Choice Hotels: 'Normalization' in U.S., Maintains Profit Forecast

08.08.2024 - 22:09 / skift.com / Sean Oneill / Patrick Pacious

Choice Hotels reported a softening in domestic revenue per available room in the second quarter – a trend other hotel companies have also noted in recent weeks. But Choice said some of the weakness was offset by demand for its extended-stay brands in the U.S. and upscale brands overseas.

Choice Hotels lowered its full-year 2024 revenue per available room [RevPAR] growth outlook to a range of -3.5% to -1.5% — down from its previous forecast of flat to 2% growth.

Patrick Pacious, Choice’s president and CEO, pointed to a “normalization” after the post-pandemic boom. However, the company maintained its adjusted EBITDA guidance range of $580 million to $600 million for the full year.

Choice Hotels executives spoke optimistically about next year’s potential during an earnings call Thursday.

“We did see in the U.S GDP growth last quarter and that generally translates into a positive RevPAR [revenue per available room] environment,” said Pacious.

“The really positive news in [the U.S. jobs report last week] was that labor force participation rate went up. When consumers have a job, they tend to have more confidence to travel. Labor force participation rate is one of the most highly correlated factors we look at.”

Choice’s second-quarter revenue per available room was below the 2.2% year-over-year increase that all U.S. hotels on average saw, according to CBRE Research.

That difference between Choice’s performance versus the national average illustrated a “wealth gap” in hotel demand. Choice Hotels brands are heavily weighted in the U.S. to more economy and premium economy brands, which have seen weaker demand from pinched middle-class consumers.

Yet Choice Hotels still sees overall strength relative to how it was doing before the pandemic. Its second-quarter revenue per available room performance was 11% higher than pre-pandemic.

“As the travel trends normalize when compared to 2019 levels, we expect our domestic RevPAR performance for the second half of the year to maintain the pace with the first six months of the year and exceed 2019 levels by approximately 10 percentage points at the midpoint of our guidance,” Pacious said.

The company’s focus on upscale and extended-stay properties appears to be paying off, with domestic franchise agreements for these segments increasing 8% year-to-date.

The WoodSpring Suites brand, in particular, saw a 10% growth in unit count to 246 hotels. “The WoodSpring Suites brand represents over two-thirds of all the rooms under construction in the economy extended stay segment,” Pacious said.

The hotel franchisor’s newest extended-stay brand, Everhome Suites, has four hotels now open and 65 domestic projects in the pipeline.

International expansion is also gaining momentum,