Choice's Demand Growth Moderating After a Strong Recovery the Past Few Years

While the coronavirus had a material impact on Choice's 2020 demand, the hotelier's U.S. leisure-based portfolio (which represents around 70% of nights) saw a full return to 2019 revenue per available room levels in 2021. We expect the narrow-moat company to gradually expand room share in the hotel industry in the next decade, supported by rejuvenated Comfort brands (27% of 2022 total domestic rooms), newer Cambria, Ascend, and Everhome concepts (8% combined), the acquisition of the Radisson brand in 2022, and a solid loyalty program with over 60 million members in 2022, up from 44 million at the end of 2019. The company has a high-single-digit share of existing U.S. hotel rooms with an expanding pipeline. We see its room growth averaging 2% over the next decade, above the 1%-2% supply lift we estimate for the U.S. industry during that time.