Check Into Wyndham Hotels Shares

Dan Wasiolek: Most are likely familiar with the hotel brands Super 8 and Days Inn, but probably fewer are aware that Wyndham Hotels is the operator of these and 18 other brands and possesses powerful intangible-asset and switching-cost advantages.

We expect Wyndham to gradually expand roomshare in the hotel industry and sustain a brand-intangible asset. This view is supported by the company's roughly 40% share of all U.S. economy and midscale branded hotels, and the industry’s fourth largest loyalty program by membership with 77 million, all of which encourage third-party hotel owners to franchisee with the company.

In addition to Wyndham's brand-intangible advantages, the company also has a switching cost moat. With all but two of its 9,000-plus hotels managed or franchised, Wyndham has an attractive recurring-fee business model with healthy returns on invested capital. Moreover, this asset-light model creates switching costs, given the 10- to 20-year contracts associated with these relationships.

With shares trading at a meaningful discount to our $76 fair value estimate, we view Wyndham shares as a place investors should travel to.