Choice Hotels International has reported its results for the third quarter of 2021, with improvements in revenue not just from 2020 but 2019. Total revenues increased 4 percent to $323.4 million compared to the same period of 2019. Domestic systemwide revenue per available room growth for the quarter exceeded guidance and outperformed the total industry by 16 percentage points, increasing 11.4 percent compared to the same quarter in 2019. “In fact, RevPAR has now exceeded 2019 levels for five consecutive months, with trends continuing into the fourth quarter,” President and CEO Patrick Pacious said on a call with investors.
RevPAR growth was driven by an increase in average daily rate of 8.8 percent and a 150-basis-point increase in occupancy levels versus third quarter 2019. Third quarter adjusted earnings before interest, taxes, depreciation and amortization were $133.2 million, a 18 percent increase from third quarter 2019.
Pacious said that as a result of the performance trends, the company expects to surpass 2019 RevPAR and adjusted EBIDTA levels for full-year 2021.
Related: Choice boosts incentives for women hotel owners
Pacious noted the company’s recent adoption of a new revenue-management capability, which is designed to help franchise owners drive top-line revenue. “This tool marks a step change improvement that we were able to put in the hands of our franchisees at a critical juncture in the recovery,” he said. “As the first mobile-enabled revenue management app, it allows our franchisees to more effectively manage their channels, rates and inventory by adapting to local market trends in real time, through repricing and competitive rates shopping multiple times during the day, and they can do this from virtually anywhere.”
The capability has improved average daily rate index gains compared to local competitors, Pacious claimed. “We are especially encouraged by forward-looking bookings for the Thanksgiving and winter holidays, with a projected rate significantly ahead of 2019 levels.” The acceptance of rate recommendations by Choice’s franchisees has been “significantly higher” than the previous tool, he added.
Segments & Brands
Choice's extended-stay portfolio achieved domestic systemwide RevPAR growth of 18.2 percent in Q3 2021 compared to the same period of 2019, driven by occupancy levels of 82 percent and a 9 percent increase in ADR. The WoodSpring Suites brand achieved RevPAR growth of 22.8 percent compared to the same period of 2019, driven by occupancy levels of nearly 86 percent and an 11.1 percent increase in ADR.
The midscale portfolio achieved domestic systemwide RevPAR growth of 9.7 percent the quarter compared to the same period of 2019, driven primarily by a 9.3 percent increase in ADR. In third quarter 2021, the Comfort brands grew RevPAR more than 8 percent, reflecting a 9 percent increase in average daily rate, and the Quality Inn brand achieved RevPAR growth of 13.3 percent, driven predominantly by a 10.4 percent increase in ADR, compared to the same period of 2019.
Related: Choice Hotels' upscale brands gain ground
The company’s upscale Cambria Hotels brand achieved gains of 12 percentage points. In Q3 2021, the Ascend Hotel Collection achieved RevPAR growth of 7.9 percent, driven by a 17.2 percent increase in ADR, compared to the same period of 2019.
Development
Choice has signed 289 domestic franchise agreements year-to-date through Sept. 30, a 25 percent increase compared to the same period of 2020. The company's domestic franchise agreements for conversion hotels increased 25 percent year-to-date through Sept. 30, compared to 2020.
The company awarded 89 domestic franchise agreements in the quarter 2021, a 10 percent increase compared to the same period in the prior year.
Choice's domestic franchise agreements for new construction hotels increased 52 percent in Q3 2021, compared to the same period of 2020, making up a third of all domestic franchise agreements awarded in the quarter, CFO Dominic Dragisich said.
The number of domestic hotels and rooms, as of Sept. 30, increased 0.1 percent and 1.2 percent, respectively, from the same day in 2020. The company's domestic upscale, midscale and extended-stay segments reported a 2 percent and 2.6 percent aggregate increase in units and rooms, respectively, since Sept. 30, 2020.
As of Sept. 30, the number of domestic rooms in Choice's upscale portfolio expanded by nearly 22 percent since Sept. 30, 2020, driven by a 6 percent increase in room count for the Cambria Hotels brand and a 27 percent increase in room count for the Ascend Hotel Collection.
For the first nine 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 strategic alliance with Penn National Gaming. In September, the company launched a new Cambria hotel prototype designed for secondary and leisure markets. “We expect this prototype will allow developers the flexibility to build at a reduced cost, expanding the markets available for growth while retaining our design-forward experience,” Pacious said.
Related: Choice Hotels launches new Cambria prototype
The company's extended-stay portfolio reached 467 domestic hotels as of Sept. 30, an 11 percent increase from the same day in 2020, with the domestic extended-stay pipeline reaching nearly 310 hotels awaiting conversion, under construction or approved for development. Pacious noted the size of the portfolio has quadrupled over the last five years, and expanded by more than 45 hotels in the third quarter year over year, now representing more than 10 percent of Choice’s total domestic rooms. In the quarter, the company's extended stay domestic franchise agreements increased 85 percent, compared to the same period in 2020, and grew 20 percent, compared to the same period in 2019. In addition, the first hotel for Choice’s newest extended stay brand, Everhome Suites, is currently under construction and scheduled to open next summer.
Related: Choice adds extended-stay brand
Choice grew the number of domestic hotels within the Comfort brand family 2.2 percent from Sept. 30, 2020. The brand's domestic franchise agreements for new construction hotels increased three-fold in Q3 2021 compared to the same period of 2020. For the first nine months of 2021, the Comfort brand family executed the highest number of conversion hotel openings since 2014.
The company's total domestic pipeline of hotels awaiting conversion, under construction or approved for development, as of Sept. 30, reached nearly 860 hotels representing more than 71,000 rooms.
Forecast
COVID-19 continues to impact the company's business and the outlook reflects the company's estimates based on the best information available at this time, according to the company. The adjusted numbers in the company's outlook exclude the net surplus or deficit generated from the company's marketing and reservation system activities, as well as other items.
Domestic RevPAR for full-year 2021 is expected to surpass 2019 levels and grow at approximately 1 percent, as compared to full-year 2019.
Adjusted EBITDA for full-year 2021 is expected to exceed 2019 levels and range between $382 million and $387 million, Dragisich said— “assuming the broader RevPAR and economy recovery trends continue.”