New president of TPG Hotels & Resorts shares vision for hospitality operator
New president of TPG Hotels & Resorts shares vision for hospitality operator
Patrick Short takes over as president and COO of Dallas-based third-party management company
Hotel investors in Asia-Pacific eager for deals while performance underwhelms
Takeaways from HICAP and other market observations
What’s wrong with the economy segment?
NATIONAL REPORT – RevPAR trends in the economy segment continue to signal weakness as more price sensitive travelers pull back on spending.
To that end, Wyndham Hotels & Resorts reported a 3Q25 RevPAR decline of 5%, both globally and domestically, reflecting continued consumer caution in an uncertain economic environment, especially within the select-service segments in the U.S.
Wyndham said it expects full-year global RevPAR to range between -3% to -2%, representing a reduction of 100 to 300 basis points from its prior outlook and implying fourth quarter global RevPAR down 7% to down 4% at the low end, assuming roughly 200 basis points of additional softening beyond third quarter results.
This outlook also assumes that U.S. performance continues to lag meaningfully behind Wyndham’s international regions, and that international trends moderate modestly from recent levels.
This ongoing weakness has begged the question more than once: is there something structurally wrong with the economy segment, especially in the U.S.?
During Wyndham’s third-quarter earnings call, President and CEO Geoff Ballotti answered a similarly posited question with a pretty emphatic “no.”
“Despite the softness that we talked about in Texas, California and Florida, we are seeing nothing structural that that concerns us in any leading indicators that we look at daily,” Ballotti said. “Our booking lead times are up 2% over the prior year; our lengths of stay are consistent with last year; our cancelation rates have actually improved over last year, 160 basis points in Q3 versus prior year.”
Ballotti also said they reference demand and occupancy levels when responding to structural questions. “This year, we’re seeing occupancy down across all chain scales year-over-year with the divergence of RevPAR being driven by ADR, with the upscale segments taking rate, while the economy and the midscale, where we’re concentrated, are not.”
Ballotti added that occupancy has not recovered to pre-COVID levels in any segment but said it has, more so, in economy and midscale segment. “If we look versus 2019 STR midscale occupancy is down 5% to 2019 versus upper upscale and luxury – both down 8% to 2019 and 100 basis points worse than economy and 300 basis points worse than midscale.
“So, the question you ask – is there anything structural that we’re seeing out there aside from persistent inflation and consumer uncertainty around immigration in some of those states that aren’t helping, the answer is that upscale hotels are able to price more aggressively to inflation than the lower chain scales are where the guest is obviously more price sensitive.”
Ballotti also said that STR rate data for economy hotels is up 11% to 2019 versus +29% in the luxury segment, which he calls “very good news for economy and midscale segments from a pricing power standpoint moving longer term, especially as wage growth continues to outpace inflation, providing upside when that consumer confidence stabilizes, and we get back to that 2% to 3% CAGR.”
Ballotti was also asked about what Wyndham is doing to help franchisees weather the storm.
He said franchisees in the lower chain scales are beginning to discount to capture demand. “We’re helping franchisees where we can and urging them to hold rates where it makes sense, especially on leisure versus the corporate contracted pricing and discounting where appropriate, but not playing heavily in that last-minute discounting on those all-channel sales. We’re trying not to discount last minute because of the long-term value dilution.”
Ballotti added that Wyndham brands are gaining the most share in the midscale, where they saw 160 basis points of RevPAR index being driven by weekdays, which was up 180 basis points. “We’re gaining with more rate index, which our revenue management teams really want to see continue for franchisee profitability,” he said.
Looking further ahead
Looking ahead, Ballotti pointed to the $1.2 trillion infrastructure bill in the U.S. as a multi-year tailwind that’s going to drive more than $3 billion of revenue to Wyndham hotels. “And the 150 basis points of growth that drove for us in Q4 of last year is now more on par with the rest of our portfolio,” he said.
Ballotti hedged a bit, admitting there is a lot of talk about freezing some of that allocated money in certain states and said they have seen some projects paused as priorities shift. But, he added, “the infrastructure spending, over 80% of which is not spent, is going to resume at some point. Infrastructure room nights contracted this year are up two times versus consumed, and they’re pacing well ahead of same time last year.”
Wyndham is also very confident that private investment in reshoring and manufacturing will continue to boom with Ballotti citing data center development, where he said Wyndham hotels in those markets outperform the hotels from a RevPAR standpoint and have gained 500 to 600 basis points.
