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Here's Why You Should Retain Choice Hotels' (CHH) Stock
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Choice Hotels International, Inc. (CHH - Free Report) is likely to benefit from improvements in business and group travel demand, expansion efforts and domestic franchise agreements. This along with a focus on the upscale portfolio bodes well. However, pandemic-induced disruptions and demand volatility are a concern.
Let us discuss the factors that highlight why investors should retain the stock for the time being.
Growth Catalysts
Image Source: Zacks Investment Research
Shares of Choice Hotels have gained 24.4% in the past year against the industry’s fall of 10.9%. The company is benefiting from sequential improvements in its business and group travel demand owing to a rise in extended vacations, household relocations and temporary remote work assignments. The transition of leisure travel into mainstream business added to the positives. Backed by the positive trends coupled with the segment-specific tailwinds, the company stated that RevPAR and adjusted EBITDA had surpassed 2019 levels. Going forward, the company anticipates business and group travel demand to strengthen and serve as a catalyst for its portfolio.
Choice Hotels relies heavily on expansion in both domestic and international markets. In 2021, the company awarded 528 domestic franchise agreements, reflecting a rise of 24% year over year. During the year, demand for conversion hotels increased 17% year over year. Coming to the extended-stay portfolio, the company witnessed rapid expansion, thereby reaching 474 domestic hotels as of Dec 31, 2021. This highlighted an increase of 6% on a year-over-year basis. The domestic extended-stay pipeline comprised 340 hotels awaiting conversion, under construction or approval for development. Relatively new to the midscale portfolio, Clarion Pointe — part of the popular Clarion brand — is experiencing great success. Clarion Point brand is resonating well with guests. Currently, the brand has 43 hotels open in the United States and 33 additional hotels awaiting conversion this year.
The company continues to focus on franchising as it intends to facilitate ROE expansion and earnings growth in the long term. Emphasis on pricing optimization and merchandising capabilities bodes well. As of Dec 31, 2021, the company had 880 hotels, with 75,000 rooms under construction, awaiting approval for development in its domestic system. In fourth-quarter 2021, domestic franchise agreements for new construction hotels rose 60% year over year. As of Dec 31, 2021, the company had 7,030 franchised hotels.
Choice Hotels’ Ascend portfolio has been doing solid business. Ascend has significantly outperformed the upscale soft brands (as well as the segment on the whole) in terms of year-over-year RevPAR change. The brand has been well received on account of smart-conversion opportunities. As of Dec 31, 2021, the number of domestic units in the company's upscale portfolio expanded 13% year over year, driven by an increase in the unit count for the Cambria Hotels brand and Ascend Hotel Collection. During fourth-quarter 2021, the company broke ground for four Cambria projects, thereby bringing the total unit count to 57. Backed by solid consumer confidence as well as the attractiveness of Choice Hotels’ value proposition, the company anticipates boosting the revenue intensity of its system by adding more properties. In 2022, the company expects to open 10 additional Cambria hotels.
Concerns
The coronavirus crisis continues to cause disruptions to the global economy and the hospitality industry. Consequently, reduced travel and demand for hotel rooms have affected the company for some time. Although the company commenced with the recovery process, we believe that the emergence of the new COVID-19 variant is likely to create volatility in demand. Going forward, the company is cautious in this regard as rising infections may trigger disruptions again.
Funko sports a Zacks Rank #1 (Strong Buy). The company has a trailing four-quarter earnings surprise of 96.2%, on average. Shares of the company have increased 18.3% in the past year.
The Zacks Consensus Estimate for Funko’s current financial-year sales and earnings per share (EPS) suggests growth of 22.7% and 22.5%, respectively, from the year-ago period’s levels.
Bluegreen Vacations sports a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 425.1%, on average. Shares of the company have surged 50.6% in the past year.
The Zacks Consensus Estimate for Bluegreen Vacations’ current financial-year sales and EPS indicates growth of 7.9% and 5.7%, respectively, from the year-ago period’s levels.
Marriott carries a Zacks Rank #2 (Buy). The company has a trailing four-quarter earnings surprise of 86.6%, on average. Shares of the company have gained 3.9% in the past year.
The Zacks Consensus Estimate for Marriott’s current financial-year sales and EPS indicates growth of 40.3% and 73%, respectively, from the year-ago period’s levels.
