Wyndham Hotel Group acquired meetings-focused Dolce Hotels and Resorts for $57 million, the companies announced on Monday.
Dolce's portfolio includes 24 properties and more than 5,500 guestrooms across seven countries in Europe and North America. Wyndham Hotel Group stated the acquisition would significantly improve its presence in the group and meetings segment and allow it to expand its managed portfolio nearly 40 percent.
"Dolce is a terrific strategic fit for us," said Geoff Ballotti, president and CEO, Wyndham Hotel Group, a subsidiary of Wyndham Worldwide. "With over three decades of established brand equity, Dolce is a respected leader in the group space with outstanding destination properties and some of the best meeting product offerings available in the market today."
Dolce's president and CEO Steven Rudnitsky said the deal with Wyndham is a win for both sides.
"For [Dolce], it preserves the nimbleness that we have as a small hotel management company," Rudnitsky said. "It also provides the capital infusion and the financial power of the Wyndham brand to grow the [Dolce] brand globally, and that is exactly what their commitment is."
The deal's $57 million will be returned to the shareholders who invested in Dolce back in 2007.
For Rudnitsky, the agreement marks a return to the Wyndham Hotel Group, where he previously served as president and CEO until 2008, when he made the move to Dolce.
Rudnitsky said the topic of consolidation with Wyndham came up while Dolce was working with Morgan Stanley to raise capital.
"Through casual conversations with Steve Holmes [of Wyndham Worldwide] and [Ballotti], it became apparent that not only did they have the capital, but they had a strong interest in building their business specifically in the meetings area."
The move by Wyndham to increase its presence in the meetings and group segment follows two years in which group travel showed significant recovery and growth. A PricewaterhouseCoopers lodging forecast released in November 2014 anticipated solid momentum for group travel growth to continue into 2015.
The Wyndham-Dolce deal comes on the heels of Marriott's announced acquisition of Canada-based Delta last week. Bjorn Hanson, a clinical professor at New York University's Tisch Center for Hospitality, Tourism and Sports Management, said to expect more consolidation "especially of midsize and smaller brands."
Hanson said three main factors are driving deals between large lodging companies and midsize brands.
"One is the large lodging companies have extremely strong balance sheets. They have the ability, and in some cases almost a need, to put that capital to work," Hanson said. "If a choice comes down to buying back stock or acquiring another brand or company, the latter is much more appealing."
The second factor he cited is the appeal of a larger company's increased purchasing and distribution power and its ability to improve profits for smaller companies.
"The large companies have just become so good at what they do, it's very hard for midsize and smaller companies to compete unless they're very niche-oriented," Hanson said.
The third driver toward consolidation Hanson cited is the difficulty of financing individual hotels without any brand affiliation. Lenders, he said, have become much more sensitive to the issue of affiliation in recent years.