Release Date: November 04, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Choice Hotels International Inc (CHH, Financial) reported a 14% increase in adjusted EBITDA and a 23% increase in adjusted EPS year over year.
- The company raised its full-year adjusted net income and EPS guidance, reflecting strong performance.
- CHH's global hotel pipeline reached a record of over 110,000 rooms, with a significant 11% year-over-year increase.
- The Radisson Americas brands showed a 10% year-over-year increase in the number of rooms in the pipeline, with a 53% increase in new construction rooms.
- CHH's extended-stay segment grew by over 10% year over year for five consecutive quarters, with over 350 hotels in the pipeline.
Negative Points
- Domestic RevPAR was down 2.5% year over year, partly due to calendar shifts and Hurricane Debby.
- The company expects a deficit of just under $40 million in its marketing fund for the year.
- There has been an increased need to use key money on more deals due to a competitive environment and tougher new construction conditions.
- The midscale and upper midscale segments underperformed compared to STR's flat performance, primarily due to regional factors.
- The company anticipates a similar level of capital investment in 2025 as in 2024, which may impact free cash flow.
Q & A Highlights
Q: Can you explain the acceleration in net reimbursable revenues this quarter and the impact of the Radisson deal on this?
A: Scott Oaksmith, CFO, explained that the integration of Choice and Radisson platforms allowed unlocking of ancillary revenue streams, contributing $15 million in incremental EBITDA this quarter due to seasonality. This will be reclassified in Q1 2025 for full-year comparability.
Q: How many 100% owned hotels are on your balance sheet, and what are your plans for construction and capital spending?
A: Scott Oaksmith, CFO, stated that Choice Hotels has 10 open hotels and a few under construction. The focus is on accelerating growth for Cambria and Everhome brands, with plans to recycle capital invested in these projects.
Q: Can you quantify the hurricane benefit seen in October and the percentage of room nights from group and business transient?
A: Patrick Pacious, CEO, noted that while October RevPAR was up 5%, it wasn't primarily hurricane-driven. The business mix was 65% leisure and 35% business, with significant growth in business transient and group travel.
Q: How are you managing SG&A expenses, and what is the outlook for free cash flow conversion into next year?
A: Scott Oaksmith, CFO, mentioned that SG&A growth is maintained at mid-single digits. Free cash flow conversion is expected to remain around 62% for the full year, with similar levels anticipated for 2025.
Q: What is the impact of the Infrastructure Act on your hotels, and how does it affect room night demand?
A: Scott Oaksmith, CFO, stated that infrastructure spending is up 4% year over year, with 38% of Choice Hotels located in top states receiving funds. This benefits both extended-stay and transient-oriented hotels.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
