Choice Hotels' Record 2022 Hinged On Moving Upmarket

25.08.2023 - 14:08 / skift.com / Sean Oneill / Patrick Pacious / Hilton Worldwide

Choice Hotels International saw revenue spike in the fourth quarter of 2022 thanks to its August acquistion of the Radisson Hotel Group Americas for $675 million and its strengthened pricing power for room rates.

“Our distinct strategy of growing our brand portfolio with hotels that generate higher royalties per unit is driving impressive results,” said President and CEO Patrick Pacious on Wednesday. “Our portfolio mix is getting stronger.”

The Rockville, Maryland-based hotel operator said that in 2022 it generated a company record net income of $332.2 million on revenue of $1.4 billion, another record.

For full year-2022, Choice Hotels —whose nearly 7,500 hotels primarily span 22 brands, such as its flagship upper midscale brand Comfort and roadside midscale brands like Quality Inn — notched a company record for adjusted earnings before interest, taxes, depreciation, and amortization at $478.6 million — a 23 percent jump compared to 2019, minus the non-comparable contribution from Radisson Hotel Group Americas.

A sign of the value of the Radisson contribution is that, if you had included it, Choice’s adjusted earnings for the quarter would be 28 percent above the 2019 level — meaning Radisson’s brands added five percentage points. Radisson Hotel Group Americas contributed $18.3 million in adjusted earnings on $104 million in revenues for the year.

The vast majority of the acquired Radisson hotels are in the Country Inn & Suites brand, and these roughly 450 hotels are helping to move Choice Hotels International’s portfolio mix upmarket.

Last month, Hilton Worldwide said it would roll out its first brand in the premium economy segment, Spark by Hilton. But Choice Hotels executives responded to analyst questions on Wednesday by saying they weren’t worried.

“We are winning the better-quality hotels that are out there, be that [economy brand] Econo Lodge, be it Quality Inn or any of our midscale brands,” Pacious said.

Owners may be skeptical of new brands, they implied.

“If you’re asking them [owners] to renovate their hotel and put capital into it, they have to be able to see the rate premium that you can drive,” said Dominic Dragisich, chief financial officer. “And in many of these markets, that rate opportunity is limited by the surrounding product.”

Choice Hotels executives said they believe their reliability for partners in helping owners manage a pandemic, a labor crisis, and inflation while driving growth will enable them to win the hotels with the most desirable properties into their system.

Fourth quarter trends show ongoing strength for Choice Hotels, as higher room rates boosted the hotel franchisor.

In the quarter, Choice generated a profit of $55.5 million on revenue of $362 million. Profit