Choice execs highlight brand growth across segments
 
Choice execs highlight brand growth across segments
09 NOVEMBER 2018 9:14 AM

During its third-quarter earnings call, Choice Hotels International President and CEO Pat Pacious highlighted the success of new and old brands, and focused on international growth across the company’s portfolio.

ROCKVILLE, Maryland—In the year since Pat Pacious’ first earnings call as president and CEO of Choice Hotels International, the company has acquired a brand and launched a brand extension.

During the company’s third-quarter earnings call Thursday morning, Pacious started out by highlighting three of its brands, WoodSpring Suites, Cambria and Comfort, and its new brand extension, Clarion Pointe.

“We launched Clarion Pointe this September, and it has been well received by the development community,” he said. “Even though we announced the brand extension with only two weeks left in the quarter, we have already awarded over a dozen new Clarion Pointe franchise agreements and have nearly 75 in the development pipeline to date.”

The first Clarion Pointe is expected to open in the first quarter of next year, he said, and when thinking about the brand extension, Choice “focused on the markets and hotels that had the potential to deliver on both rates and amenities for the Clarion Pointe brand.”

Clarion is known for having a lot of meetings-and-event space and food-and-beverage outlets, Pacious said. Clarion Pointe provides guests—and owners—with a select-service option in the midscale segment.

WoodSpring, Cambria and Comfort
Choice closed on the acquisition of WoodSpring Suites in February, and since then, the extended-stay brand has been growing rapidly, Pacious said.

“We acquired the brand when it has 238 hotels and expect to have 250 by the beginning of next year,” he said, adding that the company had signed 55 new WoodSpring contracts as of 30 September, and11 were awarded in the third quarter. The growth of the brand is expected to continue into 2019, he said.

Choice’s Cambria brand continues to help the company expand in the upper-upscale segment, and is “also a significant contributor to (our) bottom line,” Pacious said. “In fact, an average Cambria hotel produces three times as much gross room revenue as our average upper-midscale Comfort Inn. When you consider that we expect to have more than 50 Cambria hotels open next year, it’s easy to see what an important driver the brand is for Choice.”

The 40th hotel under the brand is expected to open at the end of the year, he said.

Choice has been transforming its Comfort brand through a “$2.4 billion, long-term investment with our franchisees,” Pacious said.

“We are on track and steadily approaching the finish line of this multiyear effort,” he said. “After hotels complete both the public space and guestroom renovations, the final step in the transformation journey involves updating the hotel’s signage on-property and across digital channels to the new Comfort logo, which we unveiled in May.”

The new signage cannot be displayed until a Comfort hotel undergoes the full renovation, he added.

International growth
Choice has made “exciting progress this year executing against our international strategy, focusing on high-quality, multi-unit developers and operators for long-term agreements in strategic markets,” Pacious said.

The company announced to bring seven new hotels under the Comfort and Quality brands in the Middle East during the third quarter, he said, adding four are under construction.

“These hotels represent the launch of a broader strategy with an affiliate of one of the largest tourism-and-travel companies in the Middle East to open 30 Choice-branded hotels in the region,” he said.

Choice also announced that it is expanding its European portfolio with the addition of 13 Comfort hotels with 1,000 rooms across France, he said. The company is also expanding in Latin America and Spain with 40 hotel openings planned for the year, 25 of which have already been opened through the end of October.

“In addition to entering Spain and Colombia for the first time, hotels are slated to open in Brazil, Ecuador, Mexico and Panama across the mix of our brands,” Pacious said. “Choice’s previously-announced alliance with Sercotel is contributing more than half of the 40 openings expected by year end in Spain and Latin America.”

Choice also signed a contract with a company in Mexico to open properties under the Sleep Inn brand in the country, he said.

Q3 results, 2018 outlook
According to Choice’s earnings release, “weather-related events, hotel renovations within the Comfort brand and the timing of holidays” caused revenue per available room to decrease 1.4% during the quarter compared to the same period of 2017. Average daily rate rose 0.9% and occupancy dropped 160 basis points.

For the fourth quarter, RevPAR is expected to grow between 1% and 3%. Net income for the full year is expected to range between $210 million and $214 million, and adjusted earnings before interest, taxes, depreciation and amortization is expected to range between $335 million and $340 million.

As of press time, Choice’s stock was trading at $77.64 a share, up 0.8% year to date. The Baird/STR Hotel Stock Index was down 9.2% for the same time period.

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