Analyst Note| Dan Wasiolek |
Choice Hotels' leisure-based portfolio continued to lead the U.S. travel recovery in the third quarter, with total revenue per available room reaching 111% of 2019 levels (versus 107% for Wyndham), an improvement from last quarter’s 99% (95%). Choice guided 2021 revPAR to 101% of 2019 levels, implying that fourth-quarter revPAR will sustain at around 111% of 2019 levels. We plan to raise our fair value estimate by around 10% to account for stronger near-term demand and higher long-term travel demand supported by worker flexibility, something we see benefiting our entire accommodation coverage universe. We developed our positive stance on remote working because higher-income occupations (like those in technology, finance, legal, and architecture) are in industries that are the most likely to support sustained remote working conditions. We see Choice shares as overvalued and now prefer narrow-moat Accor’s European exposure, with its shares at a 20% discount to our EUR 40 fair value estimate.