On a third-quarter earnings call, Choice Hotels International CEO Steve Joyce said revenue per available room gains in the past 24 months have been driven by the company’s efforts to revive its Comfort Inn & Suites brand.
ROCKVILLE, Maryland—Choice Hotels International has seen increases in revenue per available room over the past 24 months, which CEO Steve Joyce attributes to the rejuvenation of the company’s Comfort brands.
On the company’s third-quarter earnings call, Joyce said Choice has executed 162 new Comfort construction franchise agreements in the last two years. The brand currently has 180 Comfort properties in the new construction pipeline, according to a news release.
“Our efforts to rejuvenate the Comfort brands have included higher standards for hotels joining the brand, required meaningful property-improvement plans, and targeted underperforming Comforts for termination and replacement with new construction products are all working,” Joyce said. “These efforts have resulted in 24 consecutive months of RevPAR index gains.”
Domestic systemwide RevPAR increased 4.5% in Q3 2016, average daily rate increased 0.7% and occupancy increased 3.4%, according to a news release. The release also states that Choice’s domestic RevPAR performance in Q3 2016 outpaced the industry by 1.2%.
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The lending market for franchisees
Asked by analysts what the lending market looks like for Choice franchisees, Joyce said lenders are still lending, “but they have lowered the level somewhat.”
He added that “people were lending fairly regularly for the right sponsorship or the right product or the right franchisee kind of in the low to mid-70s; it sort of looks now like that has moved to low to mid-60s.”
Joyce said the lending landscape hasn’t affected development for franchisees yet.
“A lot of it is about the banking relationships you have. And the regional lenders are still lending and the local lenders are still lending,” he said. “It looks like there has been a general sort of easing of the leverage levels that they’re doing, but it’s not slowing our franchisees down in terms of development because, quite frankly, most of our franchisees don’t leverage that much anyway.
“They actually like a lot of equity in their deals because they like the idea of not worrying about what happens in the downturn, so if you look at our system, it probably has an overall lower leverage than almost any other system out there. So, while there is a softening of the leverage levels, we’re not seeing an impact on development yet.”
As of press time, Choice’s stocks were down 10.24% year to date. The Baird/STR Hotel Stock Index was down 4.73% at the same time.