ROCKVILLE, MD – February 17, 2022 – Choice Hotels International, Inc. (NYSE: CHH), one of the world’s largest lodging franchisors, today reported its results for the three months and year ended December 31, 2021.
“The past year was truly remarkable for Choice Hotels, as we have positioned the company to benefit from the acceleration of consumer trends that favor leisure travel, limited-service hotels and longer stay occasions,” said Patrick Pacious, president and chief executive officer, Choice Hotels. “The deliberate investments in our brands and our franchisee pricing optimization and merchandizing tools enabled us to capture more share of consumer demand and emerge as a stronger company than we were two years ago. We believe the foundation we have established for sustained growth, combined with our increased earnings power and strong financial health, will allow us to continue to capitalize on growth opportunities and drive our performance to new levels in the years to come.”
Highlights of fourth quarter and full-year 2021 results include (note that RevPAR and financial metrics are compared to 20191):
- Domestic systemwide revenue per available room (RevPAR) growth increased by 2.2% for full-year 2021, compared to the same period of 2019, exceeding full-year 2021 guidance by 120 basis points and outperforming the total industry by 19 percentage points.
- Fourth quarter domestic systemwide RevPAR growth increased 13.9%, compared to the same period of 2019, driven by an increase in average daily rate (ADR) of 9.5% and a 210-basis-point increase in occupancy levels versus fourth quarter 2019. RevPAR growth surpassed 2019 levels for the last seven months of 2021, a trend that has continued in the first quarter of 2022.
- The company’s domestic effective royalty rate for full-year 2021 increased 7 basis points over the prior year to 5.01% and reached 5.04% during the fourth quarter of 2021.
- The company continues to successfully execute its strategy of growing its more revenue intense brands with new units entering the Choice Hotels’ system in 2021 driving, on average, twice the revenue as units exiting the system.
- The company awarded 528 domestic franchise agreements in 2021, a 24% increase compared to the prior year. Of the total agreements awarded in 2021, 83% were for the company’s upscale, midscale and extended-stay brands. For full-year 2021, the company’s domestic franchise agreements for conversion and new construction hotels increased by 17% and by 39%, respectively, compared to the same period of 2020.
- Net income was $64.1 million for fourth quarter and reached a company record of $289 million for full-year 2021, representing diluted earnings per share (EPS) of $1.14 and $5.15, respectively.
- Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) for full-year 2021 reached a company record of $403.6 million, an 8% increase from the same period of 2019, exceeding the top end of the company’s full-year 2021 guidance by nearly $17 million. Adjusted EBITDA for the fourth quarter was $95.5 million, a 14% increase from the fourth quarter 2019.
- Adjusted EBITDA margin for full-year 2021 reached a company record of 74.7%, a 520-basis-point increase from the same period of 2019.
- Fourth quarter and full-year 2021 adjusted diluted EPS was $0.99 and $4.29, respectively.
- During full-year 2021, the company returned $38.4 million to shareholders in the form of cash dividends and share repurchases and announced a 6% increase in its quarterly dividend rate beginning in January 2022.
RevPAR Performance Trends
- Domestic systemwide RevPAR outperformed the respective chain scales in which the company competes by 680 basis points for full-year 2021, compared to the same period of 2019.
- Choice Hotels’ overall portfolio achieved RevPAR index gains versus local competitors of 450 basis points for full-year 2021, compared to the same period of 2019, driven by both ADR and occupancy index gains. All of the company’s brands achieved RevPAR index share gains versus local competition for full-year 2021, compared to the same period of 2019.
- The company’s overall midscale portfolio has surpassed 2019 RevPAR levels since June 2021 and achieved domestic systemwide RevPAR growth of 12.3% in fourth quarter 2021 compared to the same period of 2019, driven primarily by a 10.1% increase in ADR. In fourth quarter 2021, the Comfort brand family’s domestic systemwide RevPAR growth outperformed the upper-midscale chain scale by 870 basis points compared to the same period of 2019.
- The company’s extended-stay portfolio has consistently exceeded 2019 RevPAR levels since April 2021 and achieved domestic systemwide RevPAR growth of 24.7% in fourth quarter 2021, compared to the same period of 2019. The WoodSpring Suites brand achieved RevPAR growth of nearly 30% in fourth quarter 2021, compared to the same period of 2019, driven by occupancy levels of nearly 79% and a 16.6% increase in ADR.
- The company’s upscale portfolio continued to achieve domestic systemwide RevPAR share gains versus its competitors for full-year 2021, compared to the same period of 2019, with the Cambria Hotels brand achieving gains of over 12 percentage points for full-year 2021.
Additional details for the company’s fourth quarter and full-year 2021 results are as follows:
Revenues
- Total revenues were $1.1 billion for full-year 2021, a 4% decrease compared to the same period of 2019, and $284.6 million in fourth quarter 2021, a 6% increase compared to the same period of 2019.
