In spite of missing the mark on its projected revenue per
available room, Choice Hotels International reported somewhat positive results for
the first quarter. It attributed the RevPAR miss to the Easter holiday's shift
to March and to continued weakness in energy markets.
Average daily rate increased 2.5 percent year over year to
$76.47, while occupancy decreased from 55.7 percent to 55 percent. RevPAR grew 1.2
percent to $42.05.
"Our first quarter RevPAR growth was less than our
previous guidance of 2 percent," CFO David White said during an earnings
call. "However, our absolute RevPAR for the first quarter was in line with
the total industry results for the primary chain-scale segments in which we
operate."
White said the shift of the Easter holiday affected RevPAR
by 50 basis points. Marriott
International and Hyatt
Hotels Corp. also reported a negative impact from the early Easter. White
calculated Choice's first-quarter RevPAR "would have increased by
approximately 200 basis points over our reported results" if the company
excluded oil and gas markets.
According to STR, RevPAR in major oil and gas markets declined
18.4 percent for the first quarter. In the 20 oil and gas submarkets that
account for the majority of demand and hotel accommodations, demand declined
8.8 percent while supply rose 3.7 percent.
Choice CEO Stephen Joyce said the oil markets do appear to
be stabilizing, however, and considering other macroeconomic factors like GDP
growth and employment, the company is optimistic about the remainder of 2016.
"What
we've seen based on our bookings and our view into this summer is: It's going
to be very strong," Joyce said.
Total revenue for the first quarter increased 18 percent to
$207 million.
Brand Growth &
Refresh
Choice's upscale brands—Cambria and Ascend Hotel Collection—have
grown to 182 hotels and more than 17,000 rooms open and operating globally,
Joyce said. Cambria in particular has entered key urban markets across the United
States, including New York, Chicago, New Orleans, Nashville and Los Angeles.
Choice vice president of global sales Tim Oldfield told BTN at the end of the first quarter that
hotel solicitations by corporate programs increased 19 percent during the 2016
hotel-sourcing season. "We had more hotels going into more programs than
we've ever had," he said. Part of the formula for getting that corporate
business has been Choice's growth in the upscale segment and the refresh of its
Comfort brands.
"With the breadth of product that we've got today and the
top end fueled by our growth of the Cambria brand, we're doing business with companies
that we weren't doing business with three years ago," Oldfield said.
"That's exciting for us; it's certainly important for supporting our Cambria
brand."
Choice also is reaping the benefits of brand refreshes at
its Comfort Inn and Comfort Suites properties. First-quarter RevPAR increased 3
percent year over year at Comfort Inn and 2.5 percent at Comfort Suites. "Comfort
brand guests are noticing a transformation," Joyce said. "The 'likelihood
to recommend' scores [that Choice has collected] from Comfort guests continued
to be the highest they have ever been."
Part of the brand-refresh strategy included what Joyce
called a hardline "improve or be removed" stance. As a result,
approximately 600 hotels exited the portfolio between 2010 and the end of 2015.
"As for the remaining system, we are seeing a much higher pure rate,"
Joyce said. "With 2016 expected to be the last year of the normal brand
pruning, we are well-positioned for the next phase of the flagship Comfort
brands' lifecycle."
The combined development pipeline for the two
Comfort brands increased 24 percent during the past 12 months to more than 200 contracts
that are executed but not yet open.