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Choice Hotels (CHH) Expands the Extended Stay Brand Portfolio

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Despite a challenging construction market, Choice Hotels International, Inc. (CHH - Free Report) continues to expand its presence in the extended stay segment. Recently, the company announced the construction of three new Everhome Suites and the development of six more in Southern California.

CHH is progressing with its strategy to extend its leadership in the segment, collaborating with outstanding developers like Paladin Equity Capital. The new under-construction California properties include Everhome Suites Temecula (120-room property), Everhome Suites Ontario (113-room property) and Everhome Suites San Bernardino (114-room property). The demand for extended-stay hotels is currently twice the available supply, with significant demand in areas such as Los Angeles and San Bernardino.

These under-construction hotels — featuring spacious apartment-style rooms with separate areas for work and relaxation along with innovative built-in options for guests to personalize the space — are set to open in the second half of 2024 and early 2025.

Focus on the Extended Stay Segment

Choice Hotels' success in the extended stay segment stems from a well-segmented brand portfolio, encompassing new construction and conversion opportunities in the economy and midscale extended stay. The dedicated team of extended stay experts and a proven track record and significant growth potential contribute to the upside. Ongoing economic trends and fiscal policies — such as the $1.2-trillion infrastructure bill, the rise of remote work, the convergence of business and leisure travel, relocations and the onshoring of industries driven by the CHIPS Act — support the consistent rise in extended-stay demand.

In the first nine months of 2023, the company's extended stay hotel openings demonstrated substantial growth, up 38% year over year. The domestic extended stay pipeline also grew 12% year over year, reaching more than 47,000 rooms in the third quarter of 2023.

The company currently has a pipeline of 60 Everhome Suites properties and more than 250 properties across three other extended stay brands, including MainStay Suites, Suburban Studios and WoodSpring Suites.

Price Performance

Zacks Investment Research
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In the past six months, shares of Choice Hotels have dropped 7.9% against the industry’s 7.1% rise. Although the company has underperformed the industry in said period, its focus on continual expansion strategies through acquisitions and franchise agreements is likely to boost performance in the upcoming period.

Zacks Rank & Key Picks

Choice Hotels currently carries a Zacks Rank #3 (Hold).

Here are some better-ranked stocks from the Zacks Consumer Discretionary sector:

Royal Caribbean Cruises Ltd. (RCL - Free Report) sports a Zacks Rank #1 (Strong Buy). RCL has a trailing four-quarter earnings surprise of 28.3% on average. Shares of RCL have surged 70.9% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for RCL’s 2023 sales and earnings per share (EPS) indicates a rise of 57.5% and 186.9%, respectively, from the year-ago period’s levels.

DraftKings Inc. (DKNG - Free Report) flaunts a Zacks Rank #2 (Buy). The company has a trailing four-quarter earnings surprise of 13.2% on average. Shares of DKNG have increased 149.2% in the past year.

The Zacks Consensus Estimate for DKNG’s 2023 sales and EPS indicates a rise of 65.2% and 51.3%, respectively, from the year-ago period’s levels.

Skechers U.S.A., Inc. (SKX - Free Report) sports a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 50.3% on average. Shares of SKX have increased 27.9% in the past year.

The Zacks Consensus Estimate for SKX’s 2023 sales and EPS indicates a rise of 8.2% and 44.1%, respectively, from the year-ago period’s levels.

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