Choice Hotels International Inc., for the third quarter ended Sept. 30, reported total revenues of $425.6 million, a third-quarter record and a 3% increase compared to the same period of 2022. Net income for the period was $92.0 million.
“We generated another record quarter of impressive financial growth, driven by our best-in-class business delivery engine, the successful integration of Radisson Americas and organic growth of our brand portfolio focused on hotels that generate higher royalties per unit,” said Patrick Pacious, president/CEO, Choice Hotels. “We believe we are well-positioned to effectively grow our business in the current hotel development environment with a superior hotel conversion capability. We will continue to execute our robust organic earnings growth strategy and pursue inorganic growth to drive long-term shareholder value.”
He continued, “At its core, our proposed combination with Wyndham is about the natural fit of the two companies coming together to accelerate value creation for all stakeholders. We made our proposal public so that all groups could evaluate its benefits. For Wyndham shareholders, we provide a substantial premium and immediate value for their shares with participation in the future value of the combined entity. For Wyndham franchisees, we provide a proven model to lower costs and increase direct revenue to their hotels. We urge the Wyndham board of directors to resume discussions for the benefit of both companies’ franchisees, shareholders, associates, and guests.”
Third-quarter highlights:
- Total revenues, excluding reimbursable revenue from franchised and managed properties, increased 9% to $219.6 million compared to the same period of 2022.
- Net income was $92.0 million, representing diluted earnings per share (EPS) of $1.81. As a result of one-time items, including Radisson Hotels Americas integration costs, gains from the sale of the Cambria Hotel Nashville owned asset and extraordinary franchisee termination fees in third-quarter 2022, and the timing of net reimbursable expenses, net income and diluted EPS were 11% and 2% lower, respectively, for third-quarter 2023 compared to the same period of 2022.
- Third-quarter 2023 adjusted net income, excluding certain items, increased 6% to $92.4 million compared to the same period of 2022, and adjusted diluted EPS increased 17% to $1.82 compared to the same period of 2022.
- Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) fo grew to $155.9 million, a third-quarter record and a 12% increase compared to the same period of 2022.
- Global rooms pipeline, as of Sept. 30, increased 6% to more than 99,000 rooms from June 30. Global rooms pipeline for conversion rooms increased 11% from Sept. 30, 2022, and 27% from June 30, 2023.
- Expanded international pipeline as of Sept. 30, nearly doubling rooms count from Sept. 30, 2022, inclusive of more than 30 properties representing approximately 6,000 rooms associated with the company’s strategic alliance with one of the largest hotel operators in Mexico known for its portfolio of upscale, upper-upscale, luxury hotels and resorts in Mexico and the Caribbean.
- Achieved $84 million of annual recurring synergies through the integration of Radisson Hotels Americas, exceeding prior target by 5%.
- The company raised its financial guidance for full-year 2023.
Financial performance
- Platform and procurement services fees increased 8% to $15.5 million for third-quarter 2023 compared to the same period of 2022.
- Royalty, licensing and management fees increased 3% to $148.5 million for third-quarter 2023 compared to the same period of 2022. Excluding the one-time exit of the 110 Woodspring Suites hotels in third-quarter 2022, royalty, licensing and management fees for third quarter increased 6% compared to the same period of 2022.
- Domestic RevPAR decreased 80 basis points and increased 140 basis points for the three- and nine-month periods ended Sept. 30, respectively, compared to the same periods of 2022. The company’s third-quarter ADR increased 1.3% compared to the same period of 2022 while occupancy reached 62%.
- Domestic effective royalty rate for both the three-month and nine-month periods ended Sept. 30, ncreased 6 basis points to 4.99% compared to the respective 2022 periods.
Development
- The company executed an average of more than four hotel openings per week, for a total of 159 hotel openings year-to-date through Sept. 30, a 24% increase compared to the same period of 2022. For the first nine months of 2023, the company grew hotel openings across all segments, increasing openings in the upscale segment by 50%, the extended-stay segment by 38%, the midscale segment by 14 and the economy segment by 27% compared to the same period of 2022.
- Of the total domestic franchise agreements awarded in the nine months ended Sept. 30, 84% were for the company’s upscale, extended-stay, and midscale brands, and 72% were for conversion hotels. Of the domestic franchise agreements awarded for conversion hotels in the nine months ended Sept. 30, 67% have already opened or are expected to open by December 31.
- Domestic upscale and extended-stay portfolio grew by 11% and 13%, respectively, since Sept. 30, 2022, driven by an increase in the number of Cambria Hotels, Ascend Hotel Collection, WoodSpring Suites, MainStay Suites and Suburban Studios units. The company’s total domestic system size was more than 6,200 hotels and 490,000 rooms as of Sept. 30, 2023.
- The total number of international upscale hotels, as of Sept. 30, increased 13% from Sept. 30, 2022. The company’s total international system size approached 1,200 hotels as of Sept. 30, 2023.
- The extended-stay domestic pipeline increased 12% to more than 47,000 rooms from Sept. 30, 2022. Domestic pipeline reached nearly 86,000 rooms as of Sept. 30, 2023.
Outlook
The full-year 2023 outlook information provided below is inclusive of the Radisson Hotels Americas acquisition, which was completed in August 2022, and includes forward-looking non-GAAP financial measures, which management uses in measuring 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 and other items:
- Net income: $259 million – $264 million (prior outlook: $251 million – $259 million)
- Adjusted net income: $302 million – $308 million (prior outlook: $298 million – $306 million)
- Adjusted EBITDA: $535 million – $540 million (prior outlook: $530 million – $540 million)
- Domestic RevPAR growth: approximately 1% (prior outlook: approximately 2%)
