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08/17/2021

Choice Hotels Posts Strong Q2 2021 Results

Investing in better technology and positioning itself to take advantage of changing consumer habits has helped the brand recover faster than competitors.
Michal Christine Escobar
Senior Editor (Hotels)
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During its Q2 2021 earnings call, Choice Hotels President and CEO Patrick Pacious said the brand had “once again significantly outperformed the industry and gained share across all segment in which we compete.”

In particular, he mentioned that June and July RevPAR results exceeded 2019 levels by approximately 5% and 15% respectively. This happened, according to Pacious, through notable lift in both weekday and weekend RevPAR index and “illustrates that our strategic investments are working and gives us further optimism about our future revenue trajectory.”

Giving more color on these results, CFO Dominic Dragisich reported that June RevPAR results were driven by a nearly 3% increase in ADR and 2% point increase in occupancy. Meanwhile, July’s RevPAR growth was driven by occupancy levels of 70% and an ADR increase of 10% versus 2019 levels.

“In fact, July RevPAR for our upscale, extended-stay, upper mid scale, mid scale and economy segments all surpassed 2019 pre-pandemic levels. And we saw month over month acceleration in performance across all of our segments,” he added.

Choice Invests in Tech

While many of the enhancements Pacious mentioned had to do with launching and enhancing its brands. He also mentioned important technology investments.

“We're also improving our guest delivery at the hotel level, while strengthening our marketing and reservation systems and franchisee tools that have contributed to the outperformance our brands are demonstrating,” Pacious added.

For example, the company enhanced its pricing and merchandising tools to help franchise owners reach their target customers and effectively drive top line revenue.

“Thanks to these tools, we were successful in swiftly executing our pricing strategy and optimizing rate delivery, which resulted in significant average daily rate gains,” Pacious noted. “The company is currently outpacing the rate recovery seen following prior recessions. And our owners are very pleased with the new pricing tool [because it has] helped drive their top line outperformance versus competitors.”

Additionally, the company recorded nine of its top 10 all-time highest booking days for choicehotels.com and other proprietary digital channels in the last two months specifically because of its digital enhancements and distribution capabilities.

Capitalizing on New Trends

Pacious attributed much of the company’s success to its anticipation of new long-term consumer demographic trends. For example, Americans rediscovering domestic destinations and the continued rise of road trips. But beyond that, Choice is also looking to the rise of work from anywhere and an increase in workers retiring early. These trends give Americans much more flexibility when it comes to where and when they travel.

“The pandemic has only accelerated these trends,” Pacious said. “We believe that our business will therefore benefit in an outsized way from additional travel demand coming to our key segments.”

Choice Benefits from Loyal Members

Pacious also pointed out that its 49 million Choice Privileges members have been a boon to the company as well. For instance, they’ve contributed to a higher percentage of overall revenue for Q2 2021 when compared to 2019. And the company’s loyalty program seems to be resonating with guests. Pacious noted that it was seeing an increase in domestic loyalty program sign-ups in Q2 2021 compared to 2019.

Business and Leisure Travel Trends

According to Pacious, customers are not only planning their travel further in advance but also are staying longer. Like most brands, Choice has seen its leisure customers return first, but its also continuing to see momentum in its business travel trends.

“We have seen sequential quarter over quarter and month over month increases in our business travel booking trends in the second quarter 2021,” Pacious stated. “Likewise, with our recent refresh of the Comfort brand family and further upscale penetration, we are well positioned not only to recover our existing business customers but to expand our guest base as business travel rebounds.”

Pacious was also optimistic about group travel bookings, noting that they had reached 90% of its 2019 level in the first half of the year.