Choice Hotels executives on the company’s third-quarter earnings call said recent natural disasters could affect fourth-quarter and full-year RevPAR numbers.
ROCKVILLE, Maryland—Choice Hotels International executives gave a larger revenue-per-available-room guidance range during the company’s third-quarter earnings call due to factors including recent natural disasters.
Asked why Choice decided on a RevPAR outlook in the 200-basis-point range, CFO Dominic Dragisich said “it had a lot to do with the puts and takes.”
Because the company’s portfolio is “somewhat underpenetrated” in the Texas market, executives didn’t see the demand lift that some of Choice’s competitors did during Q3 from hurricane evacuees and relief workers, he said.
“There is a little bit of noise obviously with some of these hurricanes,” he added. “So we did want to guide to a slightly higher range.”
According to Choice’s third-quarter earnings release, RevPAR is expected to increase between 1% and 3% in the fourth quarter and 2% to 3% for full-year 2017.
As of press time, Choice stocks were up 32.7% year to date. The Baird/STR Stock Index was up 32% for the same time period.
Development, lending environment
There’s been talk of a more difficult lending environment in the development community, but an analyst on the call noted that Choice executives’ comments and the company’s pipeline statistics seem to suggest that its conversations around lending are fairly positive.
On his first call as president and CEO of the company, Pat Pacious said he’s seeing that developers are still able to get financing.
“A lot of our developers are (increasingly going to) local banks, regional banks for financing and friends and family to get their deals done,” he said. “So the lending environment and the ability to get hotels financed still continues to be pretty positive.”
He added that Choice has yet to see any indications of a cycle peak.
“As far as industry supply goes … north of 2% is where, historically, the lodging cycle has begun to peak,” he said. “We’re still below that at this point and trying to predict when that number is going to crest that 2% is a little bit difficult. But we don’t see anything really in the next 12, 18 months that would tell us we’re reaching that point.”
There were 133 new domestic franchised hotel contracts executed in the third quarter, according to the company’s earnings release. Choice’s new domestic franchise agreements for its upscale brands, Cambria Hotels and Ascend Collection, totaled 24 contracts executed, which is a 71% increase from the same period in 2016.
As of 30 September, Choice’s new construction domestic pipeline totaled 530 hotels.
There are a lot of new soft brands entering the space, but Pacious told analysts on the call that the Ascend Collection isn’t seeing any impact from competitors.
“As you can see by the numbers, Ascend continues to be a great value proposition for developers,” he said. “We’re seeing a lot of new construction coming into the Ascend brand, which is really interesting. In addition to the conversion of existing (lifestyle/boutique) hotels, we’re expecting to open 45 of those this year.”