Choice Hotels International global pipeline increased 10 percent in the first quarter of 2024 to a company record of more than 115,000 rooms from Dec. 31, including a 36 percent increase in global pipeline for conversion rooms.
Domestic rooms pipeline in the quarter increased by 11 percent in the quarter, highlighted by a 59 percent increase for conversion rooms.
The company's domestic upscale, extended stay and midscale portfolio reported a 1.2 percent increase for hotels and 0.9 percent increase for rooms since March 31, 2023. The domestic extended-stay hotels portfolio grew by 17.4 percent since March 31, 2023, driven by increases in each of the segment's brands. The company's total domestic system size increased to over 6,200 hotels and over 494,000 rooms at the end of the quarter.
"The support growth drivers each uniquely contributing to our performance include driving the revenue intense growth of our brand portfolio with a focus on hotels that generate higher than brand average royalty per unit," said President and CEO Pat Pacious during the company's earnings call. "Second, increasing the velocity of new hotel opening as we leverage our best in class hotel conversion capability which remains a distinct advantage in today's development environment. And third, expanding our international growth and finally, bolstering our platform earnings capability through strategic partnerships and other and ciliary revenue opportunities."
The international portfolio expanded by 1.3 percent in the number of hotels and by 2.3 percent in the number of rooms in the quarter. As of March 31, the international rooms pipeline increased by 3 percent from Dec. 31, and the company more than doubled the number of international rooms in the pipeline since March 31, 2023.
The company opened an average of over four hotels per week for a total of 55 hotel openings in first quarter, a 20 percent increase compared to the same period of 2023. Of the domestic franchise agreements executed for conversion hotels over the trailing 12 months ending March 31, 113 opened in the same year, a 43 percent increase over the comparable period of the prior year.
Total domestic franchise agreements for the company's upscale, extended-stay, and midscale brands executed in first quarter increased by 7 percent compared to the same period of 2023 and constituted 92 percent of total domestic franchise agreements awarded in 2024. Of the total domestic franchise agreements awarded in the quarter, 80 percent were for conversion hotels.
When asked about the potential for future acquisitions, Pacious said the company wants to find the right acquisitions to be transformation but doesn't have anything that the company is pursuing today.
"That's something we're going to continue to look at," he said. "It is something that I think when you look out in the near-term, there will be more domestic opportunities but also more international opportunities. Given the strength we have internally to acquire brands, integrate them and grow them — that's what we did with Woodspring and that is clearly what's happening with Radisson and Country Inn and Suites, we feel really good about our internal capability and core competency to execute M&A."
During the earnings call, Pacious didn't directly rule out further acquisition attempts for Wyndham Hotels & Resorts — "that will to be answered by the Wyndham shareholders in the future."
Financial Performance
The company recorded lower profit in the quarter as revenue was down slightly in part to lower royalty, licensing and management fees.
Total revenues were $331.9 million for first quarter of 2024, a 0.3 percent decrease compared to the same period of 2023. For first quarter 2024, compared to the same period of 2023, revenues, excluding reimbursable revenue from franchised and managed properties, calculated as total revenues net of reimbursable revenue of $129 million, increased 16 percent to $203 million.
Royalty, licensing and management fees totaled $105.5 million for first quarter 2024 compared to $107.5 million for the same period of 2023. First quarter 2024 domestic effective royalty rate increased 4 basis points to 5.03 percent compared to the same period of 2023.
Domestic RevPAR decreased 590 basis points for the quarter compared to the same quarter in 2023, in part reflecting the timing of Easter weekend and tougher year-over-year comparisons.
"Building on our record 2023 financial results, we drove first quarter performance to new levels, with adjusted EBITDA and EPS increasing by 17 percent and 14 percent, year-over-year, respectively," Pacious said in a statement. "These impressive results demonstrate that we are unlocking the revenue synergies from the Radisson Americas acquisition, which has meaningfully enhanced our growth profile and opened new incremental earnings streams. Looking ahead, we are confident that our versatile business model with multiple drivers positions us well to deliver continued earnings growth and create shareholder value."