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Choice Hotels Plans to Expand Cambria Brand, Eyes Unit Growth

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Choice Hotels International, Inc. (CHH - Free Report) plans to open two Cambria Hotels in the Midwestern States. To this end, the company recently signed franchise agreements with Lloyd Hospitality and MWA LLC to open Cambria Hotels in Kansas City, MO, and Indianapolis, Indiana, IN, respectively. Notably, these hotels are slated to open in 2021.

Notably, these hotel openings are helping the company to consistently expand its up-scale presence.

The five-storied, 148-roomed Cambria Indianapolis Downtown will be the company’s third property in Indiana. The hotel will be in close proximity to Interstate 70 and Indianapolis International Airport. Also, headquarters of several corporations namely Anthem, the NCAA and Rolls Royce North America as well as Lucas Oil Stadium and the Indiana Convention Center, which are the Midwest’s largest event places, will be a few minutes away from the property.

Meanwhile, the six-storied, 149-roomed Cambria Kansas City – Downtown, will be the first hotel in Missouri.  Choice Hotels is confident about the success of this new property as it will offer guests an easy access to the area’s popular restaurants, shops, Sprint Center, the KC Convention Center and KC Live. Additionally, the Riverfront Heritage Trail situated nearby will provide its guests with an opportunity to wander along the Missouri River.

Strategic Expansion to Drive Growth

Alongside domestic growth, Choice Hotels continues to expand its international footprint in new countries. Key international operating markets include Spain, Colombia, Panama, the Caribbean and Canada.

Recently, Choice Hotels also announced the opening of Cambria Hotel Fort Mill — an upscale brand under its Cambria brand. Notably, this four-story, 127-roomed property is the company’s third hotel under the Cambria brand in South Carolina, which is situated just a few miles from the state line of Charlotte, NC. The hotel was developed by Weinstein Development Company and FHF Hotel, LLC.

Moreover, Choice Hotels strengthened its presence with the launch of Clarion Pointe. Expansion of the brand is expected through 21 Clarion Pointe franchise agreements.

Last year, the company announced an alliance with Sercotel — a leading hotel operator and franchisor based in Spain. This alliance will enable the extension of Choice Hotels’ global footprint in Spain and other markets as well as the creation of opportunities for additional hotel development across Europe and Latin America.

In fact, the Cambria brand has been doing solid business. In second-quarter 2019, Cambria's RevPAR increased 2.2%, which outpaced the industry and the upscale chain scale by 110 and 260 basis points, respectively. Also, Cambria’s pipeline expanded to 82 hotels in the same period.

Impressively, the year 2019 is turning out to be an exceptional one for Cambria and the brand has already opened six hotels. It intends to open seven more hotels, with over 1,100 rooms in top-tier markets before the year-end. Notably, Choice Hotels is on track to break its openings record. To this end, it will be soon opening new properties in Anaheim and South Boston.

Backed by solid expansion strategies and a strong brand presence, shares of Choice Hotels have gained 24.1% so far this year, comparing favorably with the industry’s 18.2% rally.

That said, the hotel openings will drive revenues. The company’s revenues have improved over the past few quarters. In second-quarter 2019, total revenues came in at $317.7 million, up 8% from the year-ago quarter and outpaced the Zacks Consensus Estimate of $303 million by 4.8%.

Zacks Rank & Other Key Picks

Currently, Choice Hotels carries a Zacks Rank #2 (Buy). A few other top-ranked stocks from the same space are Wyndham Destinations, Inc. (WYND - Free Report) , American Woodmark Corporation (AMWD - Free Report) and Bright Horizons Family Solutions Inc. (BFAM - Free Report) , each carrying a Zacks Rank of 2. You can the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Wyndham reported an average earnings surprise of 6.5% in the trailing four quarters.

Shares of American have gained 53.1% so far this year.

Bright Horizons has an impressive long-term earnings growth rate of 10.1%.

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