ROCKVILLE, MD – November 5, 2021 – Choice Hotels International, Inc. (NYSE: CHH), one of the world’s largest lodging franchisors, today reported its results for the three months ended September 30, 2021.
“Our impressive third quarter results are a testament to the success of our long-term growth strategy and the investments we have made to position us to further increase our share of travel demand and benefit from trends that favor leisure travel, limited-service hotels and longer stay occasions,” said Patrick Pacious, president and chief executive officer, Choice Hotels. “Today, we are in an even stronger position to capitalize on growth opportunities to create added value and drive our performance to new levels in the years to come.”
Highlights of third quarter and year-to-date 2021 results include (note that RevPAR and financial metrics are compared to 20191):
- Domestic systemwide revenue per available room (RevPAR) growth exceeded third quarter guidance and outperformed the total industry by 16 percentage points, increasing 11.4% for third quarter 2021, compared to the same period of 2019. RevPAR growth was driven by an increase in average daily rate (ADR) of 8.8% and a 150-basis-point increase in occupancy levels versus third quarter 2019. These RevPAR trends have continued into the fourth quarter.
- The company’s domestic effective royalty rate for third quarter 2021 increased 8 basis points over the prior year third quarter to 4.99%.
- The company awarded 289 domestic franchise agreements year-to-date through September 30, 2021, a 25% increase compared to the same period of 2020. The company’s domestic franchise agreements for conversion hotels increased by 25% year-to-date through September 30, 2021, compared to the same period of 2020. The company awarded 89 domestic franchise agreements in third quarter 2021, a 10% increase compared to the same period of the prior year.
- Third quarter net income increased 53% to $116.7 million from third quarter 2019, representing diluted earnings per share (EPS) of $2.08.
- Third quarter adjusted net income, excluding certain items described in Exhibit 7, increased 11% to $85.1 million from third quarter 2019, and adjusted diluted EPS were $1.51, an increase of 10% from third quarter 2019.
- Third quarter adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were $133.2 million, a 18% increase from third quarter 2019.
- Adjusted EBITDA margin for third quarter 2021 was 80%, a 650-basis-point increase from third quarter 2019.
- In August 2021, the company’s award-winning loyalty program, Choice Privileges, surpassed 50 million members.
- During the first nine months of 2021, the company returned $22.5 million to shareholders in the form of cash dividends and share repurchases. In October 2021, the company returned an additional $12.5 million to shareholders through cash dividends.
Performance Trends
- Domestic systemwide RevPAR for third quarter 2021 outperformed the respective chain scales in which the company competes by 600 basis points, compared to the same period of 2019.
- Choice Hotels’ overall portfolio achieved RevPAR index gains versus local competitors of 370 basis points for third quarter 2021 compared to the same period of 2019, driven by both ADR and occupancy index gains.
- The company’s extended-stay portfolio achieved domestic systemwide RevPAR growth of 18.2% in third quarter 2021 compared to the same period of 2019, driven by occupancy levels of 82% and a 9% increase in ADR. The WoodSpring Suites brand achieved RevPAR growth of 22.8% in third quarter 2021 compared to the same period of 2019, driven by occupancy levels of nearly 86% and an 11.1% increase in ADR.
- The company’s midscale portfolio achieved domestic systemwide RevPAR growth of 9.7% in third quarter 2021 compared to the same period of 2019, driven primarily by a 9.3% increase in ADR. In third quarter 2021, the Comfort brand family’s domestic systemwide RevPAR change outperformed the upper-midscale chain scale by 730 basis points compared to the same period of 2019, and the Quality Inn brand achieved RevPAR growth of 13.3%, driven predominantly by a 10.4% increase in ADR, compared to the same period of 2019.
- The company’s portfolio continued to achieve domestic systemwide RevPAR share gains versus its competitors for third quarter 2021, compared to third quarter 2019, with the Cambria Hotels brand achieving gains of 12 percentage points. In third quarter 2021, the Ascend Hotel Collection achieved RevPAR growth of 7.9%, driven by a 17.2% increase in ADR, compared to the same period of 2019.