“We’re spending a lot of time with our teams, and we’ve identified over 150 planned data centers and the Wyndham hotels in those markets that we’re tracking and targeting – from the $1.6 billion Amazon Web Data Center in Canton, Mississippi, to the $800 million Meta data center in Graniteville, South Carolina – they’re seeing traction,” Ballotti continued. “We’re contracting with the surveyors from a GSO global sales standpoint and the design firms on the data centers that haven’t even begun. There’s so much early site development... So, it’s really big deal and something that we’re very excited about.”
Ballotti also reminded the assembled on the earnings call that economy and midscale hotels were the first to recover coming up out of COVID. “We know that at some point, domestic RevPAR is going to return to that 2% to 3% long-term CAGR that it’s always averaged,” he said. “Everything that’s out there from a macro setup on the infrastructure and private investment side, the historically low levels of supply and on the leisure side we have a lot to look forward to next year with America 250 the FIFA World Cup, which is a $20 billion impact... We are going to benefit from that next year.”
How creative companies objectively find systematic hotel growth
SINGAPORE — The CEO of Ace Hotels knows that lifestyle brands can seem subjective in their approach because they are creative companies. But he said at HICAP in Singapore last week that there’s an objective, even scientific, method to approach their goals.
“I guess there’s an implication that because we’re a creative company… that we think differently, but I think ultimately our roles are all the same in that we optimize value for shareholders today and provide sustainable value in the long term,” said Chris Penn, CEO of New York City-based Ace Hotels. “Our creativity and brand presence become our superpowers. So, that’s the thing that we can really leverage to deliver extra value across a number of those stakeholders.
“I don’t think we’re different. What is different is some of the inputs that deliver the value are slightly different.”
Penn said another difference for Ace Hotel is its ability to adapt to objectively changing consumer behaviors.
“If you look at how generations have changed so much faster over the past 20 years and how consumer behavior patterns are changing day-by-day and not year-by-year, we are a fluid and agile company,” he said. “We continue to evolve and the great thing is we adapt and remain relevant. That creativity, although it can appear subjective, is absolutely an objective input for us to deliver long-term, sustainable success.”
Penn was part of a “View from the Boardroom, Round Two” panel on the second day of the 35th annual Hotel Investment Conference Asia Pacific (HICAP) in Singapore. The panel included Leif Bajarias, executive vice president for finance and operations for Cebu, Philippines-based AppleOne Group; Bobby Hiranandani, co-chairman of Abu Dhabi-based Royal Group of Companies; William Huston, general partner of Singapore-based Bay Street Hospitality; and Hannah Yulo-Luccini, CEO of Singapore-based Hotel101 Global Pte., Ltd. Hok Yean Chee, president of HVS Asia Pacific, served as moderator.
Will it be relevant?
Bajarias said AppleOne also has to consider operational efficiency in its hotel investments.
“But we don’t want to forget about what happened three to four years back during the pandemic. It has affected us in such a way that right now, when we look at hotel investments in general, the main question to ask is whether this property will continue to be relevant five years after it opened,” he said. “Resilience is a key topic for us.”
The different chain scales of properties will determine the amount of hotel investment needed, Bajarias said, but the basic premise about customer behavior should remain the same.
“As you go from a standard type of hotel to luxury, every penny spent will only be justified if your guest is willing to pay for it and if they bring more guests to your property,” he said. “So, we really keep that in mind in terms of deciding what type of property to put in that market.”
Huston said Bay Street Hospitality had a clarifying moment when internally discussing how to pitch to investors.
“When we were fundraising, we realized that a lot of people were saying that they didn’t quite understand how we were identifying opportunities. I had a meeting with the team that really changed the trajectory of how we started deciding to deploy capital,” he said. “I said we need to make sure that from start to finish, we have a sequential process that anybody can understand when they see it for the first time. But also, if they decide not to allocate to the fund, it’s because we’re not fit for what they’re doing, not because there’s some miscommunication or disconnect in the underlying thesis.
“At this point, we’re able to get in front of the right type of allocators that are open to the jurisdiction where we’re deploying capital and help them do that in a much more efficient manner because of a data-driven approach, as opposed to just taking a general business test to a market.”
An HMA as a prenup
When discussing how to align visions among owners, operators and board members, Hiranandani joked that a hotel management agreement is actually a prenuptial agreement.
“You are defining the fate of your marriage before you actually get together,” he said. “The good part is, as the owner, you’re just looking at it when you enter any investment, your eyes are wide open. You know what your capital allocation is for a particular project you will be underwriting, and if you’re happy with that investment, you take it forward.
“Whereas on the operator side, they don’t look at it in such a vanilla manner. They will look at it through a different lens. Do I want my brand in this country? Do I want to be in this location? Where does this take me? Do I drive more revenue and incur costs?”
Hiranandani said it could be one of the more misaligned relationships out there, but it still exists… and works.
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