Earlier in the year, Choice Hotels International publicly sought an acquisition of Wyndham Hotels & Resorts in part to boost its international growth. Now months after dropping plans for a hostile takeover, Choice officials say they can achieve that overseas growth organically.
During Choice's second-quarter earnings call Thursday, President and CEO Patrick Pacious highlighted the 1.6% growth of the company's international portfolio, with twice as many new hotel openings outside the U.S. compared to the same quarter in 2023.
"It's an area we've renewed our focus post-Radisson acquisition," he said.
Choice saw a 22% increase for its global pipeline in the quarter compared to the midpoint of 2023 to more than 114,000 rooms. Domestically, the pipeline grew 11% with a 65% increase in rooms through conversions.
Pacious said Choice is seeing the strongest growth in international markets where the direct franchising model is strongest. Those markets include the Caribbean, Latin America and France.
Choice is also growing in Japan through a master franchise agreement. Earlier in the year, the company announced a deal with Hoshino Resorts REIT that added 22 properties to Choice's Comfort brand in Japan and grew the company's portfolio in the country to 96 properties. Pacious said those rooms will be onboarded within two months.
"We continue to see a significant opportunity to further gain international market share in the coming years, as evidenced by our rooms pipeline, which has more than tripled compared to the prior year," he said." We are making progress on onboarding more than 4,000 rooms in France under our franchise agreement with Zenitude."
Asked about the possibility of pursuing another company similar to Wyndham, Pacious said, "there are not a lot of transformational acquisitions out there."
Second-Quarter Results
During the quarter, Choice reported a 0.5% year-over-year drop in revenue per available room to $60, fueled by a 0.6% drop in average daily rate as occupancy grew marginally by 10 basis points.
Choice saw a 2% increase in total revenues in the quarter to $435.2 million, a quarterly record for the company. Adjusted earnings before interest, taxes, depreciation and amortization also hit a quarter record of $161.7 million, up 6% year over year.
Net income for the year was up 3% to $87.1 million.
Choice has repurchased $296.2 million in shares in the first half of the year. Michael Bellisario, senior hotel research analyst and director at Baird, said the company sold $15.6 million in Wyndham shares in the quarter, months after publicly ending its pursuit of an acquisition of that company. During the company's earnings call, Choice executives added the company had fully divested its Wyndham holdings.
Much like most hotel companies this quarter, Choice cut back its full-year guidance when reporting its quarterly results, shaving 350 basis points from the midpoint of its full-year projected RevPAR — now projected to fall between 3.5% and 1.5%. The company previously projected flat to 2% growth for the year.
Pacious called the scaled back full-year expectations a "factor of the normalization we're seeing" in travel demand. He added the areas with most room for growth in the second half of 2024, particularly urban hotels, are segments where Choice "under-indexes."
But Choice continues to project $580 million to $600 million in adjusted EBITDA for the year. Pacious said most of the company's financials remain strong even in a weaker RevPAR environment because of more efficient operations and greater ancillary revenue.
He said it's too early to comment on the trajectory into 2025 because of the continued uncertainty in the broader economic outlook.
As of publication time, Choice's stock was trading at $121.30, an 7.1% year-to-date increase. The NYSE Composite was up 7.9% for the same period.