Choice Hotels International is strategically shifting its focus towards higher-end and extended-stay hotels as it aims to grow beyond its traditional roadside motel brand. The company’s executives have outlined a strategy targeting urban markets and longer-term stays to increase revenue and capture higher-spending travelers. By shifting to more “revenue-intense” properties, Choice Hotels is looking to move away from its reputation as a mid-tier roadside motel brand and adopt more efficient operational models.
The company is betting big on its upmarket shift, with future properties expected to have 30% higher revenue-per-available room potential, 40% more rooms per hotel, and higher royalty rates from franchisees. This strategy has resonated with hotel developers, as Choice Hotels’ global pipeline has grown by 11% from the previous year, with 99% of rooms in development falling under its more revenue-intensive brands. Choice Hotels attributes this growth to its proven prototype and operating model.
Key trends benefiting Choice Hotels include a focus on extended-stay properties, with the company planning to grow this segment by over 10% year-over-year for five consecutive quarters. Business travel is also showing signs of recovery, particularly in the transportation and government sectors. Infrastructure spending, live tourism, demographic tailwinds, strength in road trips, and American interest in travel abroad are all contributing to Choice Hotels’ growth and expansion.
In the third quarter, Choice Hotels reported a net income of $105.7 million, up 15% year-over-year, and adjusted EBITDA of $177.6 million, up 14% year-over-year, marking a quarterly record. The company also raised its full-year outlook for 2024, implying 10% growth in EBITDA at the midpoint. Despite a slight decline in domestic revenue per available room, Choice Hotels’ growth strategy and international expansion have offset domestic headwinds.
Choice Hotels is expanding internationally, particularly in Europe, where it recently signed its first direct franchising agreement in Spain and added 2,000 rooms in France. The company’s ancillary revenue, including from co-branded credit cards, more than doubled year-over-year in the third quarter. Overall, Choice Hotels’ strategic shift towards higher-end and extended-stay properties, combined with key industry trends and financial performance, is positioning the company for growth and success in the evolving travel landscape.
