Wyndham's Brand Continues to Grow Amid Uncertainty Around the Merger With Choice

Despite near-term macro challenges (inflation, depleted consumer savings, and credit) and uncertainty around Choice's unsolicited bid for the company, we expect Wyndham Hotels & Resorts to gradually expand room share in the hotel industry and maintain a brand intangible asset and switching cost advantage. This view is supported by the company's roughly 40% share of all U.S. economy and midscale branded hotels (where Wyndham has a handful of the top 10 brands based on guest satisfaction, according to J.D. Power) and the industry’s fourth-largest loyalty program by membership (105 million as of Sept. 30, 2023), which encourages third-party hotel owners to join the platform. Also, Wyndham has around 10% and 5% share of existing U.S. and global hotel rooms, respectively, with a pipeline that represents around 28% of its current unit base. As a result, we see room growth averaging over 3%-4% during the next 10 years (2023-32), above the 1%-2% lift we model for the U.S. hotel industry.