Choice’s extended-stay brands drive Q2 RevPAR growth
 
Choice’s extended-stay brands drive Q2 RevPAR growth
09 AUGUST 2018 7:53 AM

Choice Hotels International’s MainStay Suites and WoodSpring Suites brands led the way for second-quarter domestic RevPAR growth, followed by its upscale brands Cambria and Ascend.

ROCKVILLE, Maryland—Choice Hotels International’s second-quarter domestic revenue-per-available-room growth was fueled by its extended-stay brands, and President and CEO Pat Pacious said he’s excited about the performance and development opportunities associated with the WoodSpring Suites brand.

On Choice’s second-quarter earnings call, CFO Dominic Dragisich said second-quarter RevPAR growth in the quarter was driven by a 14% RevPAR increase for the MainStay Suites brand and a 9% RevPAR increase for WoodSpring Suites.

“In addition, our upscale Cambria and Ascend brands posted second-quarter RevPAR gains of 5.7% and 8.3%, respectively, significantly higher than that 2.8% increase reported for the upscale segment by (STR),” he said.

(STR is the parent company of Hotel News Now.)

When asked if the extended-stay segment is an underexplored side of the business, Pacious said growth in the economy segment is coming from economy extended-stay growth, which WoodSpring is a key driver of.

“When you look at the STR data, you look at the data from Highland that looks at that segment, a lot of the growth is coming from the economy extended-stay segment and a lot of that growth is coming from WoodSpring,” he said.

What makes WoodSpring unique in the economy segment is the fact that properties under the brand have a larger room count than the average economy hotel, Pacious said, adding that there are two elements that make WoodSpring a leader in the segment.

“The first piece is they are larger hotels,” he said. “The second piece is they’re running at about 80% occupancy, and thirdly, these are all new-construction, full-fee, meaning no discount on the royalty rate side of the house, so we’re very excited by the performance of the hotels once they get into our system.”

Outlook
Domestic RevPAR growth for the third quarter and the full year is expected to range between 0% and 1.5% and 1.5% and 3%, respectively. Dragisich said the guidance is based on the short-term impact from renovations around Comfort’s Move to Modern package, “as well as a tougher comparable result due to the solar eclipse and (hurricane) activity that occurred in the third quarter of 2017,” which will affect third-quarter and full-year results.

International strategy
Choice’s international properties don’t drive the same profitability as hotels in domestic markets do, Pacious said, but the company has been executing a direct-booking strategy with international properties.

“If you look at our European footprint, (we are) shrinking the number of hotels but growing the number of rooms,” he said. “If you look at the exits we’ve had versus the adds we’ve had over the last (three) years, we’ve been executing this strategy. The goal was to go out of some of these tertiary markets in Europe and into more secondary and primary markets, one to drive the brand and awareness higher, but two to drive the profitability of these hotels higher.”

Choice’s deal with Spanish firm Sercotel has provided the company access to an opportunity it didn’t have “capability-wise, which is hotel management,” Pacious said. 

“We’re beginning to see some opportunity there going to market with our brand and Sercotel’s management in parts of Europe that I think are really going to help us (grow our) European footprint,” he said.

Results
For the second quarter, domestic systemwide RevPAR rose 2.7% compared to the same time during the prior year, according to the company’s earnings release. Average daily rate increased 2.4% and occupancy rose 0.3%.

Choice’s share price ended Wednesday trading at $77.10, down 0.6% year to date. The Baird/STR Hotel Stock Index was down 2.4% for the same time period.

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