With revenue down, Choice celebrates unit growth

The Cambria Hotel Ocean City - Bayfront in Ocean City, Md., opened in August. Photo credit: Choice Hotels International (Cambria Hotel Ocean City - Bayfront)

Choice Hotels International reported its results for the three and nine months ended Sept. 30.

“Choice Hotels' proven portfolio of well-segmented brands, geographic footprint, and strength in leisure travel continued to drive results that outperformed the industry and position the company to benefit from the recent shifts in consumer behavior,” said Patrick Pacious, president and CEO. “We believe that our strategy of growing our limited-service brands in the right segments and the right locations will allow us to continue to grow our share of travel demand over the long term.”

Revenue and Income

In the quarter, domestic systemwide revenue per available room declined 28.8 percent compared to the same quarter last year. Total revenues were $210.8 million, down 32 percent compared to the same period of 2019.

Net income was $14.5 million for the third quarter, and adjusted net income, excluding certain items, decreased 52 percent to $36.8 million from third quarter 2019. Adjusted earnings before interest, taxes, depreciation, and amortization for the third quarter were $74.9 million, a 34 percent decrease from third quarter 2019, and the company reported cash flow from operations of over $68 million in the third quarter 2020.

Growth

The company awarded 232 new domestic franchise agreements year to date through Sept. 30, a 38 percent decrease compared to the same period of the previous year. Nearly 70 percent of the agreements awarded year to date through Sept. 30 were for conversion hotels.

The company awarded 81 domestic franchise agreements in the quarter, a 19 percent decrease compared to the same period of the prior year. Of the total domestic franchise agreements awarded in the quarter, nearly three-fourths were for conversion hotels and over 40 percent were executed in the month of September. In addition, the company signed the largest minority-owned multiunit franchise agreement in the history of its emerging markets development program, increasing diversity among Choice Hotels' owner base and across the industry.

The company's extended-stay portfolio continued to expand, reaching 421 domestic hotels as of Sept. 30, a 6 percent increase since Sept.r 30, 2019, with the domestic extended-stay pipeline expanding to over 290 hotels awaiting conversion, under construction or approved for development. Since Sept. 30, 2019, the WoodSpring Suites brand grew the number of open domestic hotels 7 percent and its domestic pipeline 15 percent.

As of Sept. 30, the number of domestic rooms in the company's upscale portfolio expanded 33 percent since September 30, 2019, driven by an increase in room count of 14 percent for the Cambria Hotels brand and 42 percent for the Ascend Hotel Collection, the latter of which includes 17 properties associated with the company's partnership with AMResorts, an Apple Leisure Group brand.

The number of domestic hotels and rooms, as of Sept. 30, 2020, increased 0.7 percent and 1.9 percent, respectively, from Sept. 30, 2019. The company's domestic upscale, extended-stay, and midscale segments reported a 2.1 percent aggregate increase in units and a 3.4 percent increase in rooms since Sept. 30, 2019. The number of international hotels and rooms as of Sept. 30 increased 0.9 percent and 10.7 percent, respectively, from the comparable period of 2019.

The company's total domestic pipeline of hotels awaiting conversion, under construction, or approved for development as of Sept. 30, reached 945 hotels that represent over 76,000 rooms.

Looking Ahead

Fourth-quarter domestic RevPAR through Oct. 24 continued the pattern of sequential quarterly improvement, and October’s RevPAR is expected to decline approximately 25 percent from the same period of 2019. Domestic systemwide RevPAR decreased 28.8 percent for third quarter 2020 compared to the third quarter 2019, exceeding overall industry performance by nearly 20 percentage points. 

The company's domestic systemwide occupancy rate has improved since the trough of 28 percent in early April, with average weekly occupancy consistently exceeding 50 percent since the week of June 21 through Oct. 24. For the month of October, domestic systemwide occupancy is expected at 52 percent.