Choice Hotels International, Inc. has reported its second quarter 2024 results.
Highlights
"Choice Hotels generated another quarter of record financial performance amid a normalizing domestic RevPAR environment, demonstrating the strength of our versatile business model and proven growth strategy," said Patrick Pacious, president and chief executive officer. "We increased our global pipeline to new levels propelled by robust demand for our brands, accelerated the velocity of our global hotel openings, expanded our international reach, and significantly grew the size of our rewards program. With our meaningfully enhanced hotel portfolio profile, we are confident in the company's ability to continue to deliver sustained earnings growth, invest in profitable long-term growth initiatives, and return significant capital to shareholders."
Financial Performance
Total revenues excluding reimbursable revenue from franchised and managed properties, calculated as total revenues net of reimbursable revenue of $176.3 million, increased 14 per cent to $258.9 million for The second quarter 2024 compared to the same period of 2023.
Royalty, licensing, and management fees increased 1 per cent to $141.8 million for second quarter 2024 compared to $140.5 million for the same period of 2023.
Second quarter 2024 domestic effective royalty rate increased 5 basis points to 5.04% compared to the same period of 2023.
Domestic revenue per available room (RevPAR) increased 540 basis points sequentially for the three-month period ended June 30, 2024, and decreased 50 basis points compared to the same period of 2023.
Domestic occupancy increased 10 basis points compared to the same period of 2023, representing 96 per cent of 2019 domestic occupancy levels. Domestic RevPAR for the three months ended June 30, 2024 remains 11.0 per cent higher than the same period of 2019.
Development
The company's domestic upscale, extended stay, and midscale portfolio increased 1.0 per cent for hotels and increased 0.7 per cent for rooms since June 30, 2023. The domestic extended stay hotels portfolio grew by 14.0 per cent since June 30, 2023, driven by increases in each of the segment's brands. The company's total domestic system size increased to over 6,200 hotels representing over 494,000 rooms as of June 30, 2024.
The international pipeline for conversion rooms increased by 8 per cent from March 31, 2024, and the company nearly tripled the number of international rooms in the pipeline since June 30, 2023.
The company opened an average of over four domestic hotels per week for a total of 118 domestic hotel openings year-to-date through June 30, 2024, a 10 per cent increase compared to the same period of 2023. Of the domestic franchise agreements executed for conversion hotels over the trailing twelve months ending June 30, 2024, 134 opened in the same year, a 14 per cent increase over the comparable period of the prior year.
Of the total domestic franchise agreements awarded year-to-date through June 30, 2024, 82 per cent were for conversion hotels and 89 per cent were for the company's upscale, extended stay, and midscale brands.
The company's WoodSpring Suites brand grew by 10 per cent to 246 hotels since June 30, 2023, and was ranked number one for the second year in a row in guest satisfaction among economy extended stay hotel brands in the J.D. Power 2024 North America Hotel Guest Satisfaction Index Study.
Source: Choice Hotels International
Balance Sheet and Liquidity
On June 28, 2024, the company amended its revolving credit facility, increasing total commitments from $850 million to $1 billion and extending maturity from 2026 to 2029. On July 2, 2024, the company issued $600 million aggregate principal amount of new 5.85 per cent unsecured senior notes due 2034. The net proceeds from the offering were used to repay the company's $500 million unsecured term loan maturing at the end of 2024 and a portion to repay borrowings under the company's revolving credit facility, reducing the company's effective borrowing costs.
As of June 30, 2024, the company had a total available liquidity of approximately $530 million, including available borrowing capacity and cash and equivalents. In July 2024, the company fully divested the remaining shares owned in Wyndham Hotels and Resorts Inc. for approximately $91 million.
Shareholder Returns
During the six months ended June 30, 2024, the company paid cash dividends totalling $28.9 million.
During the six months ended June 30, 2024, the company repurchased 2.4 million shares of common stock for $296.2 million under its stock repurchase program and through repurchases from employees in connection with tax withholding and option exercises relating to awards under the company's equity incentive plans.
As of June 30, 2024, the company had 4.4 million shares of common stock remaining under the current share repurchase authorization.
Outlook
The company is adjusting its RevPAR outlook to reflect a more moderated domestic RevPAR performance acceleration than previously expected. The outlook information below includes forward-looking non-GAAP financial measures, which management uses in forecasting performance. The adjusted numbers in the company's outlook below exclude the net surplus or deficit generated from reimbursable revenue from franchised and managed properties, due diligence and transition costs, additional repurchases of company stock, and other items:
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