Choice Hotels International: Trailblazing Extended-Stay Conversions
Choice Hotels International's Innovative Approach to Extended-Stay Hotels
Choice Hotels International, Inc. (NYSE: CHH) is making significant strides in the hospitality industry, particularly through its strategic focus on extended-stay conversions. The company's expertise in converting top-tier hotels into vibrant extended-stay properties is contributing to its growth and expanding its presence in the market.
From the beginning of the year until mid-September, CHH successfully launched 17 MainStay Suites and Suburban Studios hotels. Impressively, 16 of these locations were transformations from existing properties, with the transition time averaging only around 120 days. Key markets for these openings included dynamic areas such as Las Vegas, Moreno Valley, Orlando, and Tampa.
Looking ahead, nearly half of the 70 hotels currently in the pipeline for MainStay Suites and Suburban Studios are also conversions, with anticipated openings scheduled between late 2024 and early 2025, marking a continued trend in CHH's expansion within this segment.
MainStay Suites and Suburban Studios: A Home Away From Home
MainStay Suites and Suburban Studios are two proprietary brands of Choice Hotels that successfully combine the comforts of home with the convenience of hotel accommodations. Each room is equipped with a full kitchen, which includes nearly every essential appliance, making it an appealing choice for various travelers.
The MainStay Suites typically cater to a diverse guest profile, including sports teams, medical professionals, business travelers, military personnel, and those relocating or undergoing renovations. Conversely, Suburban Studios tends to attract blue-collar workers, seasonal laborers, and families, showcasing CHH's ability to meet different needs across the population.
Growth of Choice Hotels in the Extended-Stay Segment
Choice Hotels has been gaining considerable momentum in the extended-stay sector, driven by a notable imbalance between the high demand and low supply of such hotels. This factor is instrumental in fueling the overall growth of the business.
At the core of the company's success in this market is its innovative "Kitchen-in-a-Box" concept. This design facilitates a quick and efficient transformation process from transient hotels to extended-stay accommodations, ensuring that each guest room includes a kitchen. With a typical conversion duration of just three to four months, hotel owners can swiftly adapt their offerings to meet this growing demand.
In the second quarter of 2024, CHH reported a remarkable 14% year-over-year increase in its domestic extended-stay unit system size. This growth across its brand portfolio positions the company well to achieve a long-term average annual growth rate of approximately 15%.
Evaluating CHH's Performance and Market Position
Over the year, shares of Choice Hotels have risen 15.3%, outperforming the industry average of 11.6%. This positive performance is attributed to a strong demand trajectory across its brand portfolio and the successful openings of extended-stay conversion hotels, alongside efforts to expand its market footprint internationally.
Furthermore, the positive trends in CHH's stock performance are reflected in the revised earnings estimates. The consensus estimate for third-quarter 2024 earnings per share has increased to $1.93 from $1.91 over a period of just 30 days, indicating a year-over-year growth of 6%.
Investment Potential and Comparisons
Currently, Choice Hotels holds a Zacks Rank #3 (Hold). In comparison, several well-ranked stocks within the Consumer Discretionary sector are also catching investor attention. For instance, Interface, Inc. (NASDAQ: TILE) boasts a Zacks Rank #1 (Strong Buy), with its stock soaring 88.7% over the past year, suggesting robust earnings potential.
Similarly, DoubleDown Interactive Co., Ltd. (NASDAQ: DDI) has also performed admirably, posting a trailing four-quarter earnings surprise of 22.1% on average. Another strong performer is Norwegian Cruise Line Holdings Ltd. (NYSE: NCLH), also ranked #1, showcasing the competitive dynamics of the hospitality and entertainment sectors.
Frequently Asked Questions
What is Choice Hotels International's stock ticker?
The stock ticker for Choice Hotels International is CHH, and it is listed on the NYSE.
What brands does Choice Hotels focus on in the extended-stay market?
Choice Hotels primarily focuses on MainStay Suites and Suburban Studios within the extended-stay market.
How many hotels did CHH launch in 2024?
In 2024, CHH launched a total of 17 new MainStay Suites and Suburban Studios hotels.
What growth rate is CHH targeting for its extended-stay segment?
CHH aims for a long-term average annual growth rate of approximately 15% across its extended-stay segment.
Which stock has shown the highest growth alongside CHH?
Interface, Inc. (NASDAQ: TILE) has shown significant growth, with a rise of 88.7% over the past year, along with CHH.
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