A statement by Stephen P Holmes, Chairman and Chief Executive Officer of Wyndham Worldwide is given below. The statement has been taken from the company’s 2006 annual report.
In 2006, we formed Wyndham Worldwide, uniting three highly successful companies, each a leader in its segment: lodging, vacation exchange and rentals, and vacation ownership. Together these three companies form a global hospitality company with a unique combination of scale, product range and geographic diversity.
Wyndham Hotel Group
Through a system of nearly 6,500 franchised and managed properties with over 543,000 rooms, Wyndham Hotel Group offers more hotels than any other company in the lodging industry. Our 10 brands generate a steady stream of franchise fees that contribute to strong revenue and earnings growth. In 2006, we opened 568 properties – our highest number since 1999 – adding a hotel every 15 hours. Our development pipeline as of December 31 includes 845 hotels and 92,000 additional rooms, with 15% planned for international markets. In 2006, revenue per available room (RevPAR) grew 13% and lodging revenues increased 24%. The group contributed 26% of total reportable segments EBITDA.
Wyndham Hotel Group franchises 10 brands, five of which operate internationally – Wyndham, Ramada, Days Inn, Super 8 and Howard Johnson. These brands are expanding globally through direct franchising, master franchises, management joint ventures and strategic joint venture alliances. With more than half the world’s lodging properties currently operated as independents, there are thousands of hotels that can benefit from the appeal of internationally recognized hotel brands to claim their fair share of the growing travel market. Doubledigit increases are projected for economy and mid-priced hotels in Europe and Asia. In the emerging markets of India and China, affordable and reliable economy and mid-priced hotels will be needed to service the massive, emerging middle class. Wyndham Hotel Group is already one of the largest U.S.-based hotel companies in China with 84 hotels in operation and is well positioned to benefit from this rapid growth.
RCI Global Vacation Network RCI Global Vacation Network is a global leader in non-hotel leisure accommodations with proprietary access to more than 60,000 vacation properties in approximately 100 countries. Through over 60 worldwide offices, we serve more than four million vacationing families each year and provide products and services to business customers that support the growth of the leisure real estate industry.These products and services include vacation exchange; vacation rentals; and advisory, research and asset management services. RCI Global Vacation Network’s brands include RCI; The Registry Collection; NorthCoursesm Leisure Real Estate Solutions; and more than 30 leading vacation rental brands.
RCI is the world’s largest vacation exchange company.Through its vast timeshare exchange network of more than 4,000 affiliated worldwide resorts, RCI served more than 3.4 million members in 2006.
The Registry Collection is one of the world’s largest luxury leisure asset exchange programs, offering members access to a global network of the very finest vacation properties and concierge services. NorthCoursesm Leisure Real Estate Solutions is an international leader in providing the full spectrum of leisure real estate advisory, research and asset management services. We are also the market leader in European vacation rental homes and global vacation condos, offering vacationers more than 56,000 rental accommodations including bungalows, campsites, castles, condos, cottages, and villas.
In 2006, RCI Global Vacation Network contributed 33% of total reportable segments EBITDA.
Wyndham Vacation Ownership Wyndham Vacation Ownership is the world’s largest timeshare business with approximately 150 vacation ownership resorts, more than 20,000 individual units and over 800,000 owners. Wyndham Vacation Ownership develops and markets points-based vacation ownership interests in timeshare resorts in top leisure destinations throughout North America, Mexico, the Caribbean and the South Pacific.We also provide consumer financing in conjunction with vacation ownership sales, and collect property management fees at our resorts.
In 2006, Wyndham Vacation Ownership’s gross vacation ownership interest sales increased by more than 25%. Unlike traditional fixed-week vacation ownership, our innovative pointsbased ownership programs give consumers substantially greater flexibility through a yearly allotment of points that can be spent in increments for custom-sized accommodations at different times of the year and for varying lengths of stay. Our products are designed to adapt to the ever changing travel needs and preferences of today’s vacationing consumers, allowing them flexibility in selecting locations and seasons for their vacations, all without forgoing the comforts of home in spacious, fully furnished condo-styled accommodations. Wyndham Vacation Ownership contributed 41% of total reportable segments EBITDA.
