Choice Hotels International ((CHH)) has held its Q4 earnings call. Read on for the main highlights of the call.
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Choice Hotels International’s recent earnings call reflected a strong financial performance, characterized by notable growth across key segments such as global rooms, business travel, and international presence. Despite these achievements, there are existing challenges in the hotel development environment that may dampen the overall enthusiasm, with limited expectations for net unit growth.
Strong Financial Performance
Choice Hotels exceeded expectations with a 12% year-over-year increase in adjusted EBITDA and a 13% increase in adjusted earnings per share for 2024. This financial upsurge underscores the company’s robust performance and its ability to navigate a complex market environment effectively.
Significant Growth in Global Rooms
The company reported a 3.3% year-over-year net increase in global rooms, with domestic rooms experiencing a 4.3% net increase. Furthermore, Choice Hotels opened 21% more hotels worldwide in 2024 compared to the previous year, highlighting its aggressive expansion strategy.
Robust Business Travel and Group Segment Growth
Business travel showed significant momentum, with the business transient segment growing 14% year-over-year in the fourth quarter. Additionally, the group travel business experienced a remarkable 45% increase in revenue from group accounts, indicating a strong recovery in these segments.
Expansion in Extended Stay and Upscale Segments
The company expanded its portfolio by adding more than 4,500 extended stay rooms in 2024. The upscale segment also saw a substantial 44% increase year-over-year, reflecting Choice Hotels’ strategic focus on diversifying its offerings.
Increased International Presence
Choice Hotels made significant strides internationally, increasing its rooms portfolio by 4.4% year-over-year and achieving a 58% increase in hotel openings. This expansion underscores the company’s commitment to strengthening its global footprint.
Challenging Hotel Development Environment
Despite an 8% year-over-year rise in new construction hotels opened, Choice Hotels faced challenges due to high interest rates and construction costs, which have complicated the hotel development environment.
Limited Net Unit Growth Outlook
For 2025, the company projects a modest 1% year-over-year growth in net global unit and room system size. This outlook reflects ongoing challenges in the hotel development sector that could impact future expansion.
Reimbursable Revenue Deficit
Choice Hotels operated its reimbursable revenue activities at an $18 million deficit for 2024, with expectations to increase this deficit to $50 million in 2025, reflecting the cost pressures the company faces.
Forward-Looking Guidance
Looking ahead to 2025, Choice Hotels anticipates adjusted EBITDA to range between $625 million and $640 million, with adjusted diluted earnings per share projected to be between $6.98 and $7.24. The company expects a 1% year-over-year growth in global unit and room system size and a 1% to 2% increase in domestic RevPAR, maintaining a cautious but optimistic outlook.
In summary, Choice Hotels International has demonstrated strong financial performance and significant growth in several key areas. However, challenges in the hotel development environment and limited expectations for net unit growth highlight areas of concern moving forward. The company’s forward guidance suggests cautious optimism as it navigates these challenges, with a focus on sustaining its growth trajectory.
