Parsippany, N.J. -
Wyndham Hotel Group is the world's largest hotel company in terms of number of
hotels, but it did not always act like it, according to president and CEO Eric
Danziger. Since becoming CEO at the end of 2008, one of Danziger's major
efforts has been to spawn more cooperation on the sales side across Wyndham's
15 disparate brands, and he also has overseen some innovations on the
technology side, including the integration of TripAdvisor reviews on the
company's brand website and apps. Danziger this month spoke with BTN lodging
editor Michael B. Baker at the company's headquarters here about the company's
growth, the revival of some of its brands and its distribution strategy.
What's Wyndham's growth story right now?
Last year was our best year ever in terms of new rooms addition. We added roughly 66,000 rooms. Our bread and butter is organic growth. We add about a hotel and a half a day around the world, and in addition to that, we've had some wonderful portfolio additions. I'm not talking about acquiring brands. The last brand we acquired was Tryp from Sol Meliá [in 2010]. We [created] a 43-hotel portfolio in Germany with Wyndham Grands, Wyndhams, Tryp by Wyndhams and Wyndham Gardens. We did 56 conversions from Jameson Inns to mostly Baymonts. We did the 20 [Hospitality Properties Trust] hotels, which were 16 conversions to Hawthorn Suites and four Wyndhams. We did eight conversions with FelCor. So, we've been busy. There's explosive growth starting in Latin America. We have explosive growth continuing in China, [where] we went from roughly 50 hotels to 542 in the last four years. We're not bent on global growth for global growth's sake. We're bent on having hotels where people want to be.
The company's doing well, and hotels are doing much better than last year, which was better than the year before. Some of that is that the market's getting better. Our group business is up, and our transient business is up. Companies have gone back to realizing the money they might save on a meeting versus a webinar might be lost in the effectiveness of the company, so meetings are back.
How has your sales strategy changed over the past several years?
This was the world's largest hotel company that no one ever knew. It was a conglomeration of brands. You've got Ramada. Everybody knows Ramada, but three years ago you would never have been able to look at any other Wyndham Hotel Group product on the Ramada website. If you were on the Ramada website and wanted to go to Parsippany, N.J., and there wasn't one or it was full, we would have done the equivalent of hanging up on you. No rooms at the inn. That's pretty goofy if you're the world's largest hotel company. Before, it was just the Cendant franchise company: Days Inn had its own conferences; Ramada had its own conference. Cross-selling now occurs on every one of our brands' websites. If you're looking for a product, and the product can't be satisfied, you'll be exposed to the other brands as well.
Has that changed how you sell on the corporate side as well?
Sure. We have about 80 people in our global sales department who sell all the brands all over the world. Corporates have different kinds of needs. There are times that certain levels of people need to stay at a Wingate, some at a Tryp and some at a Wyndham Grand, so our global salespeople will package and sell that group of 15 brands in a way that satisfies them. We do $3 billion of leads through our global sales efforts.
Forecasts are indicating occupancy and rate growth over the next several years. Is your outlook the same?
I'm probably even a little more bullish over the next few years. Will there be a down cycle in the future? Of course. We can't change history, and historically, things happen every X years, but I don't see anything on my radar that makes me feel like the business and the industry and the general state of people traveling isn't going to continue to get more and more healthy each year for the foreseeable couple of years.
Have you seen much effect from the U.S. federal sequestration budget cuts?
No, not really. It will if we don't get on top of it, but in this way: In USA Today, I was reading an article that the average line of people coming into the country is up an hour. If people who come into the United States have to come into a crappy airport and wait three hours to get in, it won't take long for people to say they'll wait till that's over. The bigger threat is that kind of thing, in terms of the sequestration. In terms of business and business travel, not yet, and I hope it doesn't.
What trends are you seeing around mobile booking?
I thought when we did mobile, we would move the business from call to web. The interesting thing is they're both way up. What happens on the mobile, is if you're driving around on your [smartphone] and look up Super 8s in New Jersey, you then click to call as opposed to click to book. So, we still get the call. You get the mobile traffic, but it reverts to a call, so both are up by 30 percent. That's still engaging the consumer directly with our company, which is what I most want to do.
Wyndham also has incorporated TripAdvisor reviews into its sites. How is that working out?
I'll tell you why I forced that. Most of our folks were against it at the beginning, more concerned about why we would show these if there was a bad property. The answer is easy. Since we know that roughly 70 percent of people want to get a peer review before they make a decision, they may leave the site and go to TripAdvisor to find out the answer. If they're on TripAdvisor looking at a property and choose not to go back to the brand and book, the only way they can do that is through a third party. Give them what they want on your site. I want hotels to have a direct relationship with a consumer, not have them educated to go elsewhere. The second reason: I'm an operator. I ran hotels. The psychology of an owner, of the big bad brand coming in and doing a [quality assessment] on you and writing you up for things, that's just the brand being turds. The psychology of having a consumer tell that owner directly what's wrong with the property is most likely to improve the quality of the product.
How is your flagship brand faring?
