Choice Hotels' Comfort relaunch dominates Q3 2015

Choice Hotels International's Q3 2015 results show a company reaping the benefits of the strong hospitality sector, seeing both high revenues in the short term and good numbers reflecting the planned rejuvenation of its Comfort Inn and Comfort Inn & Suites brands. 

The company's revenue reports for the three months ending Sept. 30, 2015 totaled $241.5 million, up 12 percent from the same period in 2014. Domestic revenue per available room increased 5.8 percent over the previous year, while occupancy and average daily rates increased 120 basis points (or 4 percent).

Earnings before interest, taxes, depreciation and amortization for Choice's third quarter totaled $81.1 million, up 10 percent from the same period in 2014, while domestic royalties during that time frame rose 6.5 percent to reach $84.7 million.

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The relaunch
The aforementioned relaunch of Choice's Comfort brands has had a profound effect on Choice's construction pipeline, increasing domestic construction by 29 percent. 

This growth was driven primarily by the increased momentum of the upscale segment, and the loss of some Comfort properties. In an earnings call this morning, Steven Joyce, president and CEO of Choice Hotels, said that the update of the Comfort brand resulted in the loss of properties that did not align with brand standards. He clarified that future supply is being developed to replace any properties removed during the process.

"We're almost done with the [exit] process," Joyce said during the call. "The bulk of the terminations will be done by the end of the year."

In addition to these exits, Choice sold the three MainStay Suites hotels that it owned and managed.

As for Choice's upscale options, the company's Cambria brand opened its second Manhattan property during Q3 (following a Chelsea hotel that opened this year), as well as a new property in Rockville, Md. Cambria also signed 16 new franchise deals this year, nine of which are in major markets and two are conversions, a first for Choice. This is part of the brand's push into urban markets, especially in areas of high density.

Future outlook
Despite not hitting its targeted goals for August (Joyce explained the missed mark on today's earnings call as a result of the month having fewer Fridays and a weak Labor Day), Choice remains optimistic it is on track to land big numbers to end the year.

The company expects RevPAR to increase approximately 5.5 percent for the fourth quarter and 7 percent for the full year, while its net domestic unit growth for 2015 is expected to increase 1 percent. In addition, the company's royalty rate is expected to increase two basis points for 2015 as compared to 2014.

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