Additional details for the company’s third quarter and year-to-date 2021 results are as follows:
Revenues
- Total revenues increased 4% to $323.4 million for third quarter 2021, compared to the same period of 2019.
- Total revenues excluding marketing and reservation system fees increased 8% to $166.5 million for third quarter 2021, compared to the same period of 2019.
- Third quarter 2021 domestic royalties totaled $123 million, a 14% increase from the same period of 2019.
Development
- The company’s domestic franchise agreements for new construction hotels increased by 52% in third quarter 2021, compared to the same period of 2020.
- As of September 30, 2021, the number of domestic rooms in the company’s upscale portfolio expanded by nearly 22% since September 30, 2020, driven by a 6% increase in room count for the Cambria Hotels brand and a 27% increase in room count for the Ascend Hotel Collection.
- For the first nine months of 2021, the upscale portfolio set a record for the highest number of upscale hotel openings in the company’s history, including 22 properties added as part of the company’s strategic alliance with Penn National Gaming. In September 2021, the company launched a new Cambria hotel prototype designed for secondary and leisure markets to position the brand for continued system growth while maximizing developers’ return on investment.
- The company’s extended-stay portfolio continued its rapid expansion, reaching 467 domestic hotels as of September 30, 2021, an 11% increase since September 30, 2020, with the domestic extended-stay pipeline reaching nearly 310 hotels awaiting conversion, under construction or approved for development. In third quarter 2021, the company’s extended stay domestic franchise agreements increased by 85%, compared to the same period in 2020, and grew by 20%, compared to the same period in 2019.
- The company continued its leadership in the midscale segment by increasing the number of domestic hotels within the Comfort brand family by 2.2% from September 30, 2020. The brand’s domestic franchise agreements for new construction hotels increased three-fold in third quarter 2021, compared to the same period of 2020. For the first nine months of 2021, the Comfort brand family executed the highest number of conversion hotel openings since 2014.
- The number of domestic hotels and rooms, as of September 30, 2021, increased 0.1% and 1.2%, respectively, from September 30, 2020. The company’s domestic upscale, midscale and extended-stay segments reported a 2.0% and 2.6% aggregate increase in units and rooms, respectively, since September 30, 2020.
- The company’s total domestic pipeline of hotels awaiting conversion, under construction or approved for development, as of September 30, 2021, reached nearly 860 hotels representing over 71,000 rooms.
Balance Sheet and Liquidity
The company improved its strong balance sheet and liquidity position in third quarter 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 September 30, 2021, the company’s total available liquidity consisting of cash and available borrowing capacity through the revolving credit facility was over $1 billion. The company generated cash flow from operations of $142.8 million for third quarter 2021, a 53% increase from the same period of 2019.
Shareholder Returns
During the nine months ended September 30, 2021, the company paid cash dividends totaling $12.5 million. Based on the current quarterly dividend rate of $0.225 per share of common stock, the company expects to pay dividends totaling approximately $25 million during 2021.
During the nine months ended September 30, 2021, the company repurchased approximately 0.1 million shares of common stock for $10 million 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 October 31, 2021, the company had 3.4 million shares remaining under the current share repurchase authorization.
In October 2021, the company returned $12.5 million to shareholders in the form of cash dividends.
Outlook
COVID-19 continues to impact the company’s business and the outlook reflects the company’s estimates based on the best information available at this time. The adjusted numbers in the company’s outlook exclude the net surplus or deficit generated from the company’s marketing and reservation system activities, as well as other items. See Exhibit 8 for the calculation of adjusted forecasted results and the reconciliation to the comparable GAAP measures.
- Domestic RevPAR for full-year 2021 is expected to surpass 2019 levels and grow at approximately 1%, as compared to full-year 2019.
- Adjusted EBITDA for full-year 2021 is expected to exceed 2019 levels and range between $382 million and $387 million.
- The company’s outlook for adjusted EBITDA is based on the current number of shares of common stock outstanding and, therefore, does not reflect any subsequent changes that may occur due to new equity grants or further repurchases of common stock under the company’s stock repurchase program.
Conference Call
Choice Hotels International will conduct a conference call on, November 4, 2021, at 8 a.m. Eastern Time to discuss the company’s third quarter 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.
