Choice Hotels International Inc CHH

Choice's Near-Term Demand Pressured by a Weaker Consumer, but Brand Advantage Remains Intact

While the coronavirus had a material impact on Choice's 2020 demand, the company's US leisure-based portfolio (which represents around 70% of nights) saw a full return to 2019 revenue per available room levels in 2021. Although near-term demand is under pressure due to waning consumer savings, we expect the narrow-moat company to gradually expand room share in the hotel industry in the next decade, with its keys increasing 2% on average annually, above the 1%-2% supply lift we estimate for the US industry during that time. This growth is supported by a rejuvenated Comfort brand (27% of 2023 total domestic rooms), newer Cambria, Ascend, and Everhome concepts (7% combined), its extended-stay brand WoodSpring (6%), the acquisition of the Radisson brand in 2022, and a solid loyalty program with 66 million members as of June 30, 2024, up from 44 million in 2019. Overall, Choice holds around 2% global hotel revenue share, ranking it sixth in the industry.