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Choice Hotels dialed back revenue expectations for the year, while highlighting strength in its economy and extended-stay properties.
The hotel franchiser on Thursday projected that its revenue per available room (RevPAR) in the U.S. will range between a 1% decline and 1% growth, down from its previous forecast of 1-2% growth.
While its mid-market properties struggled in the first quarter, brands like Econo Lodge and extended-stay options boomed.
CEO Patrick Pacious chalked up the performance to strong employment, low gas prices, and infrastructure investments tied to artificial intelligence, even as the company joined competitors Wyndham, Marriott, and Hilton in modestly lowering its outlook for growth for the year.
What Was Strongest
Economy hotels. Choice's budget hotel brands in the U.S. saw a 7.1% jump in RevPAR, year-over-year.
"Employment remains high, gas prices are low, and consumers appear to to be saying they're going to drive as opposed to fly," said Patrick Pacious, president and CEO. "So that that generally does really well for our hotels right next to the highway, and our 1,500 hotels near the national parks."
Small business travel and group travel. "Our business travel segment grew 10% year-over-year in the first quarter, driven by both group and business transient travel," said Pacious. While people aren't booking rooms as far ahead as usual, he said, they're still traveling.
Extended-stay. The operator's extended-stay brands in the U.S., such as Woodspring Suites, saw a 6.8% spike in RevPAR, year-over-year. That was significant because the company increased the size of its extended-stay portfolio by 19% over the past 5 years to about 53,000 rooms.
Pacious attributed part of extended-stay boom to "companies involved in the substantial infrastructure investments required by GenAI and the push towards reshoring of American manufacturing."
What Was Weakest
Mid-market brands. The company's "midscale" brands, which include Quality Inn, Sleep Inn, and Park Inn, had only a 1.7% rise in RevPAR.
Upscale and Above. RevPAR for the company's highest-end hotels declined 4.3% year-over-year. However, executives said this performance was due to some unusual changes in some hotels leaving and joining the system rather than demand softening and they expected it performance to normalize.
Tariffs Not a Worry
Choice's executives said they weren't concerned about the affect of a tariff war on the cost of constructing and operating hotels. They said they met with many vendors at their annual trade show last week and the tone was optimistic.