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Wyndham Worldwide Corporation (WYN), a noted hospitality company, announced that through its Exchange and Rentals business unit it is buying ResortQuest, a vacation rental firm in the U.S., for $56 million. The deal is expected to close by the end of the third quarter of 2010.

ResortQuest’s portfolio of 6,000 properties throughout the United States will complement Wyndham's existing network of 85,000 vacation properties in approximately 100 countries, with most of them in Europe. The company has acquired about 30 European rental brands since 2000.

Management believes that this acquisition will facilitate its expansion in the U.S. serviced vacation rental market, which is a $10 billion market and currently lacks a significant player. Moreover, ResortQuest's strong presence in the U.S. and Wyndham’s market leadership in Europe will enable the company to provide excellent service to the customers along with quality product offering.

We view the deal as strategically positive, given that it will expand vacation rental business in the domestic market where Wyndham’s market share is low. Moreover, the deal is also in sync with the company’s strategy to grow organically by acquiring opportunistic fee-for-service based business as it reduces the capital requirement of the company, resulting in a higher free cash flow. Going forward, we expect Wyndham to benefit from its repositioning as a more fee-for-service based business.

Wednesday, Wyndham through its subsidiary, Wyndham Hotel Group, entered into a license agreement with Planet Hollywood Resorts International LLC.

Wyndham’s primary competitors in the hotel industry include Starwood Hotels & Resorts Worldwide Inc. (NYSE:HOT), Marriott International Inc. (NASDAQ:MAR) and Home Inns & Hotels Management Inc. (NASDAQ:HMIN).

Wyndham currently retains a Zacks #1 Rank, which translates into a short-term Strong Buy rating. We are also maintaining our long-term Outperform recommendation on the stock.

Wyndham operates in the lodging, vacation exchange and rentals, and vacation ownership segments of the hospitality industry. The company has built a significant presence in most of the premier markets in the U.S. and throughout the rest of the world as well.

Source: Wyndham Worldwide Acquires ResortQuest