Exhibit 1.1
RealClearMarkets
Why the Hotel Industry Would Benefit
From More Consolidation
By Alan Grafman
February 20, 2024
Competition is good for consumers
and the country. Strong competitors make for strong competition. Look, for example, at the enormous competition that exists between the three leading insurance providers: State Farm, GEICO, and Progressive. During any football game, these three
dominate the airwaves – and spend big money – with their commercial and competitive offers. You might have even seen State Farm’s Super Bowl commercial this year featuring Arnold Schwarzenegger. Yet there continue to be many
smaller competitors, such as Allstate, Liberty, and Nationwide.
Similarly, major hotel brands like Marriott, Hilton, IHG, and Hyatt are pervasive and
competitive. They collectively control about 100 brands across all tiers of service. With that competitive landscape in mind, the proposed merger between two smaller hospitality companies, Choice Hotels and Wyndham Hotels &
Resorts, will make the combined company a stronger competitor in an already competitive field.
Regarding competition, this merger has a clear regulatory
path to close. How? Per new merger guidelines issued by the U.S. Department of Justice and the Federal Trade Commission in December of last year, “a merger that creates a firm with a share over thirty percent is also presumed to
substantially lessen competition or tend to create a monopoly.” Together, Choice and Wyndham will only account for 10% of U.S. room revenue.
The
intense competition amongst the major brands noted above would not be adversely affected by the combination of Choice and Wyndham. The hotel industry is large, with many segments that influence the cost of a room on any given night. Between the
brand, owner, and management company, one hotel property could have three different entities operating it.
According to the American Hotel &
Lodging Association, more than 50 percent of all U.S. hotels are franchised. Franchisees within the Choice and Wyndham umbrella would benefit from the lowered cost of ownership and increase in direct revenue that come as a result of the
combination of the two companies. The merger would also enable franchisees to offer guests a broader portfolio of brands across segments, “no matter their stay occasions, within a single system.” Other benefits include increased
innovation and investment in the areas of technology, system processes, and training. Consumers would still see Choice and Wyndham properties compete against each other, sometimes on the same street or community.
In addition, you may have noticed that in recent television commercials for hotel groups like Choice that there is an emphasis to “book on our web
site.” That is because online travel agencies like Hotels.com, Expedia, Priceline, and others drive up hotel room rates to consumers in exchange for the convenience. This is an extremely lucrative business for these agencies. A hotel can pay an
OTA a 25% or more fee for each booking. A study found that almost 25% of consumers report being misled by third-party OTAs on the phone or online. This amounted to $5.7 billion in fraudulent and misleading hotel booking transactions
in just one year.