Kicking off the company’s first-quarter earnings call with investors, Choice Hotels International President and CEO Patrick Pacious outlined four "business value drivers" that he said are “propelling the future success” of the company: “First, we drove our adjusted [earnings before interest, taxes, depreciation or amortization] performance to record levels and we have carried our strong momentum into 2023. Second, we are executing a distinct strategy that is strengthening our competitive position. Third, we have positioned the company to capitalize on long-term consumer and travel trends that are favorable to our brands. And finally, we are excited to onboard the Radisson America's brands onto Choice Hotels’ world-class business delivery platform, which we expect will further accelerate our transformative growth.”
Q1 Performance
For the first quarter of the year, adjusted EBITDA reached $106.4 million, a first-quarter record and a 10 percent increase from the same period in 2022, exceeding the top end of the company's guidance by $1.4 million. “These impressive financial results were fueled by our ongoing RevPAR and effective royalty rate growth,” Pacious said. “Last year, our first quarter RevPAR increased 10.4 percent from the same quarter 2019. This year, we are building on that growth with our first quarter [revenue per available room] increasing by an additional 5.9 percent year over year.”
Pacious credited the RevPAR growth, in turn, to an increase in average daily rate of 5.2 percent and a 34-basis-point increase in occupancy levels.
Radisson Americas’ portfolio-wide RevPAR increased 11.2 percent year over year during the quarter, with the upscale Radisson brand growing nearly 27 percent and outperforming the upscale segment by over six percentage points. “And once all Radisson Americas hotels are fully integrated with Choice Hotels systems and employing our tools, we expect to help drive their top-line performance and profitability to the next level,” Pacious said.
Choice’s total revenues reached $332.8 million, a first-quarter record and a 29 percent increase compared to the same period last year. Net income exceeded the top end of the company's guidance and reached $52.8 million, and adjusted net income, excluding certain items, reached a first-quarter record of $58.2 million.
Development
The company's upscale, extended-stay, and midscale segments reported a 9.5 percent increase in hotels and an 11 percent increase in rooms since March 31, 2022. The total number of domestic hotels and rooms at the end of this quarter increased 6.5 percent and 8.2 percent, respectively, from March 31, 2022.
The total number of international hotels and rooms increased 8.2 percent and 9.6 percent, respectively, from March 31, 2022.
The domestic system size for the company's upscale and upper-midscale segments grew approximately 29 percent and 24 percent, respectively, from the same quarter last year, driven by an increase in the number of hotels due to the acquisition of Radisson Hotels Americas and the growth of Cambria Hotels and the Comfort family of brands.
Of the total domestic franchise agreements awarded in first quarter 2023, 88 percent were for the company's upscale, extended-stay, and midscale brands, and 75 percent were for conversion hotels. The number of domestic franchise agreements awarded for the company's upscale segment for first quarter 2023 increased 13 percent, compared to the same period of 2022.
The company's domestic pipeline increased 11 percent to approximately 89,000 rooms, representing 925 hotels, from the same quarter in 2022. The company's extended-stay domestic pipeline reached 475 hotels, a 28 percent increase year over year. The company's upscale domestic pipeline increased 16 percent and its global pipeline as increased 14 percent to over 96,000 rooms, representing 988 hotels, from March 31, 2022.
Looking Ahead
Choice is raising its outlook for full year 2023 adjusted EBITDA, expecting to range between $525 million and $540 million, up from the prior guidance of $520 to $540 million. CFO Dominic Dragisich said this represents over 11 percent growth at the midpoint year over year.
The company also increased its guidance on net income for the year, predicting between $225 million to $265 million, up from $245 million to $265 million.