Choice Hotels It has reduced its revenue projections for this year while highlighting the strength of its economy and extended stay properties.
The hotel franchiser projected on Thursday that revenue per available room in the U.S. would range between a 1 to 2% increase and a 1% decrease, down from their previous forecast.
While mid-market property sales were down in the first quarter of 2018, brands such as Econo Lodge and long-stay options soared.
Patrick Pacious, CEO of the company, attributed the positive performance to low gas prices and infrastructure investments linked to artificial intelligence. However, the company, along with competitors Wyndham Marriott and Hilton, has modestly reduced its growth outlook for the year.
What Was the Strongest?
Hotels with a low cost. Choice’s U.S. Budget Hotel brands have seen a 7.1% increase in RevPAR from last year.
Patrick Pacious, CEO, said that gas prices were low and that consumers are choosing to drive instead of fly. “Our hotels located near highways and 1,500 hotels in national parks do very well.”
Small-business travel and group travel. Pacious stated that “our business travel segment grew by 10% in the first quarter of this year, driven both by group and transient travel for business.” He said that while people may not be booking as far in advance as they used to, they are still traveling.
Extended-stay. RevPAR for the operator’s extended stay brands in the U.S. grew 6.8% year-overyear, including Woodspring Suites. The company’s extended-stay portfolio grew by 19% to 53,000 rooms in the past five years.
Pacious attributed a part of the boom in extended stays to “companies that were involved in the significant infrastructure investments required by GenAI, and the push toward reshoring American manufacturing.”
What Were Weakest?
Brands for the mid-market. RevPAR for the company’s “midscale brands”, which include Quality Inn Sleep Inn and Park Inn only increased by 1.7%.
The Upscale Above. The RevPAR of the company’s most expensive hotels fell 4.3% on an annual basis. Executives said that this performance was due more to unusual changes, such as hotels joining and leaving the system than to a softening of demand. They expected performance to return to normal.
Tariffs Are Not an Issue
Choice’s executives stated that they were not worried about the impact of a trade war on the costs of building and operating hotels. Last week, they said that many vendors were present at their annual tradeshow and the mood was positive.
Pacious noted that many of these companies have taken steps to avoid the impact of tariffs by bringing in their stock earlier. “And secondly many of them have told us that they’ve figured out a way not to pass on those costs to the owners.”
The number that we heard was 10%. This is a very palatable figure for our franchisees, who are looking to develop their business.
Watch out for these Trends
Choice Hotels average higher-income customers. The franchisor could be more resilient than before to the next economic downturn. The multi-year efforts to move the company’s portfolio of hotels to better-branded, higher-end properties and renovated properties were credited by them.
Pacious stated that “we have more guests with higher incomes than before.” “Half of customers now have an annual household income exceeding $100,000. That’s more than 24% above the median national income. Nearly 20% exceed $200,000.”
Baby boomers are a tailwind. The company expects to see a rise in demand from newly retired people.
Pacious stated that “over 4 million Americans are expected to retire this year. They have more leisure time and money to spend on brands such as ours, which offer value for money.”
By 2030, more than half of Americans are expected to be over 65.
Robust Quarter
- Prices and stays both went up. The company’s earnings were boosted by the increase in occupancy of 30 basis points and the 1.7% growth in average daily rates.
- Profitability has risen. Adjusted EBITDA for the first quarter was a company record of $129.6 million, up 4% year-over-year, on net revenue of $209 million. Choice has essentially taken a 5,1% cut from the franchisees rates for rooms.
- Loyalty strengthened. The rewards program of the company has grown to more than 70 million members. This is an increase of 8% from year to year.
Accommodations Stock Index Performance from Year to Date
What am I seeing? The performance and stock prices of the hotels and short term rental sector within the ST200. The index comprises companies listed on global markets including international and local hotel brands, REITs in the hotel industry, hotel management firms, alternative accommodation, timeshares and other hotel companies.
The Skift Travel 200 Combining the financial performance from nearly 200 travel agencies worth more than one trillion dollars in a single number. See more hotels and short-term rental financial sector performance.
Read the full methodology behind the Skift Travel 200.
Early Check-in Stay up-to-date with all the latest hotel news.
Every Thursday, receive it straight to your inbox.
By submitting the form, you consent to receiving email communications from Skift.