- Total revenues excluding marketing and reservation system fees increased 1% to $540.5 million for full-year 2021 compared to full-year 2019, and increased 8% to $140.2 million for fourth quarter 2021, compared to the same period of 2019.
- Full-year 2021 domestic royalties totaled $382.4 million, a 4% increase from the same period of 2019, and $93.6 million for fourth quarter 2021, a 14% increase compared to the same period of 2019.
- Procurement services revenues increased 2% to $14.1 million for fourth quarter 2021, compared to the same period of 2019.
Development
- The company awarded 239 domestic franchise agreements in fourth quarter 2021, a 23% increase compared to the same period of the prior year. The company’s domestic franchise agreements for new construction hotels increased by 58% for fourth quarter 2021, compared to the same period of 2020.
- The company’s extended-stay portfolio continued its rapid expansion, reaching 474 domestic hotels as of December 31, 2021, a 6% increase since December 31, 2020, with the domestic pipeline reaching over 340 hotels awaiting conversion, under construction or approved for development. For full-year 2021, the company’s extended stay domestic franchise agreements increased by 27%, compared to the same period in 2020.
- The company continued to grow the number of domestic hotels within the Comfort brand family by 1.2% from December 31, 2020 and executed the highest number of conversion hotel openings since 2013. In the fourth quarter of 2021, the brand’s domestic franchise agreements increased by 25% and doubled for new construction hotels, compared to the same period of 2020.
- As of December 31, 2021, the number of domestic units in the company’s upscale portfolio expanded by 13% since December 31, 2020, driven by an increase in unit count for both the Cambria Hotels brand and Ascend Hotel Collection. This unit growth excludes the impact from the termination of the company’s relationship with AMResorts® following its acquisition and exit from the Ascend Hotel Collection’s portfolio of 17 AMResorts®-branded properties in fourth quarter 2021. For fourth quarter 2021, the company’s upscale domestic franchise agreements increased by 86%, compared to the prior year.
- The number of domestic hotels and rooms, as of December 31, 2021, decreased 0.8% and 1.2%, respectively, from December 31, 2020. Excluding the impact of 17 AMResorts®-branded properties and the company exiting 41 underperforming assets from the portfolio in fourth quarter 2021, the company’s domestic upscale, midscale and extended-stay segments reported a 1.6% increase in units since December 31, 2020.
- The company’s total domestic pipeline of hotels awaiting conversion, under construction or approved for development, as of December 31, 2021, increased 2% to nearly 880 hotels from third quarter 2021, representing over 75,000 rooms.
Balance Sheet and Liquidity
The company further strengthened its liquidity position at year-end 2021 and continues to benefit from its primarily franchise-only business model, which has historically provided a stable earnings stream, low capital expenditure requirements and significant free cash flow. As of December 31, 2021, the company’s total available liquidity consisting of cash and available borrowing capacity through the revolving credit facility nearly doubled to $1.1 billion, compared to December 31, 2019. The company generated cash flow from operations of $383.7 million for full-year 2021 and $138.5 million for fourth quarter 2021, increasing 42% and 74%, respectively, from the same periods of 2019.
Shareholder Returns
During full-year 2021, the company paid cash dividends totaling $25 million. During the fourth quarter of 2021, the company’s board of directors announced a 6% increase to the annual dividend rate to $0.2375 per common share outstanding effective with the dividend payable on January 18, 2022. The company expects to pay dividends totaling $53 million during 2022.
During full-year 2021, the company repurchased $13.4 million of common stock under its stock repurchase program, as well as through repurchases from employees in connection with tax withholding and option exercises relating to awards under the company’s equity incentive plans. As of January 31, 2022, the company had 3.3 million shares remaining under the current share repurchase authorization.
In January 2022, the company returned $17.6 million to shareholders in the form of cash dividends and share repurchases.
Outlook
While the company exceeded pre-COVID-19 levels for RevPAR and adjusted EBITDA for full-year 2021, the continued precise recovery trends for full-year 2022 are still somewhat uncertain.
For full-year 2022, the company expects to drive continued growth in RevPAR and adjusted EBITDA, compared to full-year 2021, including incremental investments that are expected to accelerate long-term growth in 2023 and beyond.
The company’s domestic effective royalty rate is expected to increase in the mid-single digits for full-year 2022, as compared to full-year 2021.
The company’s outlook reflects its estimates based on the best information available at this time.
Conference Call
Choice Hotels International will conduct a conference call on, February 16, 2022, at 11:30 a.m. Eastern Time to discuss the company’s fourth quarter and full-year 2021 earnings results. The dial-in number to listen to the call domestically is (888) 349-0087 and the number for international participants is (412) 317-5259. A live webcast and accompanying materials will also be available on the company’s investor relations website, http://investor.choicehotels.com/ and can be accessed via the Financial Performance and Presentations tab.
View full results here.
