Choice Hotels Is More Optimistic About Rooms Than About Profit

Choice Hotels International reported third-quarter results on November 2 and raised its outlook for revenue per available room, the industry’s standard yardstick for demand and pricing. Global RevPAR rose 3.9 percent in the quarter and US RevPAR rose 3.8 percent, with an average daily rate of $100.99 and occupancy of 61.9 percent. For the full year, the company now expects global RevPAR growth of 1.5 to 2.5 percent, up from 0 to 1 percent.

The profit picture is murkier. Revenue was $458 million against $447 million a year earlier, but net income fell 68 percent to $58 million, mainly because the prior year included a $100 million joint-venture gain. Adjusted diluted earnings per share rose 11 percent to $2.33. Full-year net income guidance was lowered to $178 million to $185 million from $230 million to $241 million.

The brand portfolio keeps growing. Choice counts 7,604 hotels and 660,614 rooms, up 1.7 percent, and a global pipeline of 78,200 rooms, of which 30,300 are extended stay. US franchise agreements awarded rose 24 percent to 6,900 rooms. Global room openings, however, dropped to 6,000 from 12,800 a year earlier.

One notable move came outside traditional hotels: Choice closed its roughly $130 million acquisition of Harvest Hosts on October 1. Adjusted EBITDA guidance for the year is $641 million to $651 million. For travelers, the takeaway is that budget and midscale rooms are earning more per night on average, which tends to show up as firmer prices rather than discounts.

Sources: Choice Hotels International investor release