Wyndham Hotel Group has already made its mark on the hotel industry in 2018 by announcing its agreement to acquire the franchise and management rights for La Quinta and its 900 hotels for $1.95 billion. For the group, which will be spun off from Wyndham Worldwide by June, the buyout brings the company's hotel total to more than 9,000, the industry's largest property count. CEO Geoff Ballotti spoke to hotels editor Danny King at the Americas Lodging Investment Summit conference in Los Angeles last week.
Q: Will you keep La Quinta in the midscale sector or will you drive it toward upper-midscale?
Geoff Ballotti
A: It's considered by Smith Travel as midscale but it's right there on the cusp, and all of its new development is upper-midscale. Its new Del Sol prototype is clearly positioned in upper-midscale, and the majority of its pipeline is new construction upper-midscale.
Q: How much higher are nightly room rates with the new prototype, and what are the most prominent amenities?
A: In terms of average rate, about $15. From a consumer point of view, it is a very clean, very trendy, very boutiquey type of design that's targeted right around 85 rooms. It's got great breakfast amenities, a health club and, depending on the market, a pool. And it's positioned in both urban and suburban destinations.
Q: Any concern over increased competition, with Hilton and InterContinental Hotels Group jumping into the space with their Tru and Avid brands?
A: Price point is important, but more important to developers is cost per key to develop, and I think this is very competitively positioned at $85,000 a key to develop a La Quinta Del Sol prototype versus midscale and upper-midscale competitors from other brands that are out there. It takes a long time to build a brand, and what La Quinta has going for it is its brand awareness, its name awareness. It quickly becomes our largest upper-midscale brand. When you're taking a brand that's as well recognized as it is and plugging it into the world's largest platform, it's a great opportunity for our largest owner, CorePoint Lodging [La Quinta's real estate-holdings entity that will be spun off], as well as for an individual single-proprietor owner that's looking to have a stronger loyalty program.
Q: Conference attendees seem confident that federal tax cuts will help the industry. What's your opinion about the tenor of the conference and the possible impact?
A: In the past four years of being in my position at Wyndham Hotel Group, I've never seen this conference more optimistic. Tax reform will create a lot of mergers and acquisitions going forward. It'll allow for companies to pay more for assets today than they were last year, and I think it makes the M&A and development opportunities a lot more heated.
Q: The fate of the Deferred Action for Childhood Arrivals (DACA) immigration policy is also very topical, especially with industry concerns over a labor shortage. What are you hoping for the Trump administration to do?
A: It's the American Hotel & Lodging Association's No. 1 issue. Labor's always been our No. 1 issue. It becomes all the more important right now. I think everyone in the industry wants to see that resolved and resolved quickly. I don't want to get into whether the administration is right or wrong, but it's obviously a real important issue for us.
Q: There's a lot of industry consolidation, and some consumer advocates would say that hurts consumers. What's your argument against that?
A: I'll use the airlines analogy, in terms of what consumers are looking for, in terms of earning enough miles to have a free flight or enough points to have a free vacation. My argument is that both for consumers and for owners, loyalty is very important right now. You've got more people earning, you've got more places to go, and there's only so many cards you're going to carry in your wallet.