Choice Hotels International’s Q2 2021 earnings report did not compare numbers to last year’s, but to those from 2019. “Our goal is not simply to return to our 2019 performance levels, but rather to capitalize on current and future investments to fuel our long term growth and drive our performance,” CEP Patrick Pacious said during a call with investors.
During the quarter, domestic systemwide revenue per available room declined 1.1 percent compared to the same period in 2019, while occupancy levels increased 20 basis points from Q2 2019. The company's June 2021 domestic systemwide RevPAR increased 4.5 percent from June 2019, while July 2021 RevPAR increased approximately 15 percent from July 2019, driven by occupancy levels of 70 percent and average daily rate growth of 10 percent. From May through July, the company surpassed its all-time single day revenue record on four separate days and recorded 14 of the highest revenue performing days in the company's history.. Ultimately, second quarter net income increased 15 percent to $85.9 million from second quarter 2019.
The company's extended-stay portfolio achieved domestic systemwide RevPAR growth of 9.9 percent in second quarter 2021, compared to the same period of 2019, driven by occupancy levels of 82 percent and an increase in ADR of 2 percent. Specifically, the WoodSpring Suites brand grew RevPAR 16 percent in the quarter compared to the same period of 2019, driven by occupancy levels of nearly 86 percent and an ADR increase of 5.6 percent.
The company's midscale portfolio achieved domestic systemwide RevPAR growth of 6.2 percent over June 2019, driven by an increase in ADR of 3.8 percent and an increase in occupancy levels of 220 basis points. In the quarter, the Quality Inn brand achieved RevPAR growth of 1.7 percent, driven predominantly by an increase in ADR of 1.3 percent, compared to the same period of 2019. The Comfort portfolio grew its domestic unit count by 2.5 percent in the year over year and had the highest number of openings since 2014.
The Cambria Hotels brand achieved gains of 14 percentage points over 2019.The Ascend Hotel Collection achieved June RevPAR growth of 4.7 percent, driven by an increase in ADR of 12.2 percent, compared to the same period of 2019.
Adjusted earnings before interest, taxes, depreciation and amortization for the second quarter were $111.8 million, a 9 percent increase from Q2 2019.
Expansion Plans
“We were very intentional in our approach to investing, prior to the pandemic, to drive growth across the more revenue-intense hotel segments,” Pacious said. “While we reduced our overall spend in 2020 due to the pandemic, we continue to invest in key strategic areas. More importantly, in today's stronger demand environment, we see an outsize opportunity to continue—or even accelerate—strategic investments to capture a greater share of travel demand.”
The company has focused on expanding its upscale positioning, strengthening its midscale collections and “rapidly growing” its extended-stay portfolio. “Our strategic investments in the extended-stay segment allowed us to quadruple the size of the portfolio over the past five years to reach 460 domestic units with a domestic pipeline of over 300 hotels,” Pacious noted.
The company's total domestic pipeline of hotels awaiting conversion, under construction or approved for development, as of June 30, reached 884 hotels representing more than 72,000 rooms.
Choice signed 200 domestic franchise agreements over the first six months of the year, a 32 percent increase compared to the same period in 2020. The company's domestic franchise agreements for conversion hotels increased by 43 percent year-to-date through June 30, compared to the same period of 2020. The company awarded 111 domestic franchise agreements in the quarter , a nearly 20 percent increase compared to the same period in the prior year.
The company's domestic franchise agreements for new-construction hotels increased 21 percent in Q2 compared to the same period of 2020. Half of the company's brands have exceeded 2019 levels for the number of domestic franchise agreements awarded in the first half of 2021.
As of June 30, the number of domestic rooms in the company's upscale portfolio had expanded by 24 percent since the same day in the previous year, driven by an 11 percent increase in room count for the Cambria Hotels brand and a 28 percent increase in room count for the Ascend Hotel Collection. For the first six months of 2021, the upscale portfolio set a record for the highest number of upscale hotel openings in the company's history, including 22 properties added as part of the company's alliance with Penn National Gaming.
The company's extended-stay portfolio reached 460 domestic hotels as of June 30, an 11 percent increase from June 30, 2020, with the domestic extended-stay pipeline reaching over 300 hotels awaiting conversion, under construction or approved for development. Since June 30, 2020, the WoodSpring Suites, MainStay Suites and Suburban brands grew the number of open domestic hotels by 6 percent, 27 percent and 15 percent, respectively. In addition, the company's domestic franchise agreements for WoodSpring Suites increased by 18 percent in the first half of the year, compared to the same period of 2019.
The company increased the number of domestic hotels within the Comfort brand family by 2.5 percent from June 30, 2020. The brand's domestic franchise agreements for new construction hotels increased by 43 percent in second quarter 2021, compared to the same period of 2020. For the first half of 2021, the Comfort brand family executed the highest number of openings since 2014.
The number of domestic hotels and rooms, as of June 30, increased 0.6 percent and 1.6 percent, respectively, from June 30, 2020. The company's domestic upscale, midscale and extended-stay segments reported a 2.5 percent and 3.1 percent aggregate increase in units and rooms, respectively, since June 30, 2020.
Looking Ahead
For the month of July 2021, Choice's RevPAR increased by approximately 15 percent over July 2019, driven by occupancy levels of 70 percent and ADR growth of 10 percent. The company currently expects RevPAR for third quarter 2021 to grow in the mid- to high-single digits, as compared to 2019.
Assuming continuation of current consumer sentiment, as well as broader RevPAR and economy recovery trends, the company currently expects adjusted EBITDA for the full-year 2021 to approach 2019 levels.