Wyndham to enter new markets with the acquisition of Tryp Hotels

In June 2010, Wyndham Worldwide Corp announced the acquisition of Tryp Hotels from Sol Meliá Hotels & Resorts. The initiative is in line with its international pipeline development strategy, mainly as a way to capitalise on market share growth opportunities in Europe and Latin America and away from its domestic market, the US.

Expected to be closed in the second quarter of 2010, the US$43 million transaction will result in the addition of the Tryp hotel brand to Wyndham’s portfolio of 11 brands and more than 7,100 hotels across the globe. Once the transaction is completed, the brand will be renamed to Tryp by Wyndham.

With nearly 100 properties in nine countries in Europe and Latin America – Spain, Germany, Brazil, France, Argentina, Cuba, Portugal, Uruguay and Italy – the Tryp brand is made up entirely of urban hotels. It is a select-service, mid-scale brand catering to business and leisure travellers in cosmopolitan cities like Madrid, Paris, and São Paulo.

The hotel brand stands out as it offers rooms designed to attend the specific needs of different type of guests – the premium room, the fitness room and the family room.

Targeted mainly at business travellers, the premium room has Internet access, a coffee machine and a premium bed by Flex. The fitness room, designed in collaboration with Lifefitness, is equipped with exercise machines including a treadmill, elliptical cycle or exercise bike and a free Fitness kit for guests.

The family room focuses mainly on leisure guests travelling with the entire family. Hence, in looking forward to make things easy while on the road, the room features bunk beds for kids and accessories for parents with babies like a bottle warmer, for example.

Recession impacts Tryp

In 2009, Tryp hotels registered a drop of almost 19% in revPAR due to a decrease in occupancy and average daily rates. Overall, the negative performance was prompted by the fact that nearly 57 Tryp hotels are located in Spain – a market that suffered a slump in tourist arrivals and declines in domestic business demand in 2009.

Stronger International Presence for Wyndham

The existing Tryp hotels will continue to be owned, operated, managed or licensed by Sol Meliá with the potential to manage more. Both companies will market the brand through their reservation systems and loyalty programs while Wyndham will be responsible for growing the brand among franchisers.

Tryp by Wyndham is expected to further boost Wyndham’s competitive positioning in markets where the company has a relatively small presence. Overall, the acquisition buys the hotel chain international presence in Europe and Latin America with very little capital investment.

Such a low risk move gives Wyndham a better positioned brand to expand internationally than its mid-scale brands: Baymont, Ramada, Howard Johnson, and Wingate by Wyndham.

As of 2010, mid-scale brands from Wyndham have little presence in both regions. Howard Johnson, for example, is highly concentrated in the US and Canada with a presence in Latin America. The Ramada brand, in contrast, is more widespread across the globe, with hotels in every single region and countries like Germany, Romania, Austria, Argentina, Peru, Mexico, India, China, Morocco, Saudi Arabia and Turkey.

Additionally, the Tryp hotel brand presents an opportunity for Wyndham to continue to add value to its mid-scale hotel offering with unique characteristics not currently offered by Ramada, Howard Johnson or Wingate.

When compared to Tryp hotels, Wyndham mid-scale brands are not as trendy and are not strategically located in large urban centers in main capital cities across the globe. Tryp hotels are also likely to be easily exported by Wyndham with much greater acceptance worldwide.

Despite gaining geographic presence, it is important not to forget that European exposure now is risky given the economic turmoil and the maturity of the market. It may be difficult for new hotel builds in that area due to a lack of financing and economic uncertainty.

Euromonitor International predicts that hotel value sales growth will be only 2% over the next five years in Western Europe. Latin America, on the other hand, is expected to grow by 11%. The opportunities for Tryp to be placed in the urban areas of Latin America is great.

Colombia and Peru, in particular, would be good candidates as these are enjoying fast growth in international arrivals and domestic tourists.