trade Commission. Choice expects to continue cooperating with the FTC during the Second Request process, which Choice expects to commence on Jan. 11. Choice remains confident that it can complete the combination within a one-year customary timeframe.
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.
