Achieves Record Revenues in 2023
Exceeds Full-Year 2023 Outlook for Unit Growth
Grows Global Rooms Pipeline Sequentially 6% including a 16% Increase for Conversion Hotels
NORTH BETHESDA, Md., Feb. 20, 2024 — Choice Hotels International, Inc. (NYSE: CHH), one of the world’s leading lodging franchisors, today reported its fourth quarter and full-year 2023 results.
Highlights include:
- Record total revenues grew 10% to $1.5 billion for full-year 2023 compared to the same period of 2022.
- Net income was $258.5 million for full-year 2023, representing diluted earnings per share (EPS) of $5.07. As a result of one-time items, including Radisson Hotels Americas integration costs, due diligence and transaction pursuit costs in 2023, gains from the sale of the Cambria Hotel Nashville owned asset and the extraordinary franchisee termination fees in 2022, and the timing of net reimbursable expenses, net income and diluted EPS were 22% and 15% lower, respectively, for full-year 2023 compared to the same period of 2022.
- Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) for full-year 2023 reached a company record of $540.5 million, a 13% increase compared to 2022, and exceeded the top end of the company’s full-year 2023 guidance.
- Full-year 2023 adjusted diluted EPS exceeded the top end of the guidance by $0.08 per share and increased 16% to $6.11 compared to the same period of 2022.
- The growth of the company’s domestic upscale, extended stay, and midscale brands accelerated from September 30, 2023, and exceeded the unit growth guidance for the full-year 2023, with the Choice legacy portfolio increasing by 1.8% for hotels and 2.4% for rooms since December 31, 2022.
- Global pipeline as of December 31, 2023, increased 6% to over 105,000 rooms from September 30, 2023. The global pipeline for conversion rooms increased by 16% from September 30, 2023, and 34% from December 31, 2022.
- The company provided full-year 2024 net income guidance of $260 million and $274 million. Adjusted EBITDA for full-year 2024 is expected to range between $580 million to $600 million.
“2023 was a year of accelerating growth, in which we exceeded the top end of the company’s full-year adjusted EBITDA and adjusted EPS guidance led by our successful strategy of adding hotels that generate higher royalties per unit. We significantly expanded our rewards program, increased our geographic reach, unlocked new value through our platform capabilities, and created step function growth through the rapid completion of the Radisson Americas’ integration,” said Patrick Pacious, President and Chief Executive Officer. “Our superior hotel conversion capability increased the velocity of new hotel openings and is a clear advantage in today’s hotel development environment. The positive momentum created by our successful strategy gives us confidence in our 2024 outlook and beyond.”
Mr. Pacious continued, “Our demonstrated track record of improving the delivery of direct business to franchisees positions us to further accelerate value creation for all stakeholders through a compelling combination with Wyndham Hotels & Resorts. By bringing Choice’s best-in-class technology and franchisee success model to the Wyndham network, we are confident we can create meaningful value for franchisees and shareholders of both companies. We are committed to pursuing this combination and remain encouraged by our progress on the regulatory front. Choice recently nominated a slate of independent, highly qualified directors to stand for election at Wyndham’s 2024 Annual Meeting of Stockholders. If elected, these nominees will exercise their independent judgment to serve Wyndham shareholders’ best interests, which we continue to believe is to move with urgency to maximize the value that can be created through a combination with Choice.”
Financial Performance
- The company achieved $85 million of annual recurring synergies through the successful completion of the integration of Radisson Hotels Americas, exceeding the prior target by 6%.
- Fourth quarter 2023 total revenues were $358.4 million, a 1% decline compared to the same period of 2022.
- Net income was $29 million for fourth quarter 2023, representing diluted EPS of $0.58. As a result of one-time items, including Radisson Hotels Americas integration costs, due diligence and transaction pursuit costs in 2023, and the timing of net reimbursable expenses, net income and diluted EPS were 48% and 44% lower, respectively, for fourth quarter 2023 compared to the same period of 2022.
- Adjusted EBITDA for fourth quarter 2023 increased 11% to $125 million from the same period of 2022. Fourth quarter 2023 adjusted diluted EPS increased 14% to $1.44 compared to the same period of 2022.
- Platform and procurement services increased 18% to $75.1 million for full-year 2023 and 6% to $16.9 million for fourth quarter 2023, compared to the same periods of 2022.
- Royalty, licensing and management fees totaled $513.4 million for full-year 2023 and $116.9 million for fourth quarter 2023, a 9% and 1% increase from the same periods of 2022.
- The company’s domestic effective royalty rate for the full-year ended December 31, 2023, increased 6 basis points to 4.99% compared to the same period of 2022.
- Domestic revenue per available room (RevPAR) increased 10 basis points and decreased 390 basis points for the twelve-month and three-month periods ended December 31, 2023, respectively, compared to the same periods of 2022. Domestic RevPAR increased 12.7% and 13.1% for the twelve-month and three-month periods ended December 31, 2023, respectively, compared to the same periods of 2019.
Development
- The company’s hotel mix of the domestic upscale, extended stay, and midscale portfolio increased by 8 percentage points since December 31, 2017, and represented 82% of the company’s total domestic portfolio as of December 31, 2023.
- The company’s domestic upscale, extended stay, and midscale portfolio increased by 1.4% for hotels and 1.6% for rooms since December 31, 2022. Domestic upscale and extended stay rooms portfolio grew by 6.3% and 14.9%, respectively, since December 31, 2022, driven by an increase in the number of Cambria Hotels, Ascend Hotel Collection, WoodSpring Suites, MainStay Suites, and Suburban Studios units. The company’s total domestic system size increased to over 6,300 hotels and nearly 497,000 rooms as of December 31, 2023.
- The company opened an average of eight hotels per week in the fourth quarter 2023, contributing to a total of 263 hotel openings for full-year 2023, a 13% increase compared to the same period of 2022.
- Of the total domestic franchise agreements awarded in full-year 2023, 83% were for the company’s upscale, extended stay, and midscale brands, and 72% were for conversion hotels. Of the domestic franchise agreements awarded for conversion hotels in 2023, 135 opened in the same year.
- Domestic rooms pipeline as of December 31, 2023, increased by 3% since September 30, 2023, highlighted by a 6% increase for conversion hotels.
- The international portfolio, as of December 31, 2023, expanded by 2.6% in the number of units and by 2.0% in the number of rooms from December 31, 2022. Specifically, the company extended its master franchise agreement with Strawberry (formerly Nordic Choice Hotels), secured a distribution partnership with a leading Spanish hotel chain, Sercotel, signed an agreement with Zenitude Hotel-Residences that is expected to double the company’s unit footprint in France, and acquired the franchise rights for City Edge Apartment Hotels in Australia. As of December 31, 2023, the international units pipeline increased by 33% from September 30, 2023, and the company more than doubled the number of international hotels in the pipeline since December 31, 2022.
Shareholder Returns
During full-year 2023, the company paid cash dividends of $56.5 million and repurchased 2.9 million shares of common stock for $365.9 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.
As of December 31, 2023, the company had 1.8 million shares of common stock remaining under the current share repurchase authorization.
Balance Sheet and Liquidity
The company generated operating cash flows totaling $297 million for the year ended December 31, 2023, and closed on a 364-day new term loan of $500 million in the fourth quarter of 2023. As of December 31, 2023, the company’s total available liquidity, consisting of cash and available borrowing capacity through the revolving credit facility, was approximately $650 million.
During the fourth quarter, the company purchased over 1.4 million shares of Wyndham common stock, valued in excess of $110 million.
