Is Now The Time To Look At Buying Choice Hotels International, Inc. (NYSE:CHH)?

Choice Hotels International, Inc. (NYSE: CHH) has been a prominent player in the hospitality industry for decades, with a diverse portfolio of brands catering to various market segments. As the industry continues to evolve, investors may be wondering if now is the right time to consider investing in CHH. This article will explore the key trends driving business and leisure travel, Choice Hotels' technology-driven growth strategies, and the company's long-term prospects to help you make an informed decision.



Key Trends Driving Business and Leisure Travel

Choice Hotels CEO Patrick Pacious has identified four long-term trends that are driving business and leisure travel:

1. Road Trips: Road trips remain extremely popular, with two-thirds of people in a recent survey by Deloitte planning to take one. The price of gas is currently 20 percent less than it was two years ago, making road trips more affordable. This trend is expected to continue, driving demand for hotel stays along popular routes and at destinations.
2. Remote Work: More flexible work arrangements give travelers more discretion over when they can travel, allowing them to blend their business and leisure trips. This trend is expected to continue, with remote work becoming more common and employees having the freedom to travel more frequently.
3. Retirements: The number of retirees in the U.S. is rising, with a record 4.1 million Americans turning 65 this year. Travel is by far the most desired retirement activity for Americans, indicating a growing market for leisure travel among retirees.
4. Infrastructure Rebuilding: The rebuilding of American manufacturing and infrastructure is driving an increase in blue-collar business travel. One estimate puts the number of room nights generated by the infrastructure bill alone at between 50 and 100 million over a ten-year period, indicating a significant opportunity for hotel brands like Choice Hotels.



Technology-Driven Growth Strategies

Choice Hotels is leveraging technology to enhance operational efficiency and consumer engagement, driving future growth in the hospitality sector. Some of the key initiatives include:

1. ChoiceConnect: This platform enables franchisees to streamline operations, improve guest communication, and enhance the overall guest experience. By providing a centralized system for managing reservations, guest communications, and property management, ChoiceConnect helps franchisees increase efficiency and reduce costs.
2. Digital marketing strategies: Choice Hotels is investing in digital marketing to better engage with consumers and drive bookings. This includes targeted online advertising, social media campaigns, and leveraging data analytics to understand customer preferences and behaviors. For example, the company has seen success with its "Your Community, Your Choice" program, which donates to local nonprofits and has raised over $275,000 since its inception.
3. Technology-driven innovations: Choice Hotels is continuously exploring new technologies to enhance the guest experience and drive growth. For instance, the company has introduced new digital key technology, allowing guests to use their smartphones as room keys, and is investing in voice-activated virtual assistants for guest rooms. Additionally, Choice Hotels is leveraging data and analytics to optimize revenue management and improve the overall guest experience.
4. Integration of acquired brands: When Choice Hotels acquired the Radisson Hotels Americas brands in 2022, it successfully integrated them onto its central reservation system within a year. This integration drove substantial increases in total digital traffic, bookings, and booked revenue for the legacy Radisson Americas brands. This demonstrates the company's ability to leverage technology to optimize the performance of its brands and drive growth.



Long-Term Prospects and Valuation

Choice Hotels' strategic focus on upscale brands, tech-driven innovations, and track record in hotel conversions position the company well for future growth. The company's strong financial performance, with revenue and net income growth in 2023, further supports its long-term prospects.

As of January 17, 2024, CHH's stock price was $140.92, with a market cap of $6.56 billion and an enterprise value of $8.42 billion. The stock has a trailing PE ratio of 27.25 and a forward PE ratio of 19.84. While the stock may seem overvalued at first glance, it is essential to consider the company's growth prospects and the potential for earnings growth to drive the stock price higher.



In conclusion, Choice Hotels International, Inc. (NYSE: CHH) is well-positioned to capitalize on key trends driving business and leisure travel, with a strong focus on technology-driven growth strategies. While the stock may seem overvalued, the company's long-term prospects and potential for earnings growth make it an attractive investment opportunity for those looking to gain exposure to the hospitality sector. As always, it is essential to conduct thorough research and consider your risk tolerance before making any investment decisions.