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Choice Hotels International Inc CHH

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Morningstar’s Analysis

Valuation
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1-Star Price

PREMIUM

5-Star Price

PREMIUM

Economic Moat

PREMIUM

Capital Allocation

PREMIUM

Choice’s Brands Gaining Share, as Its Portfolio Continues to Benefit From a Recovery in U.S. Travel

Dan Wasiolek Senior Equity Analyst

Analyst Note

| Dan Wasiolek |

Choice continued to benefit from a strong recovery in U.S. road destination travel during the first quarter, with its domestic revenue per available room, or revPAR, reaching 74% of 2019 levels (matching our forecast) versus 69% last quarter. Also, the company’s brand advantage (source of its narrow moat) is well intact, witnessed by its revPAR index (metric of share) increasing 640 basis points compared with 2019. We don’t plan a meaningful change to Choice’s $94 fair value estimate, leaving shares overvalued.

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Company Profile

Business Description

As of the end of 2020, Choice Hotels operated 598,000 rooms across 13 brands addressing the economy and midscale segments. Comfort Inn and Comfort Suites are the largest brands (28% of the company's total domestic rooms), while Ascend and Cambria (6% of total domestic rooms) are newer lifestyle and select-service brands experiencing strong demand prior to COVID-19. Choice added its 13th brand with the launch of extended-stay brand Everhome in January 2020. Franchises are 99% of total revenue, and the United States represents 78% of total rooms.

Contact
1 Choice Hotels Circle, Suite 400
Rockville, MD, 20850
T +1 301 592-5000
Sector Consumer Cyclical
Industry Lodging
Most Recent Earnings Mar 31, 2021
Fiscal Year End Dec 31, 2021
Stock Type Cyclical
Employees 1,498

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