Choice Hotels (CHH) Boosts Ascend Line-up With New Agreement
Choice Hotels International, Inc.’s CHH Ascend brand recently announced an agreement with The Brittano Group, Inc. to develop The Rook Hotels in South Boston, Virginia. The company expects to open the property in the summer of 2024.
Nestled in the heart of South Boston's downtown district, the four-story, 37-room boutique property will offer a range of experiences along with Ascend brand’s services and amenities. This includes a full-service restaurant, rooftop bar and event center. It also offers convenient access to leisure attractions.
Concerning the property, John Lancaster, vice president, emerging markets, franchise development and owner relationships, Choice Hotels International, stated, "We look forward to working with The Brittano Group, Inc. as we celebrate another milestone for this important initiative with the first Ascend hotel being developed through this one-of-a-kind program."
Emphasis on Franchise Business & Expansions
Choice Hotels gains from economies of scale associated with the franchise business. Accordingly, higher fees from franchisees and transference of cost burden to franchises provide the company with operational advantages. Apart from royalty fees and procurement-services revenues, Choice Hotels also collect marketing and reservation system fees to provide support activities to the franchise system. We believe that franchising will facilitate ROE expansion and earnings growth over the long term.
During the third quarter of 2022, the company awarded 123 domestic franchise agreements to legacy Choice brands compared with 89 franchising agreements reported in the prior-year quarter. As of Sep 30, 2022, the company’s total domestic pipeline of hotels awaiting conversion, under construction or approved for development reached 1,017 hotels (representing over 98,000 rooms), up 16% rise on a year-over-year basis. Year to date (through Sep 30, 2022), new applications for domestic franchise agreements increased 23% year over year.
The company is optimistic with respect to its expansion strategies through acquisitions and franchise agreements. The company revealed plans to open additional Ascend hotels in destinations including Orlando, Florida; Sutter Creek, California; Lake Charles, Louisiana and Puerto Rico.
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In the past six months, shares of Choice Hotels have gained 6.6% compared with the industry’s 11.8% growth.
Zacks Rank & Key Picks
Choice Hotels currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some better-ranked stocks in the Zacks Consumer Discretionary sector are World Wrestling Entertainment, Inc. WWE, Hilton Grand Vacations Inc. HGV and Royal Caribbean Cruises Ltd. RCL.
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The Zacks Consensus Estimate for WWE’s 2023 sales and earnings per share (EPS) indicates a rise of 4.9% and 10.7%, respectively, from the year-ago period’s estimated levels.
Hilton Grand Vacations carries a Zacks Rank #2 (Buy). HGV has a trailing four-quarter earnings surprise of 3.7%, on average. Shares of HGV have declined 16.4% in the past year.
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Royal Caribbean currently carries a Zacks Rank #2. RCL has a trailing four-quarter earnings surprise of negative 1.8%, on average. Shares of RCL have declined 29.1% in the past year.
The Zacks Consensus Estimate for RCL’s 2023 sales and EPS indicates a rise of 43.6% and 138.3%, respectively, from the year-ago levels.
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