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Choice Hotels (CHH) Expands Cambria Brand, Eyes Unit Growth (Revised)

Zacks

Choice Hotels International, Inc. CHH continues to expand through franchise agreements. To this end, the company recently announced that it strengthened its up-scale presence by opening Cambria Hotel Charleston Riverview under its Cambria brand. Notably, the 126-roomed hotel marks the brand’s expansion in South Carolina.

Earlier, Cambria hotels signed an agreement with Koucar Management to build hotels in Detroit and Portland in 2020 and 2021. The current move underscores Choice Hotel’s strategy of expansion of its up-scale properties.

Brand Strengthening and Expansion Bode Well

Choice Hotels relies heavily on expansion in domestic as well as international markets. In the first quarter of 2019, this hotelier awarded 79 total franchise agreements. Alongside domestic growth, the company continues to expand its international footprint in new countries. Key international operating markets include Spain, Colombia, Panama, the Caribbean and Canada.

Moreover, Choice Hotels recently strengthened its presence, with the launch of Clarion Pointe. Expansion of the brand is expected to occur through 21 Clarion Pointe franchise agreements. Meanwhile, in the last year, the company announced an alliance with Sercotel, a leading hotel operator and franchisor based in Spain. This alliance will enable the extension of Choice Hotels’ global footprint in Spain and other markets as well as the creation of opportunities for additional hotel development across Europe and Latin America.

Our Take

Notably, 99% of the company’s revenues come from the franchise business. The number of domestic franchised hotels and rooms increased 6.6% and 9%, respectively, in 2018.

The Cambria brand has more than 40 hotels across the United States, with plans to expand in prime markets this year. This will help the brand reach another milestone with 50 coast-to-coast hotel openings in 2019.

We also believe that the continual addition of hotels will help Choice Hotels to fend off intense competition from the likes of Marriott MAR, Hilton HLT and Hyatt H.

Choice Hotels currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

(We are reissuing this article to correct a mistake. The earlier article on this topic, issued on June 13, 2019, should no longer be relied upon.)


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