We've added 55 Wyndhams in the last 60 days and roughly 90 in the last year. I was president of the Wyndham brand when it started, owned by Trammell Crow in the 1990s, and took the company public, so I have a great affinity for the brand. The brand was damaged severely through a series of owners that did not treat it well, who sold off a lot of stuff and all that. Our company in its current form is only six years old. Our entire company is named after this brand, so it was incumbent upon us to maximize the brand and bring it back to its former recognition. We've worked very hard to grow it with the right kinds of properties and increase its distribution, so we are doing that. The deals we did this year as an example: in the United States, we have added in Boston; San Diego; Santa Monica; Philadelphia; Charleston, S.C.; Houston; and Dallas. That's what the consumer wants. We're doing one in Chicago. We're doing one in New York. The brand is doing very well. Five years ago I had apologize for the brand for that period of dark days of different ownership, but I don't have to apologize for it anymore. There was a period of time in those days where some Wyndhams should have been Wyndham Gardens, and it wasn't masterfully thought through as a brand, and we've evolved.
Are those largely conversions?
They're all conversions in the Wyndham brands in the United States. There are no new builds. In China, it's all new builds, because there's nothing to convert from a quality standpoint. Our Wyndhams there are six-star. In China, they build a lot on the ROE theory—"return on ego"—so our hotels are unbelievable. We are opening 10 managed Wyndhams and Ramadas in the next several months, and we're opening some already-incredible facilities. In the United States, it has been conversions, and it probably will continue to be that. The hotels that are being built are more like Microtel and Wingate: a little less expensive and a different kind of owner than the requirement of a big monster hotel. My prediction is that it's going to be a conversion game for the next foreseeable number of years.
How about Tryp?
Tryp's been fantastic. We opened a little one in New York on 35th St. between 8th and 9th Aves. It's a fantastic little box running mid-90 percent occupancy and $290 rate, and it has a very low economic overhead because it's a select-service property. We've opened eight or nine of them in the last several months, from Medellin to Panama to Quebec. I talked to an owner today, and he has one in Australia and wants to do a couple more, so it's a really exciting brand and will be a phenomenal growth vehicle for us. Wingate, a little less so on the growth because it's always been a new-construction brand only. Tryp can be both. It's certainly picking up, so that pipeline is not robust but becoming active. Tryp is generally an urban product, whereas Wingate or Wyndham Garden is a suburban product. There are exceptions, but it's generally in that kind of frame. In fact, Tryp's tagline is "Own the city."
What about your extended-stay brand, Hawthorn Suites?
There's lots of explosive growth with Hawthorn Suites. We started with roughly 80 or so when we bought it. We added 16 alone in one day with one portfolio. We're starting to bring that brand globally whereas to this point it's only been domestic. We've done a few deals in the Middle East. I just approved the new prototype for the new-build Hawthorn,[which has] a little fresher and [more] contemporary look than what we bought from Hyatt. Around here I'm called the anti-brand-standards guy, and I use Hawthorn as an example. I believe brands should have standards in terms of an essence, which is a promise to the consumer and therefore expected by the consumer. I discovered four years ago that we had a brand standard for Hawthorn for stainless steel appliances. Now, after I was done beating some guys around the head, I explained to them that concept about essences. Do you know one consumer ever who has made a selection to stay with a hotel because the appliances were stainless steel, or is the selection [because] they have the appliances they want, they're clean and they work? That's the standard.
What other brands are you focusing on?
I'm very excited, as I have been for a few years, about Howard Johnson. We all know the name. It's part of Americana. I looked at it, when I came here, as that we owned something like Nike. Within the hotel space, it's known.
It was even on "Mad Men."
Exactly. Obama said he stayed there. That's exciting. So, what are we going to do with this thing? We spent a couple years and a couple million dollars on designers and focus groups, because I want to bring it back to it ice cream and orange roofs and a 1960s feel. That's a brand that's going to be completely reinvigorated and relaunched, and I hope to announce that officially with some examples at our conference in September. I signed a deal in India for 30 of them, and these are all new-build great Howard Johnsons. One of my jobs in this case is to create the value of the brands, have them desired and wanted and everlasting, because we all know brands that have gone away, like Pan Am or Eastern Airlines. No matter how big you think you are, someone else is going to take you out if you don't do something to stay in.
What's happening in the economy tier?
A statistic that was a little surprising to me was that the average size of a Days Inn hotel or Super 8 has shrunk in the last 15 years. It isn't a surprise when you think about it, because 15 years ago, people were building 150-room economy hotels, and today they're not. Our mission for Days and Super, each which are roughly 2,000 units not withstanding global growth, is they are huge and successful brands. You're never going to see significant, great innovations in the economy space, because when you think innovation, you think something grandiose and new. Steve Jobs did not invent the phone. He made the phone better. So, I look at innovation in those brands as making the economy segment better. In Super 8, we do the cinnamon things now. We listened to people who said, "It's nice that everybody has these danishes and pastries and all this [stuff], but what I really want is cinnamon." So, we have cinnamon rolls at Super 8.
