ROCKVILLE, Md. - Choice Hotels International, Inc. (NYSE: CHH), one of the world's largest lodging franchisors, today reported its results for the three and six months ended June 30, 2020.

"The resilience of our asset-light, franchise-focused business model, combined with our winning strategy to grow the right brands in the right markets, has allowed us to capture an outsized share of demand as Americans continue to return to travel," said Patrick Pacious, president and chief executive officer, Choice Hotels. "We believe that our predominantly leisure focus and strength in domestic drive-to markets will allow us to continue to outperform the overall industry during the recovery phase. We are optimistic that our long-term view, strong balance sheet, disciplined capital allocation strategy, proven brands and compelling franchisee value proposition will help us emerge from the crisis in a position of strength."

In the second quarter of 2020, Choice Hotels continued to implement efforts to provide a broad range of support to its franchisees, guests and communities while preserving the company's financial flexibility by bolstering liquidity and reducing discretionary spending. Highlights of second quarter and year-to-date 2020 results include:

  • As of July 31, 2020, nearly 100% of the company's 5,917 domestic hotels are operating. Even in April, when the effects of COVID-19 were felt most significantly in the industry, over 90% of Choice Hotels' domestic hotels remained open. In addition, 96% of the company's more than 1,200 international hotels were open as of July 31, 2020.
  • Domestic systemwide revenue per available room (RevPAR) declined 49.6% for second quarter 2020 compared to the same period of the prior year, outperforming the total industry by 2,030 basis points and exceeding the chain scale segments in which the company competes, as reported by STR. Domestic comparable RevPAR declined 48.6% for second quarter 2020 compared to the same period of the prior year, outperforming the total industry by 2,130 basis points.
  • The company's domestic effective royalty rate for second quarter 2020 increased 10 basis points over the prior year second quarter to 4.94%.
  • The company awarded 151 new domestic franchise agreements year to date through June 30, 2020, a 42% decrease compared to the same period of the prior year. Over 80% of the agreements were signed since mid-March and two-thirds of the agreements awarded in the first half of the year were for conversion hotels. The company built on its first half development performance with an additional 33 new domestic franchise agreements awarded in the month of July.
  • Net loss was $2.4 million for the second quarter, representing diluted net loss per share of $0.04.
  • Second quarter adjusted net income, excluding certain items described in Exhibit 6, decreased 90% to $6.7 million from second quarter 2019.
  • Adjusted earnings per share for the second quarter were $0.13, an 89% decrease from second quarter 2019.
  • Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) for the second quarter were $41.1 million, a 60% decrease from second quarter 2019.

Performance Trends

  • Domestic systemwide RevPAR decreased 49.6% for second quarter 2020 compared to the second quarter 2019, exceeding overall industry performance by 2,030 basis points. In the second quarter 2020, Choice Hotels outperformed the respective chain scales in which the company competes by 670 basis points.
  • Since the onset of the pandemic in mid-March through the end of July, Choice Hotels' domestic systemwide occupancy rates outperformed the industry by an average of nearly 565 basis points per week. The trough in the company's domestic systemwide occupancy rate was the week of April 5, 2020 at 28%, compared to the overall industry rate of 21%. The company's domestic systemwide occupancy rate has seen steady improvements since that time, reaching over 50% during the last week of June and continuing to rise into July (see Exhibit 7 for weekly occupancy trends).
  • In July, domestic systemwide RevPAR declined approximately 33% over the prior year comparable monthly period, with average weekly occupancy exceeding 53% during the week of July 26, 2020. Over half of the domestic portfolio achieved occupancy levels at or above 50% during the last week of July and trends of occupancy gains have been continuing into August.
  • The company's extended-stay portfolio has proven to be highly resilient, with average occupancy rates of 66% since the onset of pandemic in mid-March through June 30, 2020 — nearly double the industry average of 34%. Specifically, the WoodSpring Suites brand experienced occupancy levels of 69% in the second quarter, outperforming the industry by 3,570 basis points. WoodSpring Suites' occupancy levels have remained above 70% since mid-May and returned to prior year levels during the last week of July.
  • Nearly 90% of the company's domestic hotels are in suburban, small towns and interstate locations, which have reported higher occupancy levels and less significant RevPAR declines than other locations during the second quarter, driven by relatively stronger consumer demand for these destinations.

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About Choice Hotels®

Choice Hotels International, Inc. (NYSE: CHH) is one of the largest lodging franchisors in the world. The challenger in the upscale segment and a leader in midscale and extended stay, Choice® has over 7,500 hotels, representing more than 630,000 rooms, in 46 countries and territories. A diverse portfolio of 22 brands that range from full-service upper upscale properties to midscale, extended stay and economy enables Choice® to meet travelers' needs in more places and for more occasions while driving more value for franchise owners and shareholders. The award-winning Choice Privileges® rewards program and co-brand credit card options provide members with a fast and easy way to earn reward nights and personalized perks. For more information, visit www.choicehotels.com.

Forward-Looking Statements This communication includes "forward-looking statements" about future events, including anticipated development and hotel openings. Such statements are subject to numerous risks and uncertainties, including construction delays, availability and cost of financing and the other "Risk Factors" described in our Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q, any of which could cause actual results to be materially different from our expectations.

Scott Oaksmith
Senior Vice President, Real Estate and Finance
Choice