Halfway through the year, Choice Hotels International provided an update on its business, including the integration of the Radisson Hotels Americas portfolio into its franchisee system.
Growth Strategy
The company continues to expand the reach of its franchise business in more revenue intense segments in 2023, with new hotels added within a brand generating, on a comparable basis, an average of 20 percent higher royalty revenue than hotels exiting the brand.
Openings Momentum
The company executed an average of more than four hotel openings per week for a total of 107 hotel openings year to date through June 30, a 39 percent increase compared to the same period of 2022. This growth was driven by an increase in conversion hotel openings of 45 percent and a 24 percent increase in new construction hotel openings.
For the first half of 2023, the company grew hotel openings across all segments, year over year, increasing openings in the upscale segment by 83 percent, the midscale segment by 42 percent, the extended-stay segment by 50 percent and the economy segment by 11 percent.
During the month of May, the company executed the highest number of hotel openings within the extended-stay segment since 2020, including six hotels for the WoodSpring Suites brand, a record for the brand's openings in a single month. The company has opened 732 new economy extended-stay rooms nationwide and 1,414 total new rooms for the brand since the start of 2023, with nearly 38,000 rooms in the domestic pipeline.
The company remains optimistic about extended-stay franchise business growth and expects the number of its extended-stay units to increase at an average annual growth rate of more than 15 percent over the next five years.
Radisson Hotels Americas Integration
Nearly a year after its acquisition of Radisson Hotel Group Americas closed, Choice Hotels has achieved approximately $80 million of annual recurring synergies, exceeding the company's original synergy target. The company anticipates unlocking additional cost and revenue opportunities for future synergies.
The company is ahead of its schedule to complete key integration milestones, including onboarding the nearly 600 Radisson Americas hotels onto its reservation delivery engine and merging the two loyalty programs by the end of the third quarter. Complete integration by the end of 2023 is expected to help further drive the Radisson Hotels Americas franchisees' topline performance and profitability.
The company drove a turnaround of Radisson Hotels Americas' results in 2022 and remains ahead of schedule in delivering expected Radisson Hotels Americas adjusted EBITDA contribution of more than $60 million in 2023, which is expected to grow to over $80 million in 2024.
Outlook
The company is reaffirming its previously provided financial guidance for full-year 2023.
The outlook information provided below is inclusive of the Radisson Hotels Americas acquisition and includes forward-looking non-GAAP financial measures, which management uses in measuring performance. The adjusted numbers in the company's outlook below exclude the net surplus or deficit generated from reimbursable revenue from franchised and managed properties, due diligence and transition costs, and other items:
In 2024, the company expects to generate more than 10 percent growth in adjusted earnings before interest, taxes, depreciation and amortization at the midpoint, year-over-year, driven by approximately $20 million in incremental contribution from Radisson Hotels Americas properties. The company also expects organic growth in more revenue-intense segments and markets and strong effective royalty rate growth.