Choice Hotels Extended Stay Brand Outpaces Industry Occupancy

The hotel industry is grappling with the negative impact of the coronavirus outbreak. However, Choice Hotels International, Inc.’s CHH brands — including WoodSpring Suites, Suburban Extended Stay, MainStay Suites and Everhome Suites — have performed significantly well amid the ongoing crisis.

Solid Performance of Extended Stay Portfolio

In March and April, the company's Extended Stay brands witnessed an average occupancy level of approximately 68% and 60% compared with the U.S. hotel industry average of approximately 40% and 25%, respectively.

In May, the company’s average occupancy rate stood at 67%. During this period, its WoodSpring Suites brand achieved an average occupancy rate of more than 70%, thereby reinforcing its consistency for high operating margin potential.

Nonetheless, RevPAR (for Extended Stay brands) in March and April declined approximately 14% and 29% compared with the industry-wide RevPAR decline of nearly 52% and 80%, respectively.

Ron Burgett, senior vice president, franchise development, Extended Stay, Choice Hotels stated, "Our extended stay brands continue to show that our proprietary operating model helps drive occupancy rates and deliver a higher return on investment for developers in practically any economic environment."

Notably, the company’s shares have gained 47.9% in the past three months compared with the industry’s 31% growth.

 

 

Unit Expansion Bodes Well

Choice Hotels has opened 17 Extended Stay hotels so far this year, which includes 11 new WoodSpring hotels, and six new hotels across the MainStay Suites and Suburban Extended Stay brands. The company also stated that it has 300 hotels in the pipeline.

Strategic Measures to Tide Over Coronavirus Crisis

To alleviate the financial impacts of the COVID-19 pandemic, the company has taken certain actions to reduce operating expenses. Notably, the CEO and the board of directors agreed to a pay cut for 2020. The board also decided to temporarily furlough part of its corporate workforce in Europe. Also, non-essential and discretionary capital expenditure was eliminated.

Despite the virus outbreak-led catastrophe and financial impact, the company appears resilient enough to navigate through the uncertain times.

Choice Hotels — which shares space with Hilton Worldwide Holdings Inc. HLT, Extended Stay America, Inc. STAY and Hyatt Hotels Corporation H in the Zacks Hotels and Motels industry — has a Zacks Rank #3 (Hold) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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