STR: Choice Hotels eyes global growth as it completes Radisson Americas integration

Pat Pacious, president and CEO said during Choice’s second-quarter earnings call that the company has room to grow in the upscale extended-stay and upper-upscale segments in the U.S. On the international front, Pacious said there’s ​“a lot of potential opportunities.”

“We’re always looking for [mergers and acquisitions] that fit the two litmus tests that we talked about: improving the [return on investment] for the owners and growing the brands for the shareholders,” he said. ​“As we look forward, there’s still some white space in our portfolio.”

Choice broke quarterly records for total revenue and adjusted earnings before interest, taxes, depreciation and amortization in the second quarter of 2023. Pacious said this is due in part to the continuing integration of the Radisson America’s portfolio and the company’s conversion capabilities. Pacious said Choice has completed some key Radisson integration milestones, including onboarding the Radisson Americas hotels onto its reservations delivery engine and integrating the loyalty programs.

Choice achieved $80 million in annual recurring synergies due to the company’s integration of Radisson properties. Pacious said Radisson Americas’ adjusted earnings before interest, taxes, depreciation and amortization is projected to be more than $80 million next year.

“The speed with which we have integrated Radisson Americas is truly remarkable, and our ability to rapidly drive synergies and quickly integrate brands is key to our long-term success,” he said. ​“As a result of our speed of execution, our guests and franchisees across the entire portfolio of brands are already reaping substantial benefits from the integration.”

Choice’s upscale, extended-stay and midscale segments grew 10 per cent in hotels and 11.7 per cent in rooms since the end of the second quarter of 2022. The company’s domestic hotels and rooms increased 6.9 per cent and 8.8 per cent, respectively, over the past year, and its international hotels and rooms increased 9 per cent and 11.8 per cent, respectively, over the same time frame.

The company’s pipeline is also growing both domestically and internationally. Dom Dragisich, chief financial officer said the company’s domestic pipeline grew 9 per cent year over year in the second quarter, while its international pipeline grew 29 per cent. Pacious said international revenue per available room exceeded expectations in the second quarter, up 16 per cent compared to 2019 levels.

Given the high cost of new builds in the current lending and interest rate environment, Pacious said Choice is ​“uniquely positioned to capitalize on” conversion opportunities in its platform. The company had a 28 per cent increase in its domestic rooms pipeline for conversion hotels, and it plans to open more than 60 conversion properties in the next three months.

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