Choice Hotels International, Inc.’s CHH shares have soared 20.8% in the past six months, significantly outperforming the industry and the S&P 500’s growth of 14% and 6.4%, respectively. This impressive rally is driven by the company’s robust unit growth, a rapidly expanding global pipeline and surging demand across its portfolio, solidifying CHH’s position as a leader in the hospitality sector.
On Tuesday, the stock closed at $141.98, 7.7% below its 52-week high but 30.4% above of 52-week low. In the past six months, CHH outperformed industry players like Hyatt Hotels Corporation H, Marriott International, Inc. MAR and Hilton Worldwide Holdings Inc.’s HLT rise of 5%, 16.1% and 14.4%, respectively.
Price Performance of CHH
Image Source: Zacks Investment Research
Technical indicators imply CHH's continued strong performance. The stock is trading above its 100-day moving average, signaling robust upward momentum and price stability. This technical strength underscores positive market sentiment and confidence in CHH's financial health and prospects.
Factors Favoring CHH Stock
Choice Hotels’ riveting growth potential depends on the continual expansion of its brands. The company’s portfolio of well-segmented brands is getting stronger. The global hotel pipeline surpassed 110,000 rooms in the third quarter, marking an 11% year-over-year increase. Notably, 99% of the rooms in the pipeline are part of the more revenue-intense brands, contributing a RevPAR premium compared with the existing portfolio. Global unit growth accelerated, with 75% more hotel openings in the third quarter compared with the previous year.
Buoyed by the positive momentum, there is substantial optimism regarding current and future portfolio prospects. Ongoing investments in franchisee-facing systems and tools, brand portfolio and platform capabilities are increasingly shaping earnings results while providing additional mechanisms for driving growth.
Choice Hotels’ Cambria portfolio has been doing solid business. The brand has been well received on account of smart-conversion opportunities. During third-quarter 2024, the Cambria brand achieved 3.3% year-over-year growth, reaching a total of 75 units. Backed by solid consumer confidence and the attractiveness of Choice Hotels' value proposition, the company anticipates boosting the revenue intensity of its system by adding more properties.
The company continues to expand its Everhome Suites portfolio to meet rising demand. CHH recently announced the opening of two new Everhome Suites properties in Fayetteville, NC and Cheyenne, WY, alongside a groundbreaking in Clarksville, TN. The expansion highlights Choice Hotels' strategic focus on high-growth markets and its efforts to address an undersupplied extended stay segment.
The expansion of Everhome Suites has been backed by a partnership with Highside Companies. Choice Hotels and Highside Companies have opened four Everhome Suites with 13 additional properties in development. Currently, the brand boasts seven open properties with more than 20 under construction and nearly another 30 expected by 2025.
Choice Hotels' growth strategy is centered on the ongoing expansion of its brand portfolio with the Everhome Suites brand showing strong performance. With more than 400 properties in development across four brands, the company’s growth prospects are clear. The growing interest from commercial real estate investors highlights the brand’s potential for continued success.
Estimate Revision Favors CHH Stock
Indicating the positive sentiment around CHH, the Zacks Consensus Estimate for earnings per share has seen upward revisions. In the past 60 days, analysts have raised their estimates for the next year by 5% to $7.16 per share.
Conclusion
Choice Hotels is demonstrating strong growth momentum, driven by an expanding global pipeline, robust unit growth and strategic brand portfolio enhancements. The company’s focus on high-growth markets, revenue-intensive brands and the extended stay segment highlights its ability to capitalize on evolving industry trends. With a positive outlook fueled by rising demand, innovative franchisee support systems and solid consumer confidence, Choice Hotels is well-positioned for continued success, making it an attractive investment for long-term growth-focused investors. CHH currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Marriott International, Inc. (MAR) : Free Stock Analysis Report
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