New travel giant Cendant buys again

FOXTROTS

Fox – sly

Trots – left-leaning (Trotsky) plus its more insalubrious meaning

Foxtrots – leading the industry in a dance. 

2005 September 20

 

In the past year, Cendant has been a company to watch – and to wonder what will happen. Like its purchase of Wyndham Hotels.

  The company is still little-known outside the US. Even if most of its assets are in the US, this is somewhat surprising, because in some measures it is the world’s biggest travel company.

  But no product carries the Cendant name; it is a giant franchising company.

  Cendant is big not just in hotels (7000 of them – yes, that’s hotels, not rooms), of which the better-known brands are probably Ramada, Days Inn, and Howard Johnson.

  But it also owns the Avis and Budget car rental companies, and Galileo (one of the top five largest global distribution systems), one of the top five online travel agencies in both the US (Orbitz) and Europe (Ebookers). And also, Gullivers/Octopus (which, in keeping with its name, has tentacles in many other aspects of distributing travel – and is particularly strong in Asia and Europe).

  The company keeps the travel and hotel sides separate (although surely the idea is to bring them together?), which partly explains the group’s low recognition.

  So why Wyndham? Well, yes. Cendant already has a brand at around that level – Ramada. And the company was looking for a quality/upscale brand to top-off, so to speak, its comprehensive coverage of the bottom (Super 8), economy (Days), and mid-market (Howard Johnson, Ramada).

  Also – Wyndham who? Ask 100 people in the trade outside the US, and perhaps 50% will have heard of it. Maybe only 25%. Do the same for the public, and it would be 25% tops. Presumably, that partly explains the modest US$100mn price tag.

  And Cendant cannot use this name to start an international chain at a higher level – because there are the 100 Wydnhams already there in the mid-market.

  But obviously there is upscale and upscale. After all, Cendant does call its new acquisition ‘upscale’ – a description generally used to define hotels at around the Hilton level, although Hilton has been moving its own bar higher for some time.

  So maybe Wyndham is ‘lower-upscale’ rather than ‘upper midscale’, and Hilton would be ‘upper-upscale’. This is beginning to sound like politics, where there is Centre-Right, Hard-Left, and where a ‘liberal’ in the US is considered Left but could be Centre in Europe. Or something like that.

  So, we’ll put that Wyndham strategy on the wait-and-see list.

  And in the meantime, we can wonder about where Cendant will strike next. Two big areas where it is absent are airlines and brick-and-mortar travel agencies. But with B&Ms losing business to what I call OTAs (online travel agencies like Cendant’s Ebookers and Orbitz), and most airlines struggling to reduce costs as operating costs spiral, Cendant is probably wise to wait.