After a solid run in 2022, Choice Hotels International, Inc. CHH continues to expand its global footprint in 2023. To this end, the company announced new-deal signings and openings in unique, experiential destinations.
The company’s Ascend brand recently announced agreements to support its coast-to-coast expansion in the United States. This property signings include Mayfair Hotel in New York, New York; CityFlats Hotel properties in Grand Rapids and Port Huron, Michigan; and an 84-room property in Ellicottville, New York. The company also signed agreements for multiple locations in California including San Francisco and Livermore.
The company announced certain openings under the Ascend Hotel Collection. The properties include The Inn at Apple Valley in Sevierville, TN; Abitta Boutique Hotel in San Juan, Puerto Rico; Casas de Suenos Old Town Historic Inn in Albuquerque, NM; and Inn on the Square in Greenwood, SC.
Each hotel offers distinctive features — from the rustic charm of The Inn at Apple Valley to the art-deco style of Abitta Boutique Hotel, the historic adobe design of Casas de Suenos Old Town Historic Inn and the rich heritage of Inn on the Square.
Mark Shalala, senior vice president, franchise development, upscale brands, Choice Hotels, stated, "It's the value we deliver for our franchisees and the operational flexibility that helps drive profitability and continued interest in the brand. In the first quarter of 2023 we had the most deal signings in that quarter in the brand's history. As we continue to grow the portfolio, Jamey Cua joins Pete Metzger and the rest of our development team as we build on this momentum throughout the year and beyond."
The Emphasis On Franchise Business Bodes Well
Choice Hotels gains from economies of scale associated with the franchise business. Accordingly, higher fees from franchisees and transference of cost burden to franchises provide the company with operational advantages. Apart from royalty fees and procurement-services revenues, Choice Hotels also collect marketing and reservation system fees to provide support activities to the franchise system.
The company’s solid commitment toward franchisee profitability is driving incremental revenues. During the first quarter of 2023, the company awarded seven new agreements and four new properties to its global portfolio under the Ascend Brand collection. As of Mar 31, 2023, the company reported 988 franchised hotels (with 96,111 rooms) under construction, awaiting conversion, approved for development or committed to future franchise development in its global system. This compares to 925 franchised hotels (84,210 rooms) in the prior year period.
Approximately 94% of the pipeline is located in the United States and approximately 77% of the domestic pipeline is new construction. During the first quarter, new applications for domestic franchise agreements increased 13% year over year. We believe that franchising will facilitate ROE expansion and earnings growth over the long term.
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In the past year, shares of Choice Hotels have declined 1% against the industry’s 1.7% rise.
Zacks Rank & Key Picks
Choice Hotels currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Zacks Consumer Discretionary sector are MGM Resorts International MGM, Royal Caribbean Cruises Ltd. RCL and Crocs, Inc. CROX.
MGM Resorts sports a Zacks Rank #1 (Strong Buy). The company has a trailing four-quarter earnings surprise of 81%, on average. The stock has increased 17.7% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for MGM’s 2024 sales and EPS indicates a rise of 1.4% and 22.3%, respectively, from the year-ago period’s estimated levels.
Royal Caribbean Cruises carries a Zacks Rank #1 (Strong Buy). RCL has a trailing four-quarter earnings surprise of 26.4%, on average. Shares of RCL have gained 61.5% in the past year.
The Zacks Consensus Estimate for RCL’s 2023 sales and EPS indicates a rise of 13.6% and 45.2%, respectively, from the year-ago period’s levels.
Crocs carries a Zacks Rank #2 (Buy). The company has a trailing four-quarter earnings surprise of 19.6%, on average. Shares of Crocs have increased 100.2% in the past year.
The Zacks Consensus Estimate for CROX’s 2023 sales and EPS indicates a rise of 7.7% and 10.5%, respectively, from the year-ago period’s levels.
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