Choice Hotels reported record 2Q24 revenues & EBITDA amid a normalizing domestic RevPAR (revenue per available room) environment. A moderated FY24 outlook reflects that the company’s domestic 2H RevPAR performance should maintain pace with 1H (although exceeding 2019 levels by 10% at the midpoint of its guidance). In any case, management reports that long-term business & leisure trends remain favorable and also that construction costs are starting to normalize.
Revenue Trends
- 2Q24 adjusted revenues (excluding reimbursable revenue from franchised & managed properties) increased +14% y/y.
- A -50 bps y/y RevPAR (revenue per available room) decline reflected a +10 bps y/y increase in occupancy levels offset by a -60 bps y/y decline in average daily rates. RevPAR was up +11% vs. 2Q19.
- Upscale portfolio outperformance was led by its Radisson brand.
- 5 years ago, the company embarked on a unit growth strategy to enhance its franchise business with more revenue-intense hotels (upscale, extended-stay & mid-scale) & subsequently increased its mix of higher revenue-generating hotels by +6% to 87%.
Margin Trends
- 2Q24 adjusted EBITDA increased +6% y/y to a record $161.7MM.
- FY24 adjusted EBITDA guidance: +9% at midpoint, reflecting disciplined discretionary investment spend & ancillary revenue strength (including loyalty).
Outlook
- FY24 RevPAR guidance was lowered to -1.5 to -3.5% y/y, reflecting the recent normalizing trend in domestic travel.
- 2Q global room pipeline increased +22% y/y, highlighted by a doubling of the global pipeline for conversion rooms. Domestic rooms pipeline increased +11% y/y, including a +65% increase for conversion rooms.
