Choice Hotels Propelled by Guests Blending Business and Leisure

Choice Hotels has been defying gravity. While the U.S. economy has been clouded by gloom, the Rockville, Maryland-based hotel operator has enjoyed bookings above pre-pandemic levels. Many travelers are extending their business trips with leisure stays, boosting occupancy.

“Remote work, which affords people of all ages greater flexibility as to when, where, and for how long they travel will also continue to fuel the strong performance of our brands,” said CEO and president Patrick Pacious during an earnings call on Tuesday.

Despite the historically softer first quarter for leisure travel, guests extended their trips into shoulder days of the weekend more than they did pre-pandemic. Choice Hotels had nearly 2 percentage points of occupancy growth on Thursdays and Sundays compared to 2019.

The company — which runs brands such as Comfort and Quality Inn — said it expected the trend of leisure travel demand to spread more evenly throughout the months of the year and into weekend shoulder days throughout the year.

The company didn’t give performance details for April.

“The entire industry saw a much softer April,” said Dominic Dragisich, chief financial officer. “A lot of it was due to some of the calendar shifts. It’s really difficult to look at one month in isolation.”

Dragisich responded to an analyst question by suggesting the April performance might have come in at a rough range of about 1 percent to 2 percent above 2019 last year’s levels in average revenue per available room, a key industry metric

“As consumers prioritize travel, we believe our business will experience outsized benefits from additional travel demand to our segments and locations,” Pacious said.

In the first quarter, Choice Hotels generated a net income of $52.8 million on revenue of $175 million, excluding reimbursable revenue from franchised and managed properties. It raised its guidance for 2023 net income, forecasting a range of between $245 million and $265 million.

In the quarter Choice Hotels produced an average of $48 a night for systemwide revenue per available room.

Profit was down primarily because of rising operating expenses — including inflation and costs from the transaction and restructuring. The company’s operating expenses were 61 percent higher, year-over-year, at $254 million.

Choice Hotels notched a quarterly company record for adjusted earnings before interest, taxes, depreciation, and amortization at $106 million.

Choice Hotels said that the properties in its recently acquired Radisson Hotel Group Americas portfolio had been performing better than expected and increased their 2024 forecast for that group’s contribution to the group’s bottom line. Most of the acquired Radisson hotels are in the Country Inn & Suites brand.

Last month Choice Hotels debuted a co-branded credit card with Wells Fargo and Mastercard, giving members of its loyalty program a refreshed way to earn reward nights and other benefits.

The extended stay sector is a hot topic for Choice Hotels just as it has been for other hotel companies in the past few months.

Executives said they had further invested in its extended stay franchise business, partly by expanding its U.S. pipeline of extended-stay hotels to 475 — a 28 percent jump year-over-year.

“We expect the number of our extended stay units to increase at an average annual growth rate of more than 15 percent over the next 5 years,” Pacious said. Confidence in extended-stay hotels is partly based on a belief that blended travel patterns will linger for some time.

For context, see Skift’s megatrend “Blended Travel Comes of Age” and our explainer this month on why extended-stay hotels aren’t in a hype cycle.

CORRECTION: The chief financial officer’s remarks on April performance have been corrected after being misheard.