Choice Hotels International saw year-over-year pipeline and unit growth across its portfolio in the third quarter.
International growth has been a focus for the company over the last few quarters. It grew its rooms portfolio outside of the U.S. 3.8% in the quarter. Its international rooms pipeline increased 21% over the same quarter last year.
"We continue to see a significant opportunity to further gain international market share in the coming years," Choice President and CEO Patrick Pacious said on the company's third-quarter earnings call.
Revenue per available room increased 9% year over year at its hotels in the Europe, Middle East and Africa region. Pacious said it will add more than 700 rooms to its portfolio in Spain, and it has recently onboarded about 2,000 rooms in France through its April franchising agreement with Zenitude Residential Hotels.
Total pipeline growth
Choice's global pipeline including the U.S. increased 11% to a third-quarter record of more than 110,000 rooms from Sept. 30, 2023. Pacious said 99% of the rooms in its global pipeline are in its more revenue-intense brands, which will lead to RevPAR premiums compared to its existing portfolio.
Hotels in Choice's U.S. pipeline represent a RevPAR premium of 30% and have, on average, more than a 40% higher room count compared to hotels in its existing portfolio.
"Our strategic focus on more revenue-intense hotels means that the pipeline continues to be of significantly higher value than the current hotel portfolio," he said.
The growth in the more revenue-intense segments — which Choice defined as upscale, extended stay and midscale — has resulted in stronger performance from both group and business transient travelers. In the quarter, Choice had a 5% increase in revenue from group accounts and grew business transient revenue 9% year over year.
Pacious said thanks to positive leisure travel trends, renewed strength in business travel — particularly among transportation and government verticals — and an acceleration of group travel, Choice increased its full-year outlook, and now expects positive RevPAR in the fourth quarter.
Choice increased its domestic rooms pipeline by 10% year over year, including a 68% increase in conversion rooms. Chief Financial Officer Scott Oaksmith said the brand opened 190 domestic hotels year to date through September, a 19% increase year over year and its highest amount since 2019.
"We expect to see an acceleration of our growth for the remainder of the year and continue to anticipate achieving our full-year growth target of approximately 2%," he said.
Third-quarter performance
In the U.S., revenue per available room dropped 2.5% in the third quarter from 2023 levels, according to its earnings report. Average daily rate at U.S. hotels was $102.10, down 1.2% over 2023 levels, while occupancy dipped 80 basis points to 61.1%.
Choice CFO Scott Oaksmith said that domestic RevPAR drop was driven in part by calendar shifts, a negative impact of Hurricane Debby and "ongoing normalizing travel trends."
October RevPAR did show some improvement though, executives said.
For the full year, executives said they expect RevPAR to decrease between 1% and 2% compared to 2023, which is an improvement over the previous RevPAR loss range of -1.5% to -3.5%.
Choice’s adjusted earnings before interest, taxes, depreciation and amortization was $177.6 million in the third quarter, representing a 14% year-over-year increase. Its total revenues for the quarter were $428 million, which was up 1% compared to last year.
The company’s net income for the third quarter was $105.7 million, up 15% compared to its 2023 third-quarter levels.
Choice increased its 2024 full-year outlook for net income to range between $276 million to $284 million, up from $260 million to $272 million. It also increased its adjusted EBITDA outlook to $590 million to $600 million, up from its prior outlook of $580 million to $600 million.
As of publication time, Choice’s stock price was trading at $138.54 per share, a 21.4% increase year to date. The New York Stock Exchange Composite Index was up 14.4% for the same time period.