Wyndham Cracks the Code for Franchising in Asia but There’s Still Work Ahead
Joon Aun Ooi, president Asia-Pacific of Wyndham Hotels & Resorts: “We know what it takes to run a successful and collaborative franchise model with owners.” Photo: Wyndham Hotels & Resorts
By Raini Hamdi, 5 April 2022
Wyndham Hotels & Resorts was expecting to open 180 hotels in Asia-Pacific last year, inching it closer to a goal of 2,000 hotels in operation in the region by 2023. Turns out that actual openings were short of 50 hotels.
Lockdowns in Asia and ups-and-downs in China in much of 2021 shook owners’ confidence to go ahead with plans, said president Asia-Pacific, Joon Aun Ooi. Some owners delayed openings; others decided to shelve projects that were not in advanced stages or exited the business entirely.
“Covid-19 has stunted growth to some extent not just for us but the industry,” said Ooi.
His target of 2,000 hotels in operation in Asia-Pacific, from around 1,600 currently, has been reset for 2025.
But Wyndham’s pandemic setback belies a bright future for franchising, specifically beyond China in South-east Asia and the Pacific Rim where the model is nascent. Wyndham terms this region as Rest of Asia-Pacific in its earnings results.
Since 2018 Wyndham has been building up scale for franchising in Rest of Asia-Pacific, leading to a total of 154 hotels in operation in this region at the end of 2021. Most of these hotels are under franchise agreements.
Other chains are also seeing franchise growth in Asia but not at accelerated levels as Wyndham. The chain focuses largely on franchising in a region where management agreements remain the dominant model.
No other hotel company perhaps is as ready for the shift to franchising in Asia as Wyndham, given its size, brand depth and experience, said one hotel consultant.
‘King’ of Hotel Franchise
Globally, Wyndham bills itself the world’s largest hotel franchising company with more than 9,000 hotels in 95 countries.
“We’ve been doing franchising for decades. Other chains are franchising too but we are doing a lot in Asia-Pacific. We know what it takes to run a successful and collaborative franchise model with owners, ” said Ooi.
“South-east Asia and the Pacific Rim may not be as big in numbers as China [in franchising] but it remains one of the fastest growing areas for us. We predict this market will pick up with a lot more speed this year.”
According to Ooi, Asian owners are more aware of the benefits of franchising. It gives them branding, distribution, tools to help them reduce operating costs, and the flexibility to run their hotels as they see fit while conforming to franchise standards.
The availability of talent in Asia to support the model also makes owners more amenable to franchising.
Asia has produced its own crop of general managers, directors of sales and marketing, and other hotel professionals as a result of the hotel sector’s development boom year after year, said Ooi.
“Asia has lots of talent now that are going to owning companies. This enables owners to hire their own GM and other team players and run the hotel themselves. Five years ago, I wouldn’t be as gung ho about franchising as I am now due to this factor.”
Not a Piece of Cake
That said, there’s still a lot of work ahead to convince doubtful Asian owners of converting to franchising at this time.
RevPAR of Wyndham’s hotels in Rest of Asia-Pacific in 2021 was US$21, 46 percent behind 2019’s level and was the slowest RevPAR recovery compared with other regions, the company’s 4Q21 earnings results in February shows.
There’s also a lot more competition as other chains, such as Hilton and Accor, are now more open to franchising than ever before. Franchise fees are said to be lower in general as a result of the pandemic and the increased competition.
“It’s a market reality that fees are down in general because of the pandemic, but on average we have been able to maintain our fees quite well,” said Ooi. “Different owners come to us with different constraints or objectives. We don’t focus so much on fees per se but on a value proposition that addresses their specific needs, and one that ensures better returns, i.e., higher revenue and lower cost structure.”
Rest of Asia-Pacific is worth Wyndham’s effort to crack the code on franchising. For one, the region yields a higher RevPAR than China. Wyndham’s earnings results show that China RevPAR in 2021 was nearly back to 2019’s level (minus 18 percent). Yet, at US$16, it’s the chain’s lowest RevPAR globally.
Nevertheless, Wyndham signed 18 hotels with around 5,700 rooms last year (see chart below), which supports its views that prospects for the model in Rest of Asia-Pacific are largely unshaken by the pandemic.
About 30 percent of signings are with existing owners, such as Phinma Microtel Hotels in the Philippines, who understand the model and have gained the experience to run franchised hotels. Repeaters also include partners in China that want to venture overseas, especially in Indochina, said Ooi.
Wyndham is “on the brink” of announcing a new deal with a partner who is “big” in China and wants to expand in South-east Asia, Ooi said. He wouldn’t reveal more details except that the said country has a huge population base and the partner will virtually have the exclusivity to grow a Wyndham brand that is not yet present in that market.
Wyndham’s move to integrate its South-east Asia and Pacific Rim region into China in 2020 has made it “seamless” for China partners to expand into Rest of Asia-Pacific, Ooi said.
Globally, the chain has 23 brands, including a just-announced “Project Echo,” an extended stay economy brand that will debut in the US. In Asia-Pacific, it has deployed 12 of those brands, among them Howard Johnson, Wyndham Grand, Wyndham Garden, Dolce, La Quinta and Ramada Encore.
Ooi touts “a brand for every owner’s need” and Wyndham’s vast set-up in Asia-Pacific to support owners as strengths, particularly in the pandemic when having teams on the ground is a real advantage. Aside from regional offices in Singapore and Shanghai, it has satellite offices in more than 10 cities across Asia-Pacific.
But while recovery signs are positive on the back of announcements of reopening in Rest of Asia, Ooi prefers to be conservative — perhaps a tiny lesson after missing the mark in the number of hotel openings in Asia-Pacific last year.
“While we are gung ho about recovery, we are also cautious,” he said. “It’s the unpredictability of the next two years.”
Unknowns include the emergence of sub-variants, or how the Ukraine crisis will continue to unfold. Moreover, China is still unable to contain the pandemic despite a zero-Covid approach. Shanghai, its most populous city, is in lockdown due to a surge in cases.
Which is yet another good reason to press on with franchising in Rest of Asia-Pacific.
– This article is the final in a series focusing on five Western chains’ expansion in Asia-Pacific excluding China, in no particular order of chains. Previous:
• Hilton Sees 2022 as the Year it Seizes Growth in Asia-Pacific Beyond China
• Marriott Ties With Accor for top Spot in Hotel Signings and Openings 2021
• Accor to Launch a Midscale Collection as Conversions Continue to Soar
• Brands Proliferation? Not With IHG in Asia. Here’s Why
