“Choice Hotels generated another quarter of record financial performance amid a normalizing domestic RevPAR environment, demonstrating the strength of our versatile business model and proven growth strategy,” said Patrick Pacious, president/CEO, Choice Hotels International Inc. “We increased our global pipeline to new levels propelled by robust demand for our brands, accelerated the velocity of our global hotel openings, expanded our international reach and significantly grew the size of our rewards program. With our meaningfully enhanced hotel portfolio profile, we are confident in the company’s ability to continue to deliver sustained earnings growth, invest in profitable long-term growth initiatives and return significant capital to shareholders.”
Highlights include:
- Second-quarter adjusted net income, excluding certain items, decreased 0.4% to $88.8 million compared to the same period of 2023.
- Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) for the second quarter grew to a quarterly record of $161.7 million, a 6% increase compared to the same period of 2023.
- Global pipeline as of June 30 increased 22% to a second-quarter record of more than 114,000 rooms from June 30, 2023, highlighted by a doubling of the global pipeline for conversion rooms. Domestic rooms pipeline as of June 30 increased by 11% since June 30, 2023, including a 65% increase for conversion rooms.
- Global hotel openings for the second quarter increased by 20% compared to the same period of 2023.
- Domestic franchise agreements for the company’s upscale, extended-stay and midscale brands executed year-to-date through June 30 increased by 8% compared to the same period of 2023.
- The international portfolio as of June 30 expanded by 1.6% in the number of rooms, highlighted by international hotel openings that doubled in the second quarter compared to the same period of 2023.
Financial performance
Total revenues excluding reimbursable revenue from franchised and managed properties, calculated as total revenues net of reimbursable revenue of $176.3 million, increased 14% to $258.9 million for the second quarter compared to the same period of 2023.
Royalty, licensing and management fees increased 1% to $141.8 million for the quarter compared to $140.5 million for the same period of 2023.
Q2 domestic effective royalty rate increased 5 basis points to 5.04% compared to the same period of 2023.
Domestic RevPAR increased 540 basis points sequentially for the three-month period ended June 30 and decreased 50 basis points compared to the same period of 2023.
Domestic occupancy increased 10 basis points compared to the same period of 2023, representing 96% of 2019 domestic occupancy levels. Domestic RevPAR for the three months ended June 30 remains 11% higher than the same period of 2019.
Development
The company’s domestic upscale, extended-stay and midscale portfolio increased 1% for hotels and increased 0.7% for rooms since June 30, 2023. The domestic extended-stay hotels portfolio grew by 14% since June 30, 2023, driven by increases in each of the segment’s brands. The company’s total domestic system size increased to over 6,200 hotels representing over 494,000 rooms as of June 30, 2024.
The international pipeline for conversion rooms increased by 8% from March 31, and the company nearly tripled the number of international rooms in the pipeline since June 30, 2023.
The company opened an average of over four domestic hotels per week for a total of 118 domestic hotel openings year-to-date through June 30, a 10% increase compared to the same period of 2023. Of the domestic franchise agreements executed for conversion hotels over the trailing 12 months ending June 30, 134 opened in the same year, a 14% increase over the comparable period of the prior year.
Of the total domestic franchise agreements awarded year-to-date through June 30, 82% were for conversion hotels and 89% were for the company’s upscale, extended-stay and midscale brands.
The company’s WoodSpring Suites brand grew by 10% to 246 hotels since June 30, 2023.
Outlook
The company adjusted its full-year RevPAR outlook to -3.5% to -1.5% to reflect a more moderated domestic RevPAR performance acceleration than previously expected. It also predicts net income for 2024 to be between $260 million and $272 million and adjusted EBITDA between $580 million and $600 million.
Tags: Choice Hotels International Inc., Patrick Pacious, second quarter results
