Revenue from Choice Hotels International's small and midsized enterprise customers increased 13 percent year over year in the second quarter, even as the company's domestic revenue per available room declined 2.9 percent, Choice executives said on a Wednesday earnings call.
Business travelers comprised 40 percent of Choice's second-quarter business, president and CEO Patrick Pacious said, pointing to construction, utilities and high-tech manufacturing as sectors of strength along with SMEs, which he cited as evidence of the "relatively resilient" profile of its business clientele.
"Significant infrastructure investments driven by Gen AI and the reshoring of American manufacturing are fueling new business demand, especially for our extended-stay hotels," Pacious said.
Pacious also noted that Choice's "investment in an enhanced group sales team" along with its recent expansion in the upscale tier helped lead to a 48 percent year-over-year increase in group travel revenue, "driven in part by small corporate groups and sports travel bookings."
Canadian JV Buyout
Choice also announced it acquired the 50 percent stake held by joint venture partner InnVest Hotels in Choice Hotels Canada for $112 million. The move will allow Choice to transition to a direct franchisor model in Canada from a master franchising model, according to the company, and will allow it to broaden the number of its available brands in Canada from the current eight to the full range of 22.
At the end of the second quarter, Choice had 350 hotels and 30,000 rooms available in Canada, with another 2,000 rooms in the development pipeline, according to the company.
Choice and InnVest had operated the joint venture for about 30 years, Pacious said, adding that InnVest will remain a franchisee in Canada.
Choice Q2 Metrics
Choice's second-quarter domestic RevPAR decreased 2.9 percent year over year to $58.22, while its average daily rate decreased 1.8 percent to $97.65 and its occupancy declined 0.7 percentage points to 59.6 percent.
Choice cited macroeconomic uncertainty along with lower government and international travel and softer leisure demand for the decline in RevPAR. The company also noted that if the effects of the Easter shift into the second quarter this year and the April 2024 total solar eclipse in the United States were excluded, the decline in domestic RevPAR would have been about 1.6 percent.
Total second-quarter Choice revenue was nearly $426 million, down from $435 million one year prior. Net income was $82 million, compared with $87 million in Q2 2024.
Choice at the end of Q2 had about 644,400 rooms in its system, up about 2 percent year over year. The company reported a pipeline of about 93,000 rooms, down from 114,000 rooms at the end of the second quarter of 2024.
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