Choice Hotels International Inc., for the first quarter ended March 31, reported net income of $31 million. Domestic RevPAR decreased 590 basis points for the quarter compared to the same period of 2023, but increased 8.2% compared to the same period of 2019.
“Building on our record 2023 financial results, we drove first quarter performance to new levels, with adjusted EBITDA and EPS increasing by 17% and 14%, year-over-year (YOY), respectively,” said Patrick Pacious, president/CEO. “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.”
Highlights include:
- Net income was $31 million for the first quarter of 2024, representing diluted earnings per share (EPS) of $0.62. As a result of one-time items, including due diligence and transaction pursuit costs, and the timing of net reimbursable expenses, net income and diluted EPS were 41% and 39% lower, respectively, for first-quarter 2024 compared to the same period of 2023.
- First-quarter 2024 adjusted net income, excluding certain items, increased 9% to $63.7 million compared to the same period of 2023, and adjusted diluted EPS increased 14% to a first quarter record of $1.28 compared to the same period of 2023.
- Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) for first-quarter 2024 grew to $124.3 million, a first-quarter record and a 17% increase compared to the same period of 2023.
- Global pipeline as of March 31 increased 10% to a company record of over 115,000 rooms from Dec. 31, 2023, including a 36% increase in the global pipeline for conversion rooms. Domestic rooms pipeline as of March 31 increased by 11% since Dec. 31, 2023, highlighted by a 59% increase for conversion rooms.
- In April, the company further strengthened its revenue-intense portfolio by relaunching Park Inn by Radisson, a premium conversion brand for the value-conscious traveler positioned just below the Quality Inn brand, with the brand’s first opening expected in third-quarter 2024.
- The company increased its guidance for diluted EPS and reiterated its guidance for net income, adjusted EBITDA and adjusted diluted EPS for full-year 2024.
Financial performance
Total revenues were $331.9 million for the first quarter of 2024, a 0.3% 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% to $203 million.
Royalty, licensing and management fees totaled $105.5 million for the first quarter of 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% compared to the same period of 2023.
Domestic RevPAR decreased 590 basis points for the three-month period ended March 31 compared to the same period of 2023, in part reflecting the timing of Easter weekend and tougher YOY comparisons. Domestic RevPAR increased 8.2% for the three month period ended March 31, 2024, compared to the same period of 2019.
Development
The company’s domestic upscale, extended-stay and midscale portfolio reported a 1.2% increase for hotels and 0.9% increase for rooms since March 31, 2023. The domestic extended-stay hotels portfolio grew by 17.4% since March 31, 2023, driven by increases in each of the segment’s brands. The company’s total domestic system size increased to more than 6,200 hotels and more than 494,000 rooms as of March 31.
The international portfolio, as of March 31, expanded by 1.3% in the number of hotels and by 2.3% in the number of rooms from March 31, 2023. As of March 31, 2024, the international rooms pipeline increased by 3% from Dec. 31, 2023, and the company more than doubled the number of international rooms in the pipeline since March 31, 2023.
The company opened an average of more than four hotels per week for a total of 55 hotel openings in first-quarter 2024, a 20% 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, 2024, 113 opened in the same year, a 43% 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 the first quarter increased by 7% compared to the same period of 2023 and constituted 92% of total domestic franchise agreements awarded in 2024. Of the total domestic franchise agreements awarded in first-quarter 2024, 80% were for conversion hotels.
Full-year outlook
The outlook information below includes forward-looking non-GAAP financial measures, which management uses in forecasting performance. The adjusted numbers in the company’s outlook below exclude the net surplus or deficit generated from reimbursable revenue from franchised and managed properties, due diligence and transition costs, additional repurchases of company stock and other items:
- Net income between $260 million and $274 million
- Adjusted net income between $306 million and $320 million
- Adjusted EBITDA between $580 million and $600 million
- Diluted EPS between $5.35 and $5.65
- Adjusted diluted EPS between $6.30 and $6.60
- Domestic RevPAR growth between flat and 2%
- Domestic net unit growth of approximately 2%
