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Choice Hotels Reports Profit Growth, Launches Book on Google

ROCKVILLE, MD—Choice Hotels International Inc. has exceeded profit and EPS expectations, according to its third quarter earnings report. The company also introduced a new booking feature in collaboration with Google, helping guests make reservations online.

“Our year-to-date development success and strong financial metrics prove our strategy is working, positioning us for further growth,” said Patrick Pacious, president/CEO of Choice Hotels. “As an asset-light franchisor, we excel at helping our owners run profitable hotels by providing them with best-in-class tools, including a proven and expanding brand portfolio, award-winning revenue-enhancing resources and industry-leading technology systems. We are extremely pleased with the initial reception received by Clarion Pointe, and are optimistic that we’ll end the year on a high note with another successful quarter, taking us into 2019 with strong momentum.”

Choice Hotels Launches Book on Google

By enabling Book on Google, Choice Hotels has made it possible for travelers to search, select and reserve hotel rooms at Choice properties. Choice Hotels’ customers can now complete a reservation online on Google using their saved Google credentials.

Unlike booking a hotel room through other third-party sites, the Book on Google reservation is handled by Choice Hotels. This includes receiving a confirmation from Choice Hotels that allows guests to manage reservations directly with the hotel. Guests also have access to Choice Privileges loyalty program by adding their Choice Privileges membership number once they receive their confirmation.

Earlier this year, Choice Hotels launched a cloud-based global reservation system. The distribution platform supports Choice’s 5,800 U.S. hotels and connects more than 200 million guests to 450,000 hotel rooms annually.

Earnings Highlights

  • Net income was $80 million, or $1.41 per diluted share, for the third quarter of 2018. Adjusted net income increased 30% to $70.3 million from the same period of the prior year.
  • Adjusted diluted earnings per share (EPS) were $1.24 for the third quarter of 2018, a 31% increase from the 2017 third quarter.
  • Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) for the third quarter 2018 were $103.6 million, an increase of 11% from the same period of 2017.
  • The company exceeded the top end of its third quarter EPS guidance by $0.07 per share.
  • Full-year guidance for adjusted EBITDA increased to a range between $335-$340 million and adjusted EPS to a range between $3.79-$3.86.

During the third quarter, the company:

  • Unveiled Clarion Pointe, a midscale select-service brand extension of Clarion, to meet strong demand from hotel owners for conversion development opportunities in the midscale segment and continued guest demand for high-quality and affordable lodging options.
  • Completed the refinancing of the company’s existing $450 million senior unsecured credit facility with a new five-year, $600 million senior unsecured revolving credit facility.
  • Repurchased 0.5 million shares of common stock for an aggregate cost of $39 million. Year-to-date share repurchases now total approximately $109 million.

Overall Results

  • Total revenues for the three months ended Sept. 30, 2018 totaled $291.5 million, an 8% increase from the third quarter of 2017.
  • Total hotel franchising revenues for the third quarter increased 9% from the third quarter of the prior year to $135.4 million.
  • Adjusted EBITDA from hotel franchising activities for the third quarter were $105.1 million, an 11% increase from the third quarter of the prior year.
  • Adjusted hotel franchising margins were approximately 75% for the third quarter of 2018.

Development

  • New executed domestic franchise agreements totaled 159 in the third quarter of 2018, an increase of 20% from the same period of the prior year.
  • New domestic franchise agreements for the company’s extended stay brands totaled 27 in the third quarter of 2018, an increase of 200% from the comparable period of 2017.
  • New construction domestic franchise agreements increased 37% in the third quarter of 2018 from the comparable period of 2017.
  • The company awarded 111 new conversion domestic franchise agreements in the third quarter of 2018, a 13% increase from the comparable period of 2017.
  • The company’s total domestic pipeline of hotels awaiting conversion, under construction, or approved for development, as of Sept. 30, 2018, increased 29% to 968 hotels from Sept. 30, 2017.
  • The new construction domestic pipeline totaled 704 hotels at Sept. 30, 2018, a 33% increase, and the conversion pipeline increased to 264 hotels, a 19% increase from Sept. 30, 2017.

Consolidated Outlook

  • Net income for full-year 2018 is expected to range between $210-$214 million, or $3.68-$3.75 per diluted share.
  • Adjusted diluted EPS for full-year 2018 is expected to range between $3.79-$3.86. The company expects full-year 2018 adjusted net income to range between $216-$220 million.
  • Adjusted EBITDA for full-year 2018 is expected to range between $335-$340 million.
  • The effective tax rate is expected to be approximately 18.5% for fourth quarter 2018 and 20.5% for full year 2018.
  • The company’s fourth quarter 2018 adjusted diluted EPS is expected to range between $0.78-$0.85.

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