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(Updated with additional analyst commentary and stock prices.)



) --

Wyndham Worldwide


is expanding through the acquisition of ResortQuest.

Wyndham said early Wednesday it will acquire


for $56 million.

ResortQuest is a vacation rental hospitality and resort real estate company that manages vacation condominiums and home rentals in the U.S.

The all cash transaction is expected to close by the end of the third quarter.

Wyndham shares slipped 3% in trading Wednesday to close at $27.41.

"The Wyndham free cash flow story just keeps getting better," noted Hudson Securities analyst Robert LaFleur.

"The deal represents a logical expansion of Wyndham's Vacation exchange and rental business," adding that it is "an excellent transaction for WYN and is exactly the kind of "tuck-in" acquisitions that management has indicated it will pursue."

LaFleur said the acquisition makes "complete sense from a strategic perspective" and that it compliments Wyndham's European vacation rental business since it "never really had a domestic foothold in the $10 billion U.S. vacation rental business."

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The analyst noted, however, that ResortQuest has had what he called a "checkered past," citing its "spectacularly unsuccessful" run as public company and as "an ill-conceived acquisition by

Gaylord Entertainment

( GET) several years back."

LaFleur said ResortQuest was "badly run as a public company and it had absolutely no synergistic qualities with Gaylord's core business of running large convention hotels and operating the Grand Ol' Opry."

Gaylord divested the business in 2007.

>> Bankruptcy Watch: 10 Riskiest Hotel Stocks

Even so, "the consolidation opportunities in the U.S. vacation business are significant and ResortQuest should provide WYN a significant platform to do this," LaFleur added.

On Tuesday

Wyndham announced a newly inked licensing deal with Planet Hollywood Hotels


>>Wyndham Wins With Planet Hollywood

"It's a small positive for Wyndham," FBR Capital Markets analyst C. Patrick Scholes told


Tuesday. "This type of deal really fits quite naturally into what a franchise hotel model should be about."

The Parsippany, N.J.-based hotel and time share operator announced a license agreement with

Planet Hollywood Resorts International

to franchise the Planet Hollywood Hotels brand and manage those properties globally.

Wyndham will "offer developers the choice of various levels of entertainment-based concepts for hotel development opportunities based on hotel or resort size and geographic location," the company said.

"It's just another arrow in the quiver of growing their hotel franchise business," Scholes said. "Planet Hollywood gets to use Wyndham's existing brand, locations and expertise to help themselves grow; Wyndham is already established so it doesn't cost them incrementally more to do this."

"It's a nice win for WYN," said the analyst.

>>Wyndham Stock Ripe for a Buy

Scholes does not expect the deal to be immediately accretive for Wyndham. Rather, he said, the upside is the implied symbolism that the market wants to use it as the expert.


reiterated his buy rating on Wydham's shares

after Wednesday's acquisition announcement, citing its free cash flow and attractive valuation.

Wyndham is also the top hotel stock pick of FBR Capital Markets' Scholes.

Scholes told


Tuesday he also considers

Choice Hotels International

(CHH) - Get Choice Hotels International, Inc. Report


Marriot International

(MAR) - Get Marriott International, Inc. Class A Report


Starwood Hotels & Resorts Worldwide


to be good investments in the sector.

These are "excellent companies," he said, but do not have as much stock price upside as Wyndham, his favorite hotel stock pick.

-- Written by Miriam Marcus Reimer in New York.

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Miriam Reimer


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