Choice Hotels International ((CHH)) has held its Q3 earnings call. Read on for the main highlights of the call.
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Choice Hotels International’s recent earnings call painted a picture of robust growth and strategic progress, despite some challenges in specific demand segments. The company reported significant growth in adjusted EBITDA and international expansion, with strong pipeline metrics and business travel revenue gains. However, U.S. RevPAR performance and specific demand segments, such as government and international inbound travel, posed challenges. Overall, the strategic progress and financial results indicate a positive trajectory for Choice Hotels.
Record-Breaking Adjusted EBITDA
Choice Hotels achieved a record third quarter adjusted EBITDA of $190 million, marking a 7% increase year-over-year. This impressive performance underscores the company’s strength across higher revenue segments and international markets, highlighting its ability to capitalize on growth opportunities.
International Growth Surge
The company’s international portfolio expanded by over 8% year-over-year, with international adjusted EBITDA growing by an impressive 35%. A strategic shift saw 40% of its international rooms portfolio transition to a direct franchising model, further strengthening its global presence.
Strong Pipeline and Franchise Growth
Choice Hotels reported a 54% year-over-year increase in global franchise agreements, with nearly 98% of rooms in the pipeline belonging to higher revenue brands. This pipeline is projected to be 1.7 times more accretive than the current portfolio, indicating strong future growth potential.
Business Travel and Group Revenue Growth
Business travel now accounts for 40% of stays, with group revenue rising by 35% year-over-year. Additionally, revenue from small and medium businesses grew by 18%, showcasing the company’s ability to capture diverse revenue streams.
U.S. RevPAR Decline
The company faced a 3.2% year-over-year decline in U.S. RevPAR, primarily due to softer government and international inbound demand. This decline highlights the challenges in specific segments that the company needs to address.
Impact of Higher Amortization and Tax Expenses
Adjusted earnings per share decreased to $2.10 from $2.23, impacted by higher amortization expenses related to the Choice Hotels Canada acquisition and a temporary increase in income tax expenses.
Challenges in Government and International Inbound Demand
Government travel was down by 20% during the quarter, and inbound travel from Canada decreased by 30%, negatively impacting overall RevPAR performance. These challenges underscore the need for strategic adjustments in these areas.
Forward-Looking Guidance
Looking ahead, Choice Hotels raised the midpoint of its full-year earnings outlook, emphasizing a nearly 2.5% year-over-year increase in net global rooms, driven by a 3.5% increase in higher revenue segments. The company is optimistic about future growth, with demand catalysts such as the 2026 World Cup and favorable demographic trends expected to propel its expansion.
In conclusion, Choice Hotels International’s earnings call highlighted a positive trajectory with significant growth in adjusted EBITDA and international expansion. While challenges in U.S. RevPAR and specific demand segments persist, the company’s strategic initiatives and robust pipeline signal promising future growth. Investors and stakeholders can look forward to the company’s continued success as it navigates these challenges.