Wyndham Worldwide is Unique in the Travel Industry
With more than half of our revenue generated from franchise fees, property management fees, membership fees and exchange fees, combined with our international diversity, Wyndham Worldwide is an extraordinarily diversified hospitality company. As a result we are buffered from economic downturns in the cyclical hotel business, as well as the natural and manmade disasters that have affected other companies in recent years.
Leveraging the Wyndham Brand Our hotel management company, created in 2005 with the acquisition of the Wyndham Hotels and Resorts brand, creates a new source of fee income in the upscale segment of the lodging business and a springboard to future growth.We are re-branding our vacation ownership resorts under the Wyndham brand to leverage resort assets and marketing under one brand name.
One-Stop Shopping for Global Travel Global tourism revenues are expected to nearly double between 2007 and 2016 to more than $12 trillion. In the United States, tourism is the thirdlargest industry after automobiles and food stores. According to the Travel Industry Association (TIA), leisure travel accounts for 87% of all overnight trips in the United States compared with 13% for business travel.
Globally, 50% of all trips are for leisure, compared with 16% for business, with the balance devoted to religious, health care and other reasons. Leisure travel is the only travel segment that continues to increase every year regardless of the state of the world economy. Even after 9/11, when business travel dipped 15% in the United States between 2001 and 2003, leisure travel increased more than 7% during the same period.
Providing Value for Today’s Traveler Today’s consumers are demanding value for their travel dollar. Low-cost air carriers in the U.S., whose market share jumped from 12% to 28% in the last five years, reflect the popularity of economical services by choice, not necessity. With our economy, mid-price and upscale accommodations, which are expected to achieve continuing RevPAR growth in 2007, and a growing demand for luxury products like our Vacation Ownership “Presidential Suites” and RCI’s The RegistryCollection, Wyndham Worldwide is ideally positioned to capitalize on this ever-growing consumer expectation of value at each price point.
Wyndham Worldwide is benefiting from the age and wealth shifts in the global population. Members of the Baby Boomer generation are living longer and taking more trips. In addition to variety and value, these travelers are seeking out familiar brands as they book accommodations for their global adventures. U.S. travel abroad has grown by double digits in recent years. Sightseeing is giving way to “sight-doing,” as Americans are staying in one place to get to know it well. This is yet another trend that supports the growth of our timeshare and vacation home rentals product lines.
While Baby Boomer demand is growing, Gen Xers’ per capita business and leisure travel spending exceeds even that of Baby Boomers (see graph). Also, technology and greater flexibility in the workplace are leading to a blurring of business and leisure travel. Driven by time poverty, hyper-tasking, and access to last-minute travel bargains through the Internet, more and more travelers are extending their business trips into leisure weekends, leading to increased travel spending.
As consumers live longer, healthier lives, and seek more balance between work and family, they are taking more and more leisure trips that include up to three generations, fueling the popularity of our vacation ownership, vacation exchange and rental businesses. These consumers want the best value for their vacation dollar in addition to a “guarantee” that they will “share time” away from their otherwise time-deprived, demanding lives.
Wyndham Worldwide’s Competitive Edge Wyndham Worldwide possesses a strong portfolio of global, well-recognized brands with significant scale within the hospitality industry. We enjoy a multiplicity of inventory, customers, and geographic markets that helps mitigate the effects of economic downturns. We generate stable revenues and earnings from a variety of sources with a history of strong and stable cash flows. We have a talented management team that produces innovative products and inspires the creativity and loyalty of a remarkably diverse family of employees.
I want to personally thank each and every one of our over 30,000 employees, our customers and our shareholders for their commitment to the success of Wyndham Worldwide. It is our collective strength that has created a competitive edge for Wyndham Worldwide. Each of our business units has forged an industry-leading position, and together, they generated an 11% increase in revenues in 2006. These results would be commendable in any year, but extraordinary in light of our corporate and operating initiatives in 2006: our transformation into an independent, publicly traded company; the integration of two newly acquired hotel companies and the re-branding of our vacation ownership business to the Wyndham name.
Bound in hospitality and bound to grow, our three business units have united to form Wyndham Worldwide, the global leader in accommodations.