Choice Hotels(US:CHH)2023-02-15 19:17Financial Data and Key Metrics Changes - The company reported a 19% increase in adjusted EBITDA for full year 2022 compared to 2021, and a 28% increase compared to 2019, marking a record year for the company [65][87] - For Q4 2022, revenues excluding reimbursable revenue increased by 33% to $186 million, with adjusted EBITDA growing 18% to $112.5 million, and adjusted earnings per share rising 27% to $1.26 [88][89] - Domestic RevPAR increased by 20.4% in Q4 2022 compared to the same quarter in 2019, driven by a 17.4% increase in average daily rate and over one percentage point increase in occupancy [120] Business Line Data and Key Metrics Changes - The domestic pipeline increased by 14% year-over-year, reaching nearly 1,030 domestic hotels at year-end, with a 9% increase excluding Radisson Americas hotels [6] - The Upper Midscale segment grew by 24% year-over-year, reaching over 2,200 domestic hotels in 2022, while the Comfort brand has seen 12 consecutive quarters of unit growth [82] - The Extended Stay segment, particularly the Everhome Suites brand, is expected to grow significantly, with over 40 domestic franchise agreements awarded last year and 60 projects in the pipeline [81] Market Data and Key Metrics Changes - The company outperformed the industry in occupancy growth across all days of the week, with notable increases in leisure travel demand extending into shoulder days of the weekend [69] - The Radisson Americas portfolio contributed $41 million in revenues and $11.5 million in adjusted EBITDA for Q4 2022, indicating strong integration performance [119] - The company expects full year 2023 domestic RevPAR to increase approximately 2% compared to 2022, with an effective royalty rate projected to grow in the mid-single digits [120][121] Company Strategy and Development Direction - The company aims to grow its brand portfolio with hotels that generate higher royalties per unit, focusing on segments with significant growth potential such as Extended Stay and Upscale [66][84] - A new co-branded credit card program with Wells Fargo and Mastercard is expected to enhance guest engagement and drive incremental revenue [67] - The company is committed to sustainability efforts and has joined the Sustainable Hospitality Alliance to promote a more sustainable future [114] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to continue driving exceptional results, supported by strategic investments and a resilient business model [76][109] - The company anticipates additional tailwinds from business travelers in sectors such as healthcare and technology, particularly in light of the Radisson Americas acquisition [78] - The company expects to grow adjusted EBITDA by approximately 11% in 2023, with a significant contribution from the Radisson Americas business unit [125] Other Important Information - The company returned over $487 million to shareholders in 2022, including $53 million in cash dividends and $435 million in share repurchases [7] - The effective royalty rate exceeded 5% for both Q4 and full year 2022, increasing four basis points compared to the prior year [90] - The company maintains a strong balance sheet with a gross debt-to-EBITDA leverage ratio of 2.5 times, below its targeted range [124] Q&A Session Summary Question: What is the outlook for unit growth in the higher-tiered chain scales? - The company expects unit growth of around 1% this year, translating to about $4.5 million of earnings growth [127] Question: How much of the expected contribution from Radisson is revenue synergy versus expense synergy? - Most of the expected contribution will come from cost synergies, with revenue synergies anticipated to materialize in the latter months of 2023 and into 2024 [133] Question: What is the impact of economy units on overall growth? - Economy units are generally being removed from the system, often going independent, but the company expects to maintain 2023 royalty revenue at the same level as 2022 [136][123] Question: Does the 2% RevPAR guidance include mix benefits? - Yes, the 2% guidance includes mix benefits and is not a same-store growth figure [138]