Choice Hotels is experiencing a robust increase in its domestic pipeline, fueled by a significant uptick in conversion rooms. The company reported a 65% year-over-year increase in these conversion rooms during Q2, reflecting a strong market demand for converting existing properties rather than building new ones. This trend is evident in the company's current domestic pipeline, where approximately 36% consists of hotel conversions.
Expanding Conversions and Developer Interest
The trend towards conversions is clear when looking at the franchise agreements Choice awarded up to June 30. A remarkable 82% of these agreements were for conversion hotels. This statistic highlights a continued interest from developers in conversion projects as a viable alternative to new construction.
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In May, Choice relaunched the Park Inn by Radisson brand, positioning it as a cutting-edge conversion brand. This repositioning is part of Choice's broader strategy to strengthen its presence in the upscale segment. The relaunch has been met with a strong initial response, with 19 global franchise agreements already in place and five hotels operating in the U.S. and Canada by the end of June.
Conversion hotels were also a key driver of pipeline growth for Choice in the first quarter of 2024. The momentum in conversions is further bolstered by increasing developer interest in Choice's extended stay and midscale new construction brands. According to the latest earnings report, 89% of the domestic franchise agreements awarded in the first half of the year were for the company's upscale, extended stay, and midscale brands.
Strong Performance in Extended Stay and Midscale Segments
Choice Hotels' extended stay brands are making notable strides, particularly the WoodSpring Suites brand, which saw a 10% year-over-year increase in its unit count during Q2. WoodSpring Suites has also earned high marks for guest satisfaction, ranking No. 1 among economy extended stay hotel brands in the J.D. Power 2024 North America Hotel Guest Satisfaction Index Study.
Similarly, Choice's midscale extended stay brand, Everhome Suites, expanded in the second quarter with several new developments and openings across the U.S. This growth underscores the company's successful strategy in the extended stay segment, catering to the needs of both business and leisure travelers looking for longer-term accommodations.
Financial Growth Accompanies Strategic Expansions
Beyond its development achievements, Choice Hotels also reported positive financial performance in the second quarter. Total revenues increased by 2% year-over-year, while adjusted EBITDA rose by 6%, reaching a quarterly record of $161.7 million. This financial growth reflects the company's effective strategy in both expanding its portfolio through conversions and meeting the evolving demands of travelers across various segments.
In summary, Choice Hotels' focus on conversions and extended stay offerings has not only driven significant pipeline growth but has also positioned the company for continued success in an increasingly competitive market. The company's ability to adapt and innovate in response to industry trends is a testament to its strong leadership and forward-thinking strategy.
Source: Hotel Dive