Choice Hotels International reports record‑breaking third quarter, raises guidance for 2024

Financial milestones

Choice Hotels reported total revenues of $428 million for the third quarter, marking a 1 per cent year-over-year increase and setting a quarterly record. Net income surged by 15 per cent, reaching $105.7 million, with diluted EPS increasing by 23 per cent to $2.22. The company also reported an adjusted net income of $106.2 million and an adjusted diluted EPS of $2.23, reflecting similar growth rates and setting new quarterly records.

The company’s adjusted EBITDA rose by 14 per cent to $177.6 million, bolstered by strong domestic and international performance. Choice Hotels’ global pipeline expanded to over 110,000 rooms, an 11 per cent increase from the previous year, driven in part by a 54 per cent rise in conversion rooms.

“We accelerated our unit growth, increased our global pipeline to new levels, expanded our international reach, and significantly grew the size of our rewards program,” says Patrick Pacious, president and CEO of Choice Hotels International. ​“The positive momentum we have created and the strength of our versatile business model bolsters our ability to continue to deliver sustained top-line and earnings growth while returning significant capital to shareholders.”

Expanding portfolio and market reach

Choice Hotels has continued to grow its footprint with a 3.8 per cent increase in the number of rooms in its international portfolio as of September 30, 2024. The number of international hotel openings tripled during this period compared to the same quarter in 2023. Domestically, the company’s upscale, extended stay and midscale rooms portfolio rose by 1.8 per cent since September 30, 2023.

Key highlights in development include the company’s 11.2 per cent increase in domestic extended-stay hotels, a result of growth across multiple brands. Domestic hotel openings reached 190 year-to-date through September 30, 2024, a 19 per cent rise over the prior year. Conversion hotels have been a strong contributor to growth, with 141 of the domestic franchise agreements signed in the last twelve months translating into openings within the same year.

Strong balance sheet and liquidity

As of September 30, 2024, Choice Hotels had total liquidity of $675.6 million, including borrowing capacity and cash equivalents. The company reported cash flow from operating activities of $122.9 million and $236.5 million for the three- and nine months ending September 30, respectively.

Shareholder returns and stock repurchase program

In the first nine months of 2024, Choice Hotels repurchased 2.9 million shares of common stock for a total of $352.9 million, representing over 6 per cent of the company’s market capitalization at the beginning of the year. This repurchase activity is part of the company’s broader commitment to shareholder returns, which also included $42.5 million in cash dividends. The company still has 4 million shares remaining under its current repurchase authorization.

Outlook for 2024

Choice Hotels has raised the midpoint of its guidance for full-year 2024, citing confidence in its growth strategy and business performance. The company expects to continue its trajectory of growth in net income, adjusted EBITDA, and diluted EPS. These projections exclude reimbursable revenue from franchised and managed properties, as well as other non-recurring items.