As Choice Hotels International celebrates the 40th anniversary of its Comfort brand this year, the company is looking to invest for the long term, said President and CEO Patrick Pacious during the business’ Q4 and full-year 2020 earnings call. “And as you can see by both unit growth and impressive [revenue per available room] performance, those investments are paying off and position the brand for growth into the future,” he said.
Competing with the Comp Set
The company’s revenue per available room results “significantly outperformed” the industry in the fourth quarter and 2020 as a whole, Pacious said. “Our domestic systemwide year-over-year RevPAR change surpassed the industry by nearly 17 percentage points for the full year, declining 30.7 percent from 2019.”
Since the onset of the pandemic in mid-March, the company has reported sequential quarter-over-quarter improvement. Fourth quarter domestic systemwide RevPAR declined 25.1 percent from the same quarter of 2019, but Pacious said Choice’s results outpace the overall industry and chain scale segments. “In fact, our outperformance expanded in the fourth quarter,” he said. “In 2020, Choice Hotels grew RevPAR faster than our local competitors, increasing RevPAR index by over 5 percentage points through notable lifts in weekday and weekend RevPAR index. Our RevPAR index growth strengthened in the fourth quarter of 2020 and continued to improve through year-end.”
Choice’s fourth-quarter 2020 domestic systemwide RevPAR surpassed the industry by nearly 26 percentage points, declining 25.1 percent from the same period of the prior year and improved by 370 basis points from the third quarter, Pacious said. “In addition, our results exceeded the primary chain scale segments in which we compete, as reported by STR, by over 5 percentage points for full year 2020 and nearly 8 percentage points for the fourth quarter.”
Choice’s domestic RevPAR declines were running at around 60 percent as the pandemic first hit in March last year—while peers were down 80 percent. Choice revenues recovered to be down around 25 percent in the fourth quarter while competitors were down around 50 percent.
In the current year to date, RevPAR has declined by approximately 18 percent compared to the same period of 2020.
"Despite a year of unprecedented challenges brought upon us by the pandemic, Choice Hotels drove results that significantly outperformed the industry,” Pacious said.
Cautious Optimism
Choice is ultimately cautious about the outlook. In terms that are currently echoed across the hospitality sector, Pacious said: “The ultimate and precise impact of COVID-19 on full-year 2021 is still unknown at this time and will depend on numerous factors, including future levels of resurgence in COVID-19 cases, the pace of vaccination rollout and vaccines' effectiveness, the duration and scope of mandated travel and other restrictions, the confidence level of consumers to travel and the pace and level of the broader macroeconomic recovery.”
But the company sounded some notes of optimism while refraining from giving formal guidance on the first quarter of 2021. There would be quarter-by-quarter improvements in RevPAR in the three months to March 31 versus the same periods of 2020 and 2019, it said.
Choice has confidence in part because 90 percent of its domestic properties are in drive-to locations and it is strong in midmarket hotels.
Total revenues fell 28 percent to $193 million in the fourth quarter compared to the same three months of 2019. Full-year revenues fell 31 percent to $774 million.
Net income was $7.9 million in the fourth quarter compared to $42 million and $75 million across 2020 against $223 million for the 2019 full year. In the 2020 periods, diluted earnings per share was 14 cents and $1.35 respectively.
Choice went into the pandemic with a healthy balance sheet and after adding debt to boost liquidity at the start of the COVID-19 crisis it remains within long-term leverage target of debt to earnings before interest, tax, depreciation and amortization of between three and four times.
Choice navigated the impact of the pandemic without having to renegotiate debt covenants, refinanced a portion of debt to extend its debt maturity profile, and capitalized on favorable credit markets to significantly reduce the company’s effective cost of borrowings.
The company has suspended the payout of dividends “while the COVID-19 pandemic is significantly impacting travel.”
A version of this story originally appeared on Hotel Management's sister site Hospitality Insights.