Choice Hotels Sees Positive Pipeline Growth

ROCKVILLE, MD—Choice Hotels continues to chart solid growth in the second quarter, according to an earnings report.

“We’re pleased to report another quarter of excellent financial performance and a positive outlook for the remainder of the year,” said Patrick Pacious, president/CEO, Choice Hotels. “We’re especially pleased that the transformation of our flagship Comfort brand is progressing on schedule and paying off: Renovated hotels are outperforming the segment and capturing more business travel while developer demand remains strong.”

In the past three months, the company entered the final stages of the $2.5-billion transformation of its flagship Comfort brand. Only one-third of Comfort hotels is either under renovation or will undergo renovations in the second half of the year.

“Additionally, our strategic investment in the upscale Cambria brand is propelling its rapid growth across the country—this summer alone, seven Cambria hotels are expected to open their doors in top-tier markets, which, together, represent more than 1,200 upscale rooms that will join our upscale portfolio,” said Pacious.

Choice Hotels achieved 16% growth in the number of domestic rooms in its upscale brands, Cambria and Ascend, as of June 30, 2019, from the second quarter 2018. It expanded the number of domestic hotels in its extended-stay brands to more than 380, a 7% increase from June 30, 2018, and increased the extended-stay domestic pipeline by 18% to over 250 hotels.

In addition, the Choice Privileges loyalty program grew to more than 42 million members.

Among the second-quarter highlights:

Revenues

  • Total revenues for the three months ended June 30, 2019, were $317.7 million, an increase of 8% from total revenues reported for the same period of 2018.
  • Total revenues, excluding marketing and reservation system fees, for the second quarter increased 5% over the prior year comparable period to $145.2 million.
  • Domestic royalty fees for the second quarter totaled $100.8 million, a 3% increase from the second quarter of 2018.
  • The company’s effective domestic royalty rate increased 10 basis points for the second quarter, compared to the same period of the prior year.
  • Domestic systemwide RevPAR declined 0.1% for the second quarter, compared to the same period of the prior year. Comfort hotels that have completed renovations outpaced their competitive set by 60 basis points, driven by both business and leisure travel.
  • Procurement services revenue increased 17% in the second quarter to $20.8 million, compared to the same period of the prior year.

Development

  • The number of domestic franchised hotels and rooms, as of June 30, 2019, increased 2% and 2.1%, respectively, from June 30, 2018.
  • International franchised hotels and rooms, as of June 30, 2019, increased 4.1% and 5.4%, respectively, from June 30, 2018.
  • The company achieved 5.4% and 5.1% net unit growth in the Clarion and Quality brands, respectively, further strengthening its midscale presence.
  • The company awarded 181 domestic franchise agreements in the second quarter of 2019, including 107 awarded in the month of June, the largest number of agreements awarded in June in the company’s history as a public company.
  • The company’s total domestic pipeline of hotels awaiting conversion, under construction or approved for development, as of June 30, 2019, increased 4% to 988 from June 30, 2018.
  • The new-construction domestic pipeline totaled 753 hotels, as of June 30, 2019, a 7% increase from June 30, 2018.
  • The company’s total international pipeline of hotels awaiting conversion, under construction or approved for development totaled 123, as of June 30, 2019, versus 74 hotels as of June 30, 2018.

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