CHH Emerges as the Pioneer of Extended-Stay Conversion Hotels

Choice Hotels International, Inc.'s CHH expertise in top-tier hotel conversions is opening new doors for it in the extended-stay hotels segment along with expanding its market reach.

Between Jan. 1 and Sept. 17, 2024, CHH opened 17 MainStay Suites and Suburban Studios hotels, of which 16 properties were conversions, with the average length of time between contract signing and official opening being around 120 days. The key opening markets were Las Vegas, NV; Moreno Valley, CA; Orlando and Tampa, FL.

Furthermore, about half of the approximately 70 properties in the pipeline for MainStay Suites and Suburban Studios are conversions, which are expected to open between September 2024 and March 2025.

CHH stock inched up 0.5% during the trading hours on Monday following this announcement.

CHH's MainStay Suites & Suburban Studios

Two of Choice Hotels' proprietary brand names, MainStay Suites and Suburban Studios, offer the comforts of home with a fully equipped kitchen in every room housing almost all the necessary kitchen appliances. Guests can unwind and relax or catch up on work with free Wi-Fi in the spacious guestrooms.

The guest profile of MainStay Suites comprises sports teams, medical professionals, business travelers, members of the military, mid-level blue-collar workers, students, professors, medical patients and people relocating or renovating their homes. On the other hand, the guest profile of Suburban Studios includes blue-collar infrastructure and construction workers as well as seasonal workers and families.

Choice Hotels' Extended-Stay Conversion Success

Choice Hotels' move into the extended-stay hotel space has been gaining recognition in the industry. The imbalance between low supply and high demand for extended-stay hotels has been fueling the growth trend of this business in the hospitality industry.

The company's success in this space is built upon its "Kitchen-in-a-Box" concept, which showcases a modular kitchen design that allows franchisees to quickly and efficiently convert a transient hotel into an extended-stay hotel with kitchens in each room. With a conversion tenure of three to four months, with this model, owners and developers can make expeditious offerings of extended stay rooms.

During the second quarter of 2024, CHH grew its domestic extended-stay unit system size by 14% year over year. With growth across its extended-stay brands' portfolio, the company is well-positioned to achieve a long-term average annual growth of 15%.

CHH's Price Performance

Shares of this global hotel franchisor have gained 15.3% in the year-to-date period, outperforming the Zacks Hotels and Motels industry's 11.6% growth.  Strong demand trends across the company's diversified portfolio of brands and extended-stay conversion hotel openings, along with international market reach expansion, are favoring the growth trajectory.

Image Source: Zacks Investment Research

The improving trend is clear from CHH's estimate revision trend as well. The Zacks Consensus Estimate for third-quarter 2024 earnings per share has trended upward to $1.93 from $1.91 in the past 30 days. The estimated figure indicates 6% year-over-year growth.

CHH's Zacks Rank & Key Picks

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

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

Interface, Inc. TILE currently sports a Zacks Rank #1 (Strong Buy).

TILE has a trailing four-quarter earnings surprise of 65%, on average. The stock has surged 88.7% in the past year. The Zacks Consensus Estimate for TILE's 2024 sales and earnings per share indicates growth of 3.9% and 28%, respectively, from the year-ago levels.

DoubleDown Interactive Co., Ltd. DDI currently sports a Zacks Rank of 1. DDI has a trailing four-quarter earnings surprise of 22.1%, on average. The stock has gained 54% in the past year.

The Zacks Consensus Estimate for DDI's 2024 sales and EPS indicates an increase of 12.6% and 15.8%, respectively, from the year-ago levels.

Norwegian Cruise Line Holdings Ltd. NCLH presently sports a Zacks Rank of 1. NCLH has a trailing four-quarter earnings surprise of 5.7%, on average. The stock has gained 38.3% in the past year.

The Zacks Consensus Estimate for NCLH's 2024 sales and EPS indicates an increase of 9.8% and 125.7%, respectively, from the year-ago levels.

To read this article on Zacks.com click here.