ROCKVILLE, Maryland—Choice Hotels International, Inc. reported its first quarter 2023 results.
Total revenues reached $332.8 million for the first quarter of 2023, a first-quarter record and a 29 percent increase compared to the same period of 2022.
Net income exceeded the top end of the company’s guidance and reached $52.8 million for the first quarter of 2023, representing diluted earnings per share (EPS) of $1.02. As a result of one-time items, including Radisson Hotels Americas integration costs, and the timing of net reimbursable expenses, net income, and diluted EPS were 22 percent and 15 percent lower respectively for the first quarter of 2023, compared to the same period of 2022.
The first quarter of 2023 adjusted net income, excluding certain items, reached a first-quarter record of $58.2 million, and the company’s adjusted diluted EPS increased 9 percent to a first-quarter record of $1.12, compared to the same period of 2022.
Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) for the first quarter of 2023 reached $106.4 million, a first-quarter record and a 10 percent increase compared to the same period of 2022, and exceeded the top end of the company’s guidance by $1.4 million.
Domestic revenue per available room (RevPAR) increased 5.9 percent for the first quarter of 2023 compared to the same period of 2022, driven by an increase in average daily rate (ADR) of 5.2 percent and a 34-basis-point increase in occupancy levels.
The first quarter of 2023 domestic effective royalty rate increased by 6 basis points to 4.99 percent, compared to the same period in 2022.
During the first quarter of 2023, the company returned over $173 million to shareholders in the form of cash dividends and share repurchases and announced a 21 percent increase in its quarterly dividend rate beginning in April 2023.
In February 2023, the company signed a multi-year agreement with Wells Fargo and Mastercard to launch a new co-branded credit card, which is expected to drive incremental adjusted EBITDA in 2023 and thereafter.
“Building on our record 2022 earnings results, our distinct growth strategy and best-in-class franchising business engine drove first quarter performance to new levels, with adjusted EBITDA increasing by 10 percent year-over-year,” said Patrick Pacious, president and CEO. “At the same time, we are ahead of plan integrating the Radisson Hotels Americas business unit, which we expect will further accelerate our transformative growth.”
Financial Performance
- Total revenues, excluding reimbursable revenue from franchised and managed properties, increased 34 percent to $175 million for the first quarter of 2023, compared to the same period of 2022.
- Platform and procurement services fees increased 18 percent to $13.8 million for the first quarter of 2023, compared to the same period of 2022.
- Royalty, licensing, and management fees increased 18 percent to $107.5 million for the first quarter of 2023, compared to the same period of 2022.
- Domestic royalties increased 13 percent to $98.2 million for the first quarter of 2023, compared to the same period of 2022.
Development
- The company’s upscale, extended-stay, and midscale segments reported a 9.5 percent increase in hotels and an 11 percent increase in rooms since March 31, 2022. The total number of domestic hotels and rooms, as of March 31, 2023, increased 6.5 percent and 8.2 percent, respectively, from March 31, 2022.
- The total number of international hotels and rooms, as of March 31, 2023, increased 8.2 percent and 9.6 percent, respectively, from March 31, 2022.
- As of March 31, 2023, the domestic system size for the company’s upscale and upper-midscale segments grew by approximately 29 percent and 24 percent, respectively, since March 31, 2022, driven by an increase in the number of hotels due to the acquisition of Radisson Hotels Americas and the growth of Cambria Hotels and the Comfort family of brands.
- Of the total domestic franchise agreements awarded in the first quarter of 2023, 88 percent were for the company’s upscale, extended-stay, and midscale brands, and 75 percent were for conversion hotels. The number of domestic franchise agreements awarded for the company’s upscale segment for the first quarter of 2023 increased by 13 percent, compared to the same period in 2022.
- The company’s domestic pipeline as of March 31, 2023, increased 11 percent to approximately 89,000 rooms, representing 925 hotels, from March 31, 2022. The company’s extended-stay domestic pipeline reached 475 hotels as of March 31, 2023, a 28 percent increase versus March 31, 2022. The company’s upscale domestic pipeline as of March 31, 2023, increased 16 percent from March 31, 2022. The company’s global pipeline as of March 31, 2023, increased 14 percent to over 96,000 rooms, representing 988 hotels, from March 31, 2022.
Shareholder Returns
During the three months ended March 31, 2023, the company paid cash dividends totaling approximately $13 million. During the first quarter of 2023, the company’s board of directors announced a 21 percent increase in the annual dividend rate to $1.15 per common share outstanding.
During the three months ended March 31, 2023, the company repurchased approximately 1.3 million shares of common stock for over $160 million under its stock repurchase program as well as through repurchases from employees in connection with tax withholding and option exercises relating to awards under the company’s equity incentive plans. As of March 31, 2023, the company had 3.4 million shares of common stock remaining under the current share repurchase authorization.
Outlook
The outlook information provided below is inclusive of the Radisson Hotels Americas acquisition unless otherwise noted and includes forward-looking non-GAAP financial measures, which management uses in measuring performance.
