• Adjusted EBITDA: Increased 12% year-over-year to $604.1 million for full year 2024.
• Adjusted Earnings Per Share: Rose 13% year-over-year to $6.88 for full year 2024.
• Global Rooms Growth: Net increase of 3.3% year-over-year, with a 4.3% increase in domestic rooms.
• Hotel Openings: 21% more hotels opened worldwide in 2024 compared to the prior year.
• Domestic RevPAR: Increased 4.5% year-over-year in the fourth quarter.
• Business Transient Segment Growth: Grew 14% year-over-year in the fourth quarter.
• Group Sales Revenue: Increased over 45% year-over-year in the fourth quarter.
• Extended Stay Rooms Growth: Domestic extended-stay room system size grew by 10% year-over-year.
• Upscale Segment Growth: Global room system size increased by 44% year-over-year.
• Radisson Americas Franchise Agreements: Executed twice as many domestic franchise agreements in 2024 compared to 2023.
• International Adjusted EBITDA: Increased by 50% in the fourth quarter.
• Rewards Program Membership: Expanded to 69 million members, an 8% increase year-over-year.
• Adjusted Free Cash Flow: Generated over $390 million, a 13% year-over-year increase.
• Shareholder Returns: Returned over $435 million to shareholders in 2024, including $56 million in dividends and over $380 million in share repurchases.
• 2025 Adjusted EBITDA Outlook: Expected to range between $625 million and $640 million.
• 2025 Adjusted Earnings Per Share Outlook: Expected to range between $6.98 and $7.24.

• Warning! GuruFocus has detected 6 Warning Sign with CHH.

Release Date: February 20, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Choice Hotels International Inc (NYSE:CHH) exceeded the top end of their guidance with a 12% year-over-year increase in adjusted EBITDA and a 13% increase in adjusted earnings per share for 2024.
• The company realized a 3.3% year-over-year net increase in global rooms, with a 4.3% net increase in domestic routes, indicating strong growth in their more revenue-intense segments.
• Choice Hotels International Inc (NYSE:CHH) opened 21% more hotels worldwide in 2024 compared to the prior year, showcasing their ability to move hotels from the pipeline to open status efficiently.
• The company achieved record organic growth in their rewards program, expanding it to 69 million members, an 8% increase compared to the prior year.
• Choice Hotels International Inc (NYSE:CHH) reported a 45% year-over-year revenue increase from group accounts in the fourth quarter, driven by meetings and events-related travel, highlighting their success in capturing group business demand.

Negative Points

• The company's guidance for 2025 indicates a modest net global units and room system size growth of approximately 1% year-over-year, which may be seen as conservative given their recent momentum.
• Interest rates and elevated construction costs are impacting new hotel development, which could limit future growth opportunities.
• Despite strong EBITDA growth, the operating cash flow has not increased at the same rate, partly due to increased use of key money in a competitive environment.
• The company's effective royalty rate growth is expected to be in the mid-single digits for 2025, which may not fully capitalize on the potential of their expanded scale.
• Choice Hotels International Inc (NYSE:CHH) faces challenges in the hotel development environment, with new construction starts being affected by high interest rates and construction costs.

Q & A Highlights

Q: Can you explain the line items related to other revenues from franchise and managed properties? A: Scott Oaksmith, CFO, explained that the line item includes reimbursable and non-reimbursable revenues. In the quarter, $161 million was reimbursable, and just under $40 million was non-reimbursable, generating $14.5 million, up 16% year-over-year. The full year added about $63 million of EBITDA from non-reimbursable items, while the reimbursable side ran a deficit of about $18 million, which was better than the $35 million initially guided.

Q: What was the impact of the hurricane on Q4 RevPAR? A: Scott Oaksmith noted that the hurricane contributed about 125 basis points of lift in Q4 RevPAR, translating to roughly 30 basis points for the full year. The quarter saw a 4.5% increase in RevPAR, driven by business transient revenue up 14% and strong group business.

Q: How should we think about investment spending levels in 2025 compared to 2024? A: Patrick Pacious, CEO, stated that 2025 investments will focus on enhancing franchisee profitability, developing better tools for small and medium-sized business customers, and strengthening the rewards program. Investments are aimed at driving top-line revenue, reducing costs, and making it easier for franchisees to do business with Choice Hotels.

Q: What are the assumptions for net unit growth in 2025? A: Scott Oaksmith mentioned that international rooms are expected to grow slightly above 3%, while domestic growth will be slightly positive. The overall unit volume growth is projected to be around 1%, with a focus on revenue-intense units similar to 2024.

Q: Can you clarify the economics of the Westgate deal? A: Scott Oaksmith explained that the Westgate deal involves a distribution agreement with higher fees for reservations delivered than a typical franchise agreement. The blended rate will be slightly south of the average royalty rate but significantly higher than the 5% standard.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.