Choice Earnings: Sales Growth Moderates After a Strong Recovery; Radisson Synergies Drive Profits

We don't expect much change to our Choice $130 fair value estimate, outside of time value, as demand growth moderates after a strong recovery to date. Having already recovered to 2019's level in 2021, Choice's U.S. second-quarter revenue per available room (including its Radisson acquisition), or revPAR, moderated to just 0.5% growth, compared with a 6% lift last quarter. We estimate revPAR was down a point or two from last quarter's 119% of 2019's level. Still, Choice maintained its 2023 revPAR growth target of 2%, which we think is achievable. This growth sits below the low-double-digit lift we expect for narrow-moat peers Hilton and Marriott, which have more exposure to travel broadening out to group, business, and international from leisure travel, which led the recovery. Beyond this year, we see a mid-single-digit revPAR average annual increase in 2024-27 for Choice, as the firm benefits from remote work flexibility and a U.S. onshoring and infrastructure rebuild, boosting its interstate and extended-stay portfolio.