Choice Hotels sees growth outpacing industry
NEW YORK (Reuters) - Choice Hotels International Inc (CHH.N) is on track to meet its target for a 3 percent increase in the number of its franchised hotels this year, the company's chief financial officer said on Wednesday.
That would outpace the Smith Travel Research forecast for unit growth in the economy to mid-scale segment of 2.4 percent.
Since travel demand is so highly correlated to the state of the overall economy, growth in the lodging sector "is really about stealing share from your competitors," Choice CFO David White said at the Reuters Travel and Leisure Summit in New York.
The company has forecast that its revenue per available room will drop 10 percent this year.
Choice is a pure-play hotel franchisor, unlike other publicly traded lodging companies like Starwood Hotels & Resorts Worldwide Inc (HOT.N), which derive most of their revenue from fees for managing hotels.
The company, with economy to mid-scale brands like Comfort Inn and EconoLodge, now holds about a 9.4 percent share of the U.S. hotel market.
"We deliver a lot of their top line," White said, explaining that about a third of Choice's franchisee gross room revenues come through central systems.
The CFO said he has no major concerns about the financial stability of current franchisees, although Choice has eliminated capital spending requirements for 2009 and is conducting free training for "streetwise tactics for tough times."
He said Choice managed to avoid adding on amenities like scented lobbies, and has allowed its owner/operators to cut back on things like coffee in the lobby and the number of towels in bathrooms.
Historically, about 70 percent of the company's unit growth has come from conversion of existing hotels to its brands, while 30 percent has come from new construction, where the credit crunch has slowed some larger hotel projects.
"It is less of a problem in the segment we operate in where the total enterprise values are less than a New York City full-service hotel, because our franchisees tend to be owner-operators who have strong relationships with local and regional banks," White said.
The CFO also said Choice would consider expansion into the higher end hotel market.
"We would look at other brands, if they became available," he said.
(Editing by Phil Berlowitz)
