Analyst Note| Dan Wasiolek |
Choice’s second quarter offered a plethora of data supporting our view that the company’s U.S. drive-to portfolio (nearly 90% of U.S. hotels are suburban, small town, and off-interstate) is positioned to outperform peers in 2020 and that its brand intangible asset (the source of its narrow moat) is firmly intact. Choice’s U.S. revenue per available room, or revPAR, declined 50% versus a 51% decline for narrow-moat Wyndham and the mid-70% to high-80% range reported by higher-rate competitors. Choice’s outperformance is occurring throughout its portfolio, with its revPAR 565 basis points higher than direct hotel comparables since mid-March. Meanwhile, with Choice noting its July revPAR declined just 33%, we don’t expect to meaningfully alter our 2020 revPAR estimate for a 31% decline. Further, we don’t plan a material change to our $87 fair value estimate, leaving shares slightly undervalued.