There's always going to be a need for economy markets, because the nation needs economy product. The average income is what it is. It should not prevent someone who doesn't make a lot of money from having a nice overnight experience. It should not prevent them from going to see the biggest ball of twine in the world or Disney. I want to give them a clean, comfortable place to do that and be loyal to the brand, so as their economics improve, they can stay at a Wingate, then a Tryp, then Wyndham, if the relationship is with us. One reason we're focused on growth in China is not just because it's a market for growth. As that billion people start having the ability to travel, I want them to know about us because they saw us in their backyard.
When Marriott recently launched its economy brand, it mentioned that 80 percent of Europe's economy hotels are unbranded. Do you see opportunity there?
That's a number that's tossed around, and I want to disabuse you of thinking that's all opportunity. For illustration purposes, 80 percent of that 80 percent is probably unbrandable. If you think of all those hotels people refer to, that includes the 17-room Cotswold Inn and Tar Pit. The real opportunity is what's brandable. It still makes it a huge opportunity, but it's not as monstrous as you think. We're doing a lot of things there with the economy brands. The same thing's true in the Middle East. A lot of the motorways have very little in the way of places for people to stay, so we've done Days Inns. We have 10 in Germany, for example. We have roughly 400 properties in Europe, maybe more with the 43 we added in Germany. With Europe's financial situation, it's not going to be number one, two or three in terms of growth for us for the next several years. There's so much concern and caution, and so much of the money is being used to bail out governments, that there's not quite the focus on development. There will be, once all that noise settles down.
Where are the opportunities, then?
The Middle East has lots of great opportunities, and the expanded Africa area now is brand-new for us. We just stated growing in Africa, and it's going to be significant. I wouldn't have thought that a year ago. I was asked yesterday whether they're the new India. I said that they have an opportunity to be a bigger growth area than India, because it's hard to do business in India and they aren't quite fixing the infrastructure issues that are impediments to growth, whereas in some of the African countries, it's all about, "What do we have to do to create the infrastructure and opportunity for development?"
Turkey is huge for us right now. We have two Wyndhams there: One on the Asia side and one on the Europe side, one open and one going to open in a couple of months. We have roughly 20 Ramadas and 30 others in the pipeline. I'm going to Saudi Arabia next month. We have a big Wyndham under construction there and several Ramadas. We have several hotels in Qatar and a Wyndham under construction in Bahrain. In Latin America, we hadn't focused on it because I don't want to go into a country with one and say, "Here we are," because you can't do a good job for anybody with one. So, we created a strategy. We'll be announcing some neat things down there pretty quickly, but it's a huge area.
Are you considering adding new brands?
Sure. We're ever on the search for acquisitions. I did surprise people when we bought Tryp. People didn't think about buying foreign brands. There's not a month that goes by that we're not looking at something, and we'll exercise good sense. We looked at several brands for sale in China and chose to say they aren't the right ones, which is not to say that there isn't a right one.
Do you still have a partnership with Corinthia, and is the luxury tier somewhere Wyndham would like to be?
That was a good partnership for its time, but it really wasn't right for us or them. For us, it restricted our ability to do a hotel in a big part of the world, because it ceded it to them. As we got our act together, owners want to do business with us and not be compelled to do it with someone else because we gave away the master right. We now have that opportunity to do all those Wyndhams and Wyndham Grands ourselves. I should never say never, but it is not my current interest to be in the super-luxury business. Right now, our top-end hotel is Wyndham Grand. Think of that as a competitor to Omni and JW Marriott, not to Four Seasons. To the extent we want to be above that, I want to have a very thoughtful business plan that makes sense.
No, it's not, but it better get ready. Those that ain't, better run. We spent about $150 million in this hotel group in the last couple of years getting ready. Some of that is to have enhanced websites and things we should do as a normal course of business, and some is research and development. You aren't going to change the buying behaviors of the consumer, so you therefore better change your company to be aligned with that. Amazon is the best example in the world. I read every night. I read three books a week. I haven't been to a bookstore in 15 years. Amazon is now the place I buy shoetrees from. So, they got it, that they needed to find a way in which they could satisfy a growing consumer want, so the industry better do the same. We have an e-commerce department of 50 people, from zero four years ago. That's their job every day: How do we do more in this space and better in this space?
Do you see entries by Google or Apple as much of a threat?
If I'm Google or Apple, I'd be more focused on doing a better job at my consumer sales. Let's make my iPhone a better iPhone. I don't lose any sleep over it. They're in an entirely different business. How silly would it be if I got in the computer-making business? Why don't I do what I do, you do what you do, and we'll put the two together really well.
It's evolving, too. I'm often asked whether we're fighting with the OTAs. It's not a question of fighting. The reality is the business did a really silly thing as a reaction to 2001, which was to cede the best rates to the third party. So, whether it's our own direct strategy or efforts together with the industry, it's really designed to bring the consumer back to the brands. To that extent, Room Key was a step. It's still new. It's a year old, but it's doing well.