Choice Hotels (CHH) Expands In Nevada, Strengthens Portfolio

Choice Hotels International, Inc. (NYSE:H) has collaborated with Brookwood Hotels to open its first hotel in Nevada. The new hotel named WoodSpring Suites Reno Sparks is exclusively designed for extended stay travelers, and is located in close proximity to the Reno-Tahoe International Airport and the University of Nevada. Notably, the property is supposed to be managed by Nationwide Hotel Management Company.

The move underscores Choice Hotels’ efforts to expand its footprint globally and strengthen its portfolio. Driven by its expansion strategy, shares of Choice Hotels have gained 30.7% in the past two years compared with the industry’s 4.5% decline.

Expansion — Key Growth Driver

Choice Hotels relies heavily on expansion in both domestic as well as international markets. Apart from constant franchise expansion, the company recently added 239 extended-stay hotels in 35 states to its portfolio through the acquisition of Woodspring Suites.

Choice Hotels expects to see Woodspring having 250 hotels by the beginning of 2019. In the first nine months of 2018, Choice Hotels opened 11 WoodSpring hotels in top markets like Chicago, Seattle, Charlotte and Detroit. Growth in these hotels is expected to accelerate in 2019. Additionally, in the fourth quarter, the company finalized an agreement with a developer to build more than 20 additional WoodSpring Suites over the next 4 years. Net domestic unit growth for 2018 is expected to be 7-8%.

Meanwhile, management continues to expand its international footprint in new countries alongside domestic growth. In April, the company announced its 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

We believe that the addition of WoodSpring Suites Reno Sparks will further drive Choice Hotels’ overall top line. In the third quarter of 2018, revenues increased 8% year over year. For 2018, the Zacks Consensus Estimate pegs revenues of $1.06 billion, reflecting 5% growth from 2017. The expansion can also be seen as Choice Hotels’ strategy to fend off intense competition from the likes of Marriott (NASDAQ:MAR) , Hyatt (NYSE:H) and Hilton (NYSE:H) .

Choice Hotels currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Looking for Stocks with Skyrocketing Upside?

Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.

Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.

See the pot trades we're targeting>>