ROCKVILLE, Maryland—Choice Hotels International, Inc. reported its second quarter 2023 results. Highlights of second quarter 2023 results include:
- Total revenues reached $427.4 million for the second quarter of 2023, a quarterly record and a 16 percent increase compared to the same period of 2022.
- Net income reached $84.7 million for the second quarter of 2023, representing diluted earnings per share (EPS) of $1.65. 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 20 percent and 13 percent lower, respectively, for the second quarter of 2023 compared to the same period of 2022.
- Second quarter 2023 adjusted net income, excluding certain items described in Exhibit 6, increased 12 percent to $89.1 million compared to the same period of 2022 and the company’s adjusted diluted EPS increased 22 percent to $1.75 compared to the same period of 2022.
- Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) for the second quarter of 2023 reached $153.1 million, a quarterly record and an 18 percent increase compared to the same period of 2022.
- The company’s domestic effective royalty rate for both the three-month and six-month periods ended June 30, 2023, increased 6 basis points to 4.99 percent compared to the respective 2022 periods.
- The company’s global pipeline as of June 30, 2023, increased 10 percent to over 93,000 rooms. The company’s global rooms pipeline for conversion hotels as of June 30, 2023, increased 14 percent from June 30, 2022, and 25 percent from March 31, 2023. The company’s domestic rooms pipeline for conversion hotels as of June 30, 2023, increased 10 percent from June 30, 2022, and 28 percent from March 31, 2023.
- The company achieved $80 million of annual recurring synergies through the Radisson Hotels Americas integration, exceeding the company’s original synergy target ahead of schedule. In July 2023, the company onboarded the nearly 600 Radisson Hotels Americas hotels onto its reservation delivery engine and integrated the two loyalty programs.
- During the first six months of 2023, the company returned approximately $264 million to shareholders in the form of cash dividends and share repurchases. Over the trailing twelve months ended June 30, 2023, the company repurchased 5.6 million shares of common stock totaling over $655 million, representing 10 percent of the shares outstanding as of June 30, 2022.
“Choice Hotels generated record revenues, fueled by our best-in-class hotel conversion and reservation-delivery capabilities as well as our success in integrating Radisson Hotels Americas ahead of schedule,” said Patrick Pacious, president and CEO. “The exceptional speed with which we are able to move conversion projects through the pipeline has driven impressive revenue-intense hotel openings in the first half of 2023 and further strengthened our award-winning brand portfolio, reinforcing our confidence in the company’s ability to drive significant growth in 2023 and beyond.”
Financial Performance
- Total revenues, excluding reimbursable revenue from franchised and managed properties, increased 28 percent to $227.8 million for the second quarter of 2023 compared to 2022.
- Platform and procurement services fees increased 32 percent to $28.8 million for the second quarter of 2023 compared to 2022.
- Royalty, licensing, and management fees increased 16 percent to $140.5 million for the second quarter of 2023 compared to 2022.
- Domestic royalties increased 7 percent to $125.1 million for the second quarter of 2023 compared to 2022.
- Domestic revenue per available room (RevPAR) increased 50 basis points for the second quarter of 2023 compared to the same period of 2022, driven by a 2.8 percent increase in average daily rate. The company’s second-quarter 2023 occupancy levels exceeded 60 percent.
Development
- The company’s upscale, extended-stay, and midscale segments reported a 10 percent increase in hotels and an 11.7 percent increase in rooms since June 30, 2022. The company’s total number of domestic hotels and rooms as of June 30, 2023, increased 6.9 percent and 8.8 percent, respectively, from June 30, 2022.
- The total number of international hotels and rooms, as of June 30, 2023, increased 9 percent and 11.8 percent, respectively, from June 30, 2022.
- As of June 30, 2023, the domestic system size for the company’s upscale and upper-midscale segments grew by approximately 32 percent and 24 percent, respectively, since June 30, 2022, driven by an increase in the number of Radisson Hotels Americas units and the growth of the Ascend Hotel Collection, Cambria Hotels, and the Comfort family of brands.
- 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 percent increase compared to the same period of 2022. For the first half of 2023, the company grew hotel openings across all segments, increasing openings in the upscale segment by 83 percent, the midscale segment by 42 percent, the extended stay segment by 50 percent, and the economy segment by 11 percent compared to the same period of 2022.
- Of the total domestic franchise agreements awarded in the six months ended June 30, 2023, 85 percent were for the company’s upscale, extended-stay, and midscale brands and 77 percent were for conversion hotels. Of the 126 franchise agreements awarded for conversion hotels in the six months ended June 30, 2023, 65 percent have already opened or are expected to open by December 31, 2023.
- The company’s domestic pipeline increased 9 percent to over 87,000 rooms, representing 899 hotels, and the international pipeline increased 29 percent to over 6,300 rooms, representing 61 hotels. The company’s extended-stay and upscale domestic pipelines increased 17 percent to 450 hotels and 27 percent to 127 hotels, respectively.
Shareholder Returns
During the six months ended June 30, 2023, the company paid cash dividends totaling approximately $28 million.
During the six months ended June 30, 2023, the company repurchased 1.8 million shares of common stock for $236.3 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. Over the trailing twelve months ended June 30, 2023, the company repurchased 5.6 million shares of common stock totaling over $655 million, representing 10 percent of the shares outstanding as of June 30, 2022.
As of June 30, 2023, the company had 2.8 million shares of common stock remaining under the current share repurchase authorization.
