Choice Hotels Defends Pipeline as it Pushes Wyndham Bid
07.11.2023 - 20:23
/ Sean Oneill
/ Patrick Pacious
Choice Hotels International said the organic growth of its development pipeline is healthy despite claims it has recently relied on growth by acquisitions instead.
“Through our superior speed-to-market conversion processes and best-in-class franchisee support, we are able to move projects quickly through the pipeline,” said president and CEO Patrick Pacious during an earnings call on Tuesday.
Choice said its legacy brands in the U.S. that were upscale, extended-stay, and midscale expanded in room count by 1.9%. That figure excluded its economy brands and brands from its recent acquisition of Radisson Americas — which together make up roughly half of its portfolio by property count.
Choice Hotels also said it had opened the prototype for its flagship midscale Comfort brand last month, with 136 projects in the pipeline.
Yet some analysts are looking closely at the larger patterns.
“Choice-legacy room count has negative to modest footprint growth,” said Joseph Greff, lead hospitality analyst at J.P. Morgan, in a report before the earnings call. “Its closest comparable, Wyndham, has positive net footprint growth of about 4% year-over-year.”
Choice last month made a hostile takeover bid of Wyndham, which led to carping by Wyndham executives — who last week critiqued Choice Hotels’s performance.
“Choice has used M&A [mergers and acquisitions] to mask its lack of organic growth through the $675 million acquisition of the rights to use the Radisson brand in the Americas, which has accounted for the entirety of their reported system growth since the transaction closed of August of 2022,” said Wyndham CEO Geoffrey Ballotti on an earnings call.
Choice Hotels had two years of negative organic growth in its hotel pipeline for its legacy (non-Radisson) brands.
Choice’s pipeline slowdown appeared to be a partial drag on revenue per available room.
Its domestic revenue per available room rose 1.4% for the first nine months of 2023. But in the third quarter, its domestic revenue per available room was only $64, down 0.8% from a year earlier.
Choice’s growth in revenue per available room has lagged U.S. hotel group rivals.
Choice Hotels executives highlighted a few reasons for optimism about its hotel development pipeline.
“We are also executing new hotel openings at an impressive pace,” Pacious said. “Through September, we averaged more than four openings per week.”
The group’s international pipeline, including Radisson’s brands, nearly doubled in the third quarter. Globally, it said its rooms pipeline growth for conversion hotels was up 11%.
Domestically, it predicted nearly 70 additional domestic conversion projects would open by year’s end. These would primarily be hotels that tend to deliver higher revenue per