Choice Hotels International completed its acquisition of Radisson Hotels Americas in the third quarter and executives at the brand believe the deal is a "significant leap forward" for the company.
“Our impressive results and outlook clearly demonstrate that we are in a stronger position than ever,” President and CEO Pat Pacious said during the company’s third-quarter earnings call.
Choice’s full-year 2022 adjusted earnings before interest, taxes, depreciation and amortization is projected to grow 15% and 25% compared to full-year 2021 and 2019, respectively.
The addition of the Radisson brands will drive an incremental $80 million in recurring EBITDA upon its full integration in 2024, Pacious said.
Chief Financial Officer Dominic Dragisich said that value has to do with how well the Radisson portfolio meshes with Choice.
“A lot of that has to do with the revenue synergies being much stronger than expected,” Dragisich said. “I would argue that $80 million certainly has some upside as we continue to unlock some of this value associated with the acquisition.”
Pacious said Choice is hoping to complete its technology integration of Radisson — a single reservation system, website and call center provider — by the second half of 2023. Choice has already begun to make investments in its website, which will lead to some RevPAR increases before the full integration.
“There are things they were doing that are better than what we were doing at Choice, so this isn’t all [to] put everything on the Choice system. The combined platform going forward is going to be really inclusive of what we were doing great and what they were doing great,” he said.
Business and Leisure Travel
Pacious said the company’s goal in the third quarter wasn’t to simply meet pre-pandemic levels but to build on growth in RevPAR-accretive segments and locations.
“We have built on that strength throughout the third quarter and are confident that the changes we are observing in leisure and business travel behavior, that favor our brands, will enable us to maximize growth opportunities well into the future,” he said.
Choice’s domestic revenue per available room growth has outperformed 2019 levels for 16 consecutive months and the hotel industry for 11 consecutive months, according to the company's earnings release.
The company’s continued growth in RevPAR can be attributed to its focus on remote work, retirements, road trips, rising wages and "reshoring" of American manufacturing, Pacious said. He added Choice expects business travel to increase due to more of the U.S. supply chain moving domestically and the nationwide investment from the infrastructure bill.
“The time of year and the time of week that people are now able to travel post-pandemic, these changing travel behaviors are really going to provide a significant tailwind for our business,” he said.
Openings, Closings and Transactions
In the third quarter, Choice opened five properties across four brands, including:
- Two Cambria Hotels in the Cambria Hotel New Haven University District and the Cambria Hotel Denver International Airport.
- The inaugural Everhome Suites hotel in the Everhome Suites Corona.
- The largest MainStay Suites property in the MainStay Suites Orange County John Wayne Airport.
- The 50th Clarion Pointe property in the Clarion Pointe On The Lake Clarksville-South Hill West.
The company acquired Radisson Hotels Americas in August for $674 million. The deal added more than 73,000 rooms across Choice’s global portfolio, including more than 53,000 domestic rooms.
Not including the Radisson addition, Choice’s domestic hotel portfolio grew 5.4% compared to the third quarter 2021. Its total domestic rooms increased 5.5% compared to the same period.
Despite the overall growth in hotels and rooms, five of Choice’s brands — Quality Inn, Econo Lodge, Rodeway Inn, WoodSpring Suites and Ascend Hotel Collection — were in the negatives in terms of open hotels compared to this time last year. Pacious said this won’t be a long-term trend moving forward.
“There were hotels within the existing unit count that were already transitioning out, so we were aware of that,” Pacious said. “We do expect to get these brands back into a growth mode.”
Choice sold its Cambria Hotel Nashville Downtown in July for $109.5 million to an undisclosed buyer. It secured a 30-year agreement for the new owner to continue to operate the property as a Cambria Hotel.
In September, Choice announced it signed an agreement in July with Colorado-based real estate investment firm ServiceStar Capital Management to develop 21 Everhome Suites hotels.
By the Numbers
According to Choice’s third-quarter earnings release, the company’s portfolio achieved a revenue per available room of $63.45, a 15.2% increase over the third quarter of 2019. Its average daily rate was $100.07, a 15.1% increase over 2019 levels, and occupancy was 63.4%, breaking even with the same quarter in 2019.
Choice’s adjusted earnings before interest, taxes, depreciation and amortization was $139.4 million for third quarter 2022, representing a 4.4% increase from the same time period in 2021.
The company expects its full-year 2022 EBITDA to range between $465 million to $470 million, which would be a 15% to 17% growth compared to full-year 2021, Dragisich said.
The company’s net income of $103.1 million in the third quarter was a 12% decrease from the third quarter of 2021.
As of press time, Choice’s stock price was trading at $117.44 per share, down 23.7% year to date. The New York Stock Exchange Composite Index was down 14.5% for the same time period.