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Here's Why You Should Retain Choice Hotels' (CHH) Stock
Choice Hotels International, Inc. (CHH - Free Report) is likely to benefit from improvements in business and group travel demand, expansion efforts and domestic franchise agreements. This along with a focus on the upscale portfolio bodes well. However, pandemic-induced disruptions and demand volatility are a concern.
Let us discuss the factors that highlight why investors should retain the stock for the time being.
Growth Catalysts
Image Source: Zacks Investment Research
Shares of Choice Hotels have gained 24.4% in the past year against the industry’s fall of 10.9%. The company is benefiting from sequential improvements in its business and group travel demand owing to a rise in extended vacations, household relocations and temporary remote work assignments. The transition of leisure travel into mainstream business added to the positives. Backed by the positive trends coupled with the segment-specific tailwinds, the company stated that RevPAR and adjusted EBITDA had surpassed 2019 levels. Going forward, the company anticipates business and group travel demand to strengthen and serve as a catalyst for its portfolio.
Choice Hotels relies heavily on expansion in both domestic and international markets. In 2021, the company awarded 528 domestic franchise agreements, reflecting a rise of 24% year over year. During the year, demand for conversion hotels increased 17% year over year. Coming to the extended-stay portfolio, the company witnessed rapid expansion, thereby reaching 474 domestic hotels as of Dec 31, 2021. This highlighted an increase of 6% on a year-over-year basis. The domestic extended-stay pipeline comprised 340 hotels awaiting conversion, under construction or approval for development. Relatively new to the midscale portfolio, Clarion Pointe — part of the popular Clarion brand — is experiencing great success. Clarion Point brand is resonating well with guests. Currently, the brand has 43 hotels open in the United States and 33 additional hotels awaiting conversion this year.
The company continues to focus on franchising as it intends to facilitate ROE expansion and earnings growth in the long term. Emphasis on pricing optimization and merchandising capabilities bodes well. As of Dec 31, 2021, the company had 880 hotels, with 75,000 rooms under construction, awaiting approval for development in its domestic system. In fourth-quarter 2021, domestic franchise agreements for new construction hotels rose 60% year over year. As of Dec 31, 2021, the company had 7,030 franchised hotels.
Choice Hotels’ Ascend portfolio has been doing solid business. Ascend has significantly outperformed the upscale soft brands (as well as the segment on the whole) in terms of year-over-year RevPAR change. The brand has been well received on account of smart-conversion opportunities. As of Dec 31, 2021, the number of domestic units in the company's upscale portfolio expanded 13% year over year, driven by an increase in the unit count for the Cambria Hotels brand and Ascend Hotel Collection. During fourth-quarter 2021, the company broke ground for four Cambria projects, thereby bringing the total unit count to 57. Backed by solid consumer confidence as well as the attractiveness of Choice Hotels’ value proposition, the company anticipates boosting the revenue intensity of its system by adding more properties. In 2022, the company expects to open 10 additional Cambria hotels.
Concerns
The coronavirus crisis continues to cause disruptions to the global economy and the hospitality industry. Consequently, reduced travel and demand for hotel rooms have affected the company for some time. Although the company commenced with the recovery process, we believe that the emergence of the new COVID-19 variant is likely to create volatility in demand. Going forward, the company is cautious in this regard as rising infections may trigger disruptions again.
Zacks Rank & Key Picks
Choice Hotels' currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1Rank (Strong Buy) stocks here.
Some better-ranked stocks in the Consumer Discretionary sector include Funko, Inc. (FNKO - Free Report) , Bluegreen Vacations Holding Corporation and Marriott International, Inc. (MAR - Free Report) .
Funko sports a Zacks Rank #1 (Strong Buy). The company has a trailing four-quarter earnings surprise of 96.2%, on average. Shares of the company have increased 18.3% in the past year.
The Zacks Consensus Estimate for Funko’s current financial-year sales and earnings per share (EPS) suggests growth of 22.7% and 22.5%, respectively, from the year-ago period’s levels.
Bluegreen Vacations sports a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 425.1%, on average. Shares of the company have surged 50.6% in the past year.
The Zacks Consensus Estimate for Bluegreen Vacations’ current financial-year sales and EPS indicates growth of 7.9% and 5.7%, respectively, from the year-ago period’s levels.
Marriott carries a Zacks Rank #2 (Buy). The company has a trailing four-quarter earnings surprise of 86.6%, on average. Shares of the company have gained 3.9% in the past year.
The Zacks Consensus Estimate for Marriott’s current financial-year sales and EPS indicates growth of 40.3% and 73%, respectively, from the year-ago period’s levels.