Adjusted EBITDA: Increased 4% year-over-year to $129.6 million. Adjusted Earnings Per Share: Increased 5% year-over-year to $1.34. Global Rooms Growth: Increased 3.9% year-over-year. Domestic RevPAR: Increased 2.3% year-over-year. Extended-Stay Portfolio Growth: Increased 19% over past years to approximately 53,000 rooms. Extended-Stay RevPAR Growth: Increased 6.8% year-over-year. Effective Royalty Rate: Increased 8 basis points year-over-year. Partnership Services and Fees Revenue: Increased 28% year-over-year. Adjusted Free Cash Flow: Increased 30% year-over-year to $36 million. Shareholder Returns: $115 million returned, including $27 million in dividends and $88 million in share repurchases. Total Available Liquidity: $594 million as of March 31, 2025. Full Year 2025 Adjusted EBITDA Guidance: $615 million to $635 million. Full Year 2025 Adjusted EPS Guidance: $6.90 to $7.22.

Warning! GuruFocus has detected 8 Warning Signs with BN.

Release Date: May 08, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Choice Hotels International Inc (NYSE:CHH) reported a 4% year-over-year increase in adjusted EBITDA and a 5% increase in adjusted earnings per share for the first quarter of 2025. The company achieved a 3% year-over-year net increase in global rooms, with a 4% net increase in more revenue-intense rooms. Business travel segment grew 10% year-over-year, driven by both group and business transient travel. The company's extended-stay portfolio increased by 19% over the past years, representing half of the total domestic rooms pipeline. Choice Hotels International Inc (NYSE:CHH) expanded its rewards program to over 70 million members, an 8% year-over-year increase, enhancing customer loyalty and direct bookings.

Negative Points

The company adjusted its full-year 2025 outlook due to a more uncertain macroeconomic backdrop, impacting the lodging industry. Domestic RevPAR expectations were revised to a range of negative 1% to positive 1%, reflecting recent trends and macroeconomic uncertainty. The pipeline of rooms has ticked down each quarter for the last four quarters, raising concerns about future unit growth. April RevPAR performance was down approximately 1% year-over-year when normalizing for the Easter shift and eclipse-related travel impacts. The upscale segment showed a decline due to a few properties leaving and newer properties ramping, affecting RevPAR results.

Q & A Highlights

Q: How is Choice Hotels positioned in the current macroeconomic environment, especially with the observed softness in leisure and lower-end chain scales? A: Patrick Pacious, CEO, highlighted that Choice Hotels is well-positioned due to its diversified consumer base, which includes higher-income consumers and a balanced mix of business and leisure travelers. The company is gaining market share, particularly in the economy and extended-stay segments, and is optimistic about its brand positioning and consumer resilience.

Story Continues

Q: What are the expectations for net unit growth for the remainder of the year, excluding the impact of Westgate? A: Patrick Pacious, CEO, expressed confidence in achieving about 1% worldwide rooms growth, driven by international expansion and the company's competency in hotel conversions. The focus is on the velocity of moving projects from the pipeline into the system, with a significant portion of openings coming from conversions.

Q: Can you explain the components contributing to EBITDA growth despite a flat RevPAR environment? A: Scott Oaksmith, CFO, explained that domestic royalty rate growth is expected to contribute 1% to 2% growth to EBITDA, with partnership services and fees adding about 2% growth. The international business and owned hotel portfolio are expected to add about 1% growth, slightly offset by small increases in SG&A.

Q: What feedback did you receive from franchisees at the recent convention regarding development and market conditions? A: Patrick Pacious, CEO, noted that franchisees were optimistic, with hotels performing better than peers due to investments in loyalty programs and revenue optimization. Extended-stay remains a sought-after segment, and Choice's strong brand awareness attracts more hotels during uncertain times.

Q: How does the company view international expansion opportunities, and what strategies are in place? A: Patrick Pacious, CEO, highlighted international growth as a key focus, with significant opportunities in the Caribbean, Latin America, and Canada. The Radisson acquisition has enhanced brand awareness and interest, and the company sees potential for extended-stay growth in these regions.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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