Choice Hotels International, Inc. | February 20, 2023

Domestic RevPAR accelerated in fourth quarter to 20.4% versus 2019; full-year net income and adjusted EBITDA surpassed 2019 levels by 49% and 28%, respectively

ROCKVILLE, Md., Feb. 20, 2023 — Choice Hotels International, Inc. (NYSE: CHH), one of the world’s largest lodging franchisors, today reported its fourth quarter and full-year 2022 results.

“2022 was a landmark year for Choice Hotels, in which we drove step function growth with adjusted EBITDA surpassing 2019 levels by 28%. We generated significant organic growth over 2021 and acquired the Radisson Hotels Americas brands in August, which has accelerated our long-term growth potential,” said Patrick Pacious, president and chief executive officer. “Our distinct strategy of growing our brand portfolio with hotels that generate higher royalties per unit is driving impressive results. The new capabilities we have built to improve the profitability of each franchisee have resulted in three straight years of RevPAR growth that exceeded the industry, strengthening our competitive position and creating additional runway for growth in 2023 and beyond.”

Highlights of fourth quarter and full-year 2022 results include:1,2

  • Total revenues reached a company record of $1.4 billion for full-year 2022, a 31% increase compared to the same period of 2021. For full-year 2022, Radisson Hotels Americas contributed $104.2 million in total revenues.
  • Net income reached a company record of $332.2 million for full-year 2022, a 15% increase compared to the same period of 2021, representing diluted earnings per share (EPS) of $5.99.
  • Full-year 2022 adjusted net income, excluding certain items described in Exhibit 7, was $292.6 million, a 21% increase from the same period of 2021. The company’s adjusted diluted EPS increased 23% to $5.27, compared to the same period of 2021.
  • Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) for full-year 2022 reached a company record of $478.6 million, a 19% increase compared to the same period of 2021 and exceeded the top end of the company’s full-year 2022 guidance by nearly $9 million. Excluding the $18.3 million adjusted EBITDA contribution from Radisson Hotels Americas, adjusted EBITDA for full-year 2022 increased by 14% compared to full-year 2021 and by 23% compared to full-year 2019.
  • Domestic revenue per available room (RevPAR) growth accelerated quarter-over-quarter, increasing by 20.4% for fourth quarter 2022, compared to the same period of 2019, outperforming the total industry by 700 basis points.
  • The company repurchased 3.7 million shares of common stock during full-year 2022, representing 7% of the average shares outstanding for the year ended December 31, 2022. 3  This increased year-to-date returns to shareholders to over $487 million in the form of cash dividends and share repurchases, as of December 31, 2022.
  • The company’s total domestic pipeline as of December 31, 2022, increased 14% to 1,029 hotels representing approximately 100,000 rooms, from December 31, 2021. 4
  • The company’s domestic effective royalty rate was 5.05% for full-year 2022, an increase of 4 basis points compared to the same period of 2021.
  • The company sold the Cambria Hotel New Haven, Connecticut, property in October 2022 for approximately $30 million and secured a 30-year franchise agreement with the buyer to continue to operate the hotel as a Cambria Hotel. The sale of this hotel increased the recycling of prior investments in Cambria Hotels development projects for the 12 months ended December 31, 2022 to approximately $170 million.

RevPAR Performance Trends

  • RevPAR increased 14.6% for full-year 2022, compared to the same period of 2019, meeting the top end of full-year 2022 guidance.
  • RevPAR increased 20.4% for fourth quarter 2022, compared to the same period of 2019, driven by an increase in average daily rate (ADR) of 17.4% and a 130-basis-point increase in occupancy levels, compared to fourth quarter 2019.
  • Domestic systemwide RevPAR growth surpassed 2019 levels for 19 consecutive months through December 31, 2022. The trend has continued in the first quarter of 2023, with January RevPAR increasing over 6%, compared to January of 2022. 5
  • The company’s extended-stay portfolio has exceeded 2019 RevPAR levels every month since April 2021 and achieved domestic RevPAR growth of 27.8% in fourth quarter 2022, compared to the same period of 2019. The WoodSpring Suites brand achieved RevPAR growth of 33.4% in fourth quarter 2022, compared to the same period of 2019.
  • The company’s overall midscale portfolio has consistently surpassed 2019 RevPAR levels since June 2021 and achieved domestic RevPAR growth of 17.3% in fourth quarter 2022, compared to the same period of 2019 . In 2022, the Comfort brand continued to achieve RevPAR share gains versus local competitors, and the brand’s domestic RevPAR growth continued to outperform the upper-midscale chain scale, compared to the same period of 2019.
  • The company’s upscale portfolio achieved domestic RevPAR growth of 10.4% for full-year 2022, compared to the same period of 2019, outperforming the upscale chain scale by nearly 10 percentage points.

