Choice Hotels International, Inc. (NYSE: CHH) today provided an update on its business, including the rapid integration of the Radisson Hotels Americas portfolio into its franchisee success system.
Key updates include:
Distinct Growth Strategy Strengthens Choice Hotels' Competitive Position
- The company continues to successfully execute its strategy of expanding the reach of its franchise business in more revenue intense segments in 2023, with new hotels added within a brand generating, on a comparable basis, an average of 20% higher royalty revenue than hotels exiting the brand.
- In 2024, the company expects to generate more than 10% adjusted EBITDA growth at the midpoint, year-over-year, driven by approximately $20 million in incremental contribution from Radisson Hotels Americas as well as organic growth in more revenue intense segments and markets, strong effective royalty rate growth, and other factors.
Strong Openings Momentum
- The company executed an average of more than four hotel openings per week, for a total of 107 hotel openings year-to-date through June 30, 2023, a 39% increase compared to the same period of 2022. This growth was driven by an increase in conversion hotel openings of 45% and a 24% increase in new construction hotel openings.
- For the first half of 2023, the company grew hotel openings across all segments, year-over-year, increasing openings in the upscale segment by 83%, the midscale segment by 42%, the extended stay segment by 50%, and the economy segment by 11%.
- During the month of May, the company executed the highest number of hotel openings within the extended stay segment since 2020, including a record number of hotels opened for the WoodSpring Suites brand in a single month. The company remains optimistic about extended stay franchise business growth and expects the number of its extended stay units to increase at an average annual growth rate of more than 15% over the next five years.
Radisson Hotels Americas Integration Delivers Meaningful Synergies Ahead of Schedule, with More Opportunities on the Horizon
- Due to the company's integration expertise and its strategic investments in state-of-the-art technologies, Choice Hotels has achieved approximately $80 million of annual recurring synergies, exceeding the company's original synergy target. The company anticipates unlocking additional cost and revenue opportunities for future synergies.
- Choice Hotels, its guests, and its franchisees across the entire portfolio of brands are already reaping substantial benefits from the integration. The company is ahead of its schedule to complete key integration milestones, including onboarding the nearly 600 Radisson Americas hotels onto its world-class reservation delivery engine and merging the two award-winning loyalty programs by the end of the third quarter – within just a year of the acquisition. Complete integration by the end of 2023 is expected to help further drive the Radisson Hotels Americas franchisees' topline performance and profitability.
- The company drove a turnaround of Radisson Hotels Americas' results in 2022 and remains ahead of schedule in delivering expected Radisson Hotels Americas adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) contribution of over $60 million in 2023, which is expected to grow to over $80 million in 2024.
Strong Share Repurchase Activity
During the six months ended June 30, 2023, the company repurchased approximately 1.8 million shares of common stock for over $220 million under its stock repurchase program. As of June 30, 2023, the company had 2.8 million shares of common stock remaining under the current share repurchase authorization.
Outlook
The company is reaffirming its previously provided financial guidance for full-year 2023.
The outlook information provided below is inclusive of the Radisson Hotels Americas acquisition and includes forward-looking non-GAAP financial measures, which management uses in measuring 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, and other items:
| Full-Year 2023 | Prior Outlook | |
| Net Income | $255 – $265 million | $255 – $265 million |
| Adjusted Net Income | $292 – $302 million | $292 – $302 million |
| Adjusted EBITDA | $525 – $540 million | $525 – $540 million |
| Adjusted Diluted EPS | $5.70 – $5.90 | $5.70 – $5.90 |
| Effective Income Tax Rate | 24 % | 24 % |
In 2024, the company expects to generate more than 10% adjusted EBITDA growth at the midpoint, year-over-year, driven by approximately $20 million in incremental contribution from Radisson Hotels Americas as well as organic growth in more revenue intense segments and markets, strong effective royalty rate growth, and other factors.
| CHOICE HOTELS INTERNATIONAL, INC. AND SUBSIDIARIES | Exhibit 1 | ||||||
| SUPPLEMENTAL INFORMATION - 2023 OUTLOOK | |||||||
| (UNAUDITED) | |||||||
| Guidance represents the midpoint of the company's range of estimated outcomes for the year ended December 31, 2023 | |||||||
| ADJUSTED EBITDA FULL YEAR FORECAST | |||||||
| (dollar amounts in thousands) | Midpoint | ||||||
| 2023 Guidance | |||||||
| Net income | $ 261,700 | ||||||
| Income tax expense | 82,700 | ||||||
| Interest expense | 66,900 | ||||||
| Interest income | (5,600) | ||||||
| Other gain | (1,300) | ||||||
| Equity in operating net gain of affiliates | (800) | ||||||
| Depreciation and amortization | 50,900 | ||||||
| Mark to market adjustments on non-qualified retirement plan investments | 1,800 | ||||||
| Operational restructuring, due diligence and transition costs | 39,600 | ||||||
| Share-based compensation | 18,000 | ||||||
| Franchise agreement acquisition costs amortization | 10,800 | ||||||
| Net reimbursable deficit from franchised and managed properties | 7,800 | ||||||
| Adjusted EBITDA | $532,500 | ||||||
| ADJUSTED NET INCOME & DILUTED EARNINGS PER SHARE (EPS) FULL YEAR FORECAST | |||||||
| (dollar amounts in thousands, except per share amounts) | Midpoint | ||||||
| 2023 Guidance | |||||||
| Net income | $ 261,700 | ||||||
| Adjustments: | |||||||
| Operational restructuring, due diligence and transition costs | 29,400 | ||||||
| Net reimbursable deficit from franchised and managed properties | 5,900 | ||||||
| Adjusted Net Income | $297,000 | ||||||
| Diluted Earnings Per Share | $ 5.10 | ||||||
| Adjustments: | |||||||
| Operational restructuring, due diligence and transition costs | 0.58 | ||||||
| Net reimbursable deficit from franchised and managed properties | 0.12 | ||||||
| Adjusted Diluted Earnings Per Share (EPS) | $ 5.80 | ||||||
SOURCE Choice Hotels International, Inc.