NATIONAL REPORT—Wyndham Hotels & Resorts and CorePoint Lodging Inc., a pure play select-service hotel owner strategically focused on the midscale and upper-midscale segments, together have resolved open issues between the two companies. Wyndham has entered into an agreement with CorePoint to collaborate on a number of new technology and operating initiatives and support CorePoint’s efforts to enhance its portfolio.
In late July, CorePoint had alleged that Wyndham had failed to meet certain requirements under the hotel management agreements pursuant to which Wyndham currently manages La Quinta-branded hotel properties owned by CorePoint. Wyndham denies the allegations made by CorePoint, and the agreement provides a mutual release of other claims made by both parties under existing agreements and reflects their continuing long-term relationship.
As part of the agreement, Wyndham will make payments of approximately $20 million to CorePoint, primarily over the next year, and CorePoint will commit to maintain cash operating reserves of approximately $20 million. Wyndham also will commit to developing enhanced automated revenue management, sales and reservations technology. CorePoint agreed to pay Wyndham for the substantiated costs of the implementation of the Sabre SynXis property management system for CorePoint’s properties. The agreement does not change the underlying fee structures set forth in the management and franchise agreements between the parties.
The two companies also agreed to finalize outstanding tax matters related to Wyndham’s May 2018 acquisition of La Quinta Holdings Inc. Pursuant to the acquisition agreement, Wyndham had temporarily retained $240 million of cash purchase price in order to make required payments to tax authorities, with the remainder to be released to CorePoint. As of June 30, 2019, Wyndham had provided $223 million to tax authorities, and Wyndham will release the remaining $17 million to CorePoint in November.
As a result of the agreement with CorePoint, Wyndham will record charges of approximately $26 million ($21 million after-tax) in the third quarter. In particular, Wyndham will record a $6 million expense related to the resolution of the tax matters and a $20 million contra-revenue related to the payments that Wyndham is providing to CorePoint. Wyndham considers these items to be transaction-related, so they will not impact Wyndham’s adjusted EBITDA, adjusted net income or adjusted earnings per share.
“We look forward to continuing to franchise and manage the hotels in CorePoint’s portfolio and to supporting CorePoint’s efforts to sell its non-core hotel assets, while retaining the franchise agreements with new owners interested in continuing to elevate the quality and performance of these hotels,” said Geoff Ballotti, Wyndham’s president/CEO.
Keith Cline, president/CEO, CorePoint, noted, “We are pleased to reach this settlement and come to an agreement on what we believe are key revenue management and other functionalities to be implemented over the next year that are necessary for our hotels to deliver the level of performance they are capable of achieving over time. We look forward to collaborating with our third-party manager to improve the operating performance of our portfolio. Moreover, the clarification and agreement on transfer approval criteria should better facilitate our disposition strategy to drive shareholder value.”