Financial Performance

  • Fourth quarter 2022 total revenues increased 27% to $362 million, compared to the same period of 2021, including a $64 million revenue contribution from Radisson Hotels Americas.
  • Total revenues, excluding reimbursable revenue from franchised and managed properties, increased 33% to $186 million for fourth quarter 2022, compared to the same period of 2021, and included a $40.6 million revenue contribution from Radisson Hotels Americas.
  • Net income was $55.5 million for fourth quarter 2022, representing diluted EPS of $1.04.
  • Fourth quarter 2022 adjusted net income, excluding certain items described in Exhibit 7, reached $67.2 million, a 20% increase compared to the same period of 2021, representing adjusted diluted EPS of $1.26, a 27% increase from the same period of 2021.
  • Adjusted EBITDA for fourth quarter 2022 increased 18% to $112.5 million from the same period of 2021 and included $11.5 million of adjusted EBITDA contribution from Radisson Hotels Americas.
  • Domestic royalties totaled $434.3 million for full-year 2022, a 14% increase from the same period of 2021, and $102.6 million for fourth quarter 2022, a 10% increase compared to the same period of 2021.
  • Procurement services revenues increased 27% to $63.8 million for full-year 2022, compared to the same period of 2021.

Development

  • The company awarded 590 domestic franchise agreements in 2022, an 11% increase compared to the prior year. Of the total agreements awarded in 2022, 87% were for the company’s upscale, midscale and extended-stay brands. In addition, the company awarded a record number of franchise agreements to underrepresented and minority owners in 2022, bringing the total number of executed contracts to 345 since the inception of the program.
  • The number of domestic franchise agreements awarded for the company’s extended-stay segment for full-year 2022 marked a company record, increasing 77% compared to the same period of 2021. The Cambria brand doubled the number of domestic franchise agreements awarded for full-year 2022, compared to the same period of 2021.
  • The company’s extended-stay domestic pipeline reached 496 hotels as of December 31, 2022, a 34% increase since December 31, 2021. In 2022, the Everhome Suites brand, an all-new construction midscale extended-stay brand, celebrated the opening of its first hotel and expanded its domestic pipeline to 60 hotels as of December 31, 2022.
  • The company’s upscale, extended-stay and midscale segments reported a 9.5% increase in hotels and 10.5% increase in rooms since December 31, 2021. The total number of domestic hotels and rooms, as of December 31, 2022, increased 6.5% and 7.9%, respectively, from December 31, 2021.
  • As of December 31, 2022, the domestic system size for the company’s upscale segment grew by 29% since December 31, 2021, driven by an increase in the number of hotels due to the acquisition of Radisson Hotels Americas and the growth of Cambria Hotels brand. The domestic system size for the company’s upper-midscale segment grew by 24% in 2022, compared to the same period of 2021.

Shareholder Returns

During full-year 2022, the company paid cash dividends totaling approximately $53 million, compared to total dividends of $25 million paid in 2021.

During full-year 2022, the company repurchased $434.7 million of common stock, including $188.2 million during the fourth quarter, 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 December 31, 2022, the company had 4.7 million shares of common stock remaining under the current share repurchase authorization.

Outlook

The outlook information provided below is inclusive of the Radisson Americas acquisition unless otherwise noted and includes forward-looking non-GAAP financial measures, which management uses in measuring performance. The adjusted numbers in the company’s outlook below exclude the net surplus or deficit generated from reimbursable revenue from franchised and managed properties, gain (loss) on sales of assets, due diligence and transition costs and other items:

Full-Year 2023

  • Net Income for full-year 2023 is expected to range between $245 million and $265 million.
  • Adjusted EBITDA for full-year 2023 is expected to range between $520 million and $540 million, representing an approximately 11% increase at the midpoint from the company’s adjusted EBITDA for full-year 2022. The company’s full-year 2023 outlook for adjusted EBITDA includes an adjusted EBITDA contribution of more than $60 million from the Radisson Hotels Americas business unit.
  • Excluding the impact of Radisson Hotels Americas, adjusted EBITDA for full-year 2023 on a comparable basis is expected to grow by approximately 7% versus full-year 2022. 6
  • Domestic RevPAR for full-year 2023 is expected to increase approximately 2%, compared to full-year 2022.
  • The domestic effective royalty rate for full-year 2023 is expected to continue to grow on a comparable basis in the mid-single digits versus full-year 2022, off a 4.93% baseline in 2022. 7
  • The domestic number of units for the company’s upscale, extended-stay and midscale segments is expected to grow approximately 1% for full-year 2023, compared to full-year 2022.

First Quarter 2023

  • Net Income for first quarter 2023 is expected to range between $28 million and $32 million.
  • Adjusted EBITDA for first quarter 2023 is expected to range between $100 million and $105 million.

View First Quarter and Full Year 2022 Results.