Back to top

Image: Bigstock

Choice Hotels Continues to Expand Brands, Eyes Revenue Growth

Read MoreHide Full Article

Choice Hotels International, Inc. (CHH - Free Report) continues to expand through franchise agreements. To this end, the company recently announced that it has strengthened its mid-scale presence by opening the Clarion Hotel The Hub in Oslo. This is the largest hotel in the company’s portfolio as well as in the city.

The company’s Cambria hotels also signed an agreement with Koucar Management to build hotels in Detroit and Portland in 2020 and 2021. The unit growth will be supported by Detroit’s downtown businesses, which have seen a surge in investment and steady rise in average daily rate. Portland is one of the country’s largest destinations in terms of tourist count.

Coming to Comfort Hotels, Choice Hotels continues to drive growth with seven openings in coastal U.S. states. More than 60 Comfort Hotels are slated to open this year in major markets along with almost 300 hotels in pipeline, of which 80% are new construction.

Brand Strengthening and Geographical Expansion

Choice Hotels relies heavily on expansion in domestic as well as international markets. In the fourth quarter, this hotelier awarded 73 total franchise agreements out of which 43 were domestic and 30 international. Alongside domestic growth, the company continues to expand its international footprint — the key markets being Spain, Colombia, Panama, the Caribbean and Canada.

Moreover, the company strengthened its mid-scale presence with the launch of Clarion Pointe. The brand is expected to expand through 21 Clarion Pointe franchise agreements. Meanwhile, last year, the company announced an alliance with Sercotel, a leading hotel operator and franchisor in Spain. This alliance will fortify Choice Hotels’ global footprint in Spain and other markets as well as open up opportunities for hotel development in Europe and Latin America.

Our Take

Notably, 99% of Choice Hotels’ revenues come from the franchise business. The number of domestic franchised hotels and rooms increased 6.6% and 9%, respectively, in 2018.

The Cambria brand has more than 40 hotels across the United States, with plans to expand in prime markets this year. This will help the brand meet another milestone with 50 coast to coast hotel openings in 2019. Meanwhile, the Comfort brand has more than 700 hotels, with over 170 hotels having installed new signs, while over 450 hotels are in the process of obtaining new signage.

We also believe that the continual addition of hotels will help Choice Hotels fend off intense competition from the likes of Marriott (MAR - Free Report) , Hilton (HLT - Free Report) and Hyatt (H - Free Report) .

Notably, shares of the company has lost 4.8% over the past year. However, it has outperformed the overall industry’s decline of 16.3%.

Choice Hotels currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Today's Best Stocks from Zacks

Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2018, while the S&P 500 gained +15.8%, five of our screens returned +38.0%, +61.3%, +61.6%, +68.1%, and +98.3%.

This outperformance has not just been a recent phenomenon. From 2000 – 2018, while the S&P averaged +4.8% per year, our top strategies averaged up to +56.2% per year.

See their latest picks free >>