Faster integration of Radisson platform adds to bullish growth and performance outlook by Choice International.
ROCKVILLE, Maryland – Choice Hotels International pointed to its ability to
convert properties, its faster than expected integration of Radisson Hotels
Americas and strong international performance as key drivers of 2Q23 results,
that included total revenues of $427.4 million, a quarterly record and a
16% increase compared to the same period of 2022.
The company achieved $80 million of annual
recurring synergies through the Radisson Hotels Americas integration, exceeding
the company’s original synergy target ahead of schedule. In July 2023, the
company onboarded the nearly 600 Radisson Hotels Americas hotels onto its
reservation delivery engine and integrated the two loyalty programs.
Domestic RevPAR increased 50 basis points for 2Q23 compared
to the same period of 2022, driven by a 2.8% increase in average daily rate and
performance by the higher-end chain scales. The company's second quarter 2023
occupancy levels exceeded 60%.
Choice’s global pipeline as of June 30, 2023, increased
10% to over 93,000 rooms (down from >96,000 rooms in 1Q23) and 61 hotels.
The company’s global rooms pipeline for conversion hotels as of June 30,
2023, increased 14% from June 30, 2022, and 25% from March
31, 2023. The company’s domestic rooms pipeline for conversion hotels as
of June 30, 2023, increased 10% from June 30, 2022, and 28%
from March 31, 2023.
The company’s upscale, extended-stay, and midscale segments
reported a 10% increase in hotels and an 11.7% increase in rooms since June
30, 2022. The company's domestic hotels and rooms as of June 30, 2023, increased
6.9% and 8.8%, respectively, from June 30, 2022.
The velocity of our conversion openings has been so quick that some conversion hotels never appeared in our quarterly pipeline numbers. This momentum we see in conversion activity gives us further confidence in the prospects for our continued growth in 2023 and beyond.
Patrick Pacious
International hotels and rooms, as of June 30, 2023, increased
9% and 11.8%, respectively, from June 30, 2022.
As of June 30, 2023, the domestic system size for the
company's upscale and upper-midscale segments grew by approximately 32% and
24%, respectively, since June 30, 2022, driven by an increase in the
number of Radisson Hotels Americas units and the growth of the Ascend Hotel
Collection, Cambria Hotels, and the Comfort family of brands.
The company executed an average of more than four hotel
openings per week, for a total of 107 hotel openings year-to-date through June
30, 2023, a 39% increase compared to the same period of 2022. For the first
half of 2023, the company grew hotel openings across all segments, increasing
openings in the upscale segment by 83%, the midscale segment by 42%, the
extended stay segment by 50%, and the economy segment by 11% compared to the
same period of 2022.
Looking ahead, Choice Hotels CEO Patrick Pacious said
greater than 50% of the company's domestic pipeline is either under construction, is a
conversion hotel (30%), or has financing. He added that nearly 80% of the
domestic agreements awarded in the first half of the year were for conversion
hotels. “Of the 126 domestic franchise agreements we executed for conversion
hotels in the first half of 2023, two-thirds have already opened or are
expected to open by the end of this year,” he said.
Choice expanded its global rooms pipeline for conversion
hotels in the second quarter by 25% compared to the first quarter of this year,
and 14% year-over-year.
Pacious also pointed to Choice’s speed to market for
conversions, stating they are opening the doors of economy and midscale
properties as royalty generating hotels in just under 100 days on average. “The
velocity of our conversion openings has been so quick that some conversion
hotels never appeared in our quarterly pipeline numbers,” he added. “This
momentum we see in conversion activity gives us further confidence in the
prospects for our continued growth in 2023 and beyond.”
Expanding on the Radisson integration, Pacious said that by
year end when all Radisson Americas hotels are fully integrated with Choice’s
systems and employing its tools, the company expects to help drive Radisson top
line performance and reduce its operating costs to bring profitability
to the next level.
“The Radisson Americas portfolio RevPAR increased 3.8% year-over-year in the second quarter,” Pacious continued. “Specifically, the
Radisson upscale brand itself grew nearly 13% year over year, outperforming the
upscale segment by seven percentage points."
Choice reported 2Q23 adjusted EBITDA upside of ~3% (+$4 million) and increased the low end of the full-year guidance range by ~1% (+$5 million).
Royalty, licensing and management fees were $140.5 million, up 16% YOY, and adjusted EBITDA hit $153.1 million. Adjusted earnings per share was $1.75, beating Street estimates.
During the first six months of 2023, Choice returned approximately $264 million to shareholders in the form of cash dividends and share repurchases. Over the trailing twelve months ended June 30, 2023, the company repurchased 5.6 million shares of common stock totaling over $655 million, representing 10% of the shares outstanding as of June 30, 2022.
Choice raised its adjusted EPS guidance ~2% at the midpoint to $5.86-$6.01 and increased the low end of the adjusted EBITDA range by $5 million to $530-$540 million. RevPAR growth (domestic) has been increased ~2%.