Choice Hotels Narrows Its Revenue Gap, but Its Upscale Brands Still Trail
CEO Dom Dragisich reports U.S. RevPAR grew 3.8% ahead of forecasts, though upscale brands continue to lag behind industry averages.
Stock photo for illustration only, not from the actual event
- U.S. RevPAR grew 3.8%, beating Wall Street forecasts by about 1.5 percentage points
- Budget brands outperformed the industry, growing 3.5% against a 2.5% market average
- Upscale and above brands grew just 1.1%, trailing the roughly 4% industry benchmark
- The company is shifting asset-light by selling two owned hotels and buying Harvest Hosts
Choice Hotels' latest financial results under CEO Dominic Dragisich highlight early signs of progress within its budget hotel portfolio, even as higher-priced tiers face ongoing struggles. U.S. revenue per available room, or RevPAR, increased by 3.8%, coming in roughly 1.5 percentage points above Wall Street expectations. Dragisich also noted during a Monday earnings call that RevPAR for October reached approximately 7%.
However, performance varied significantly across different price points. According to Truist Securities citing CoStar data, Choice's economy brands outpaced the broader U.S. industry with a 3.5% RevPAR growth compared to the industry's 2.5%. Conversely, its upscale and higher-tier brands grew by a mere 1.1%, falling short of the roughly 4% industry average, while midscale and upper-midscale segments grew 3.6% against a 4.5% market benchmark. Analysts C. Patrick Scholes and Gregory Miller suggested these figures imply the company continues to lose market share.
Stock photo for illustration only, not from the actual event
Back in August, Dragisich's primary hurdle was that Choice lagged behind competitors across every tier from economy to upscale. While the third-quarter results improved the overall picture, they did not completely erase those challenges. Acknowledging the relative performance against industry benchmarks, the chief executive offered a candid assessment.
"We did narrow the gap."
Dominic Dragisich
In terms of corporate strategy, Choice Hotels is actively pushing toward an asset-light model. The firm took a $24 million charge to terminate an option for acquiring an unnamed European hospitality business after the arrangement shifted into an obligation. Furthermore, Choice sold two owned hotels for about $34 million in net proceeds while retaining their franchise agreements, leaving the company with 17 owned properties. This follows its October 1 acquisition of RV membership club Harvest Hosts for roughly $130 million as part of its organic growth push.
The strong performance in Choice Hotels' budget segment underscores consumer price sensitivity and resilient demand in the economy travel tier. Meanwhile, the underperformance in upscale properties highlights the fierce competition in higher-end hospitality where travelers have an abundance of alternatives. Transitioning toward an asset-light structure allows the company to minimize heavy real estate exposure and focus primarily on high-margin franchise fees.
Source: Skift
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