Economy Hotel Giant Choice Hotels Is Ready for Its Upscale Debut

The past two years have been anything but easy for American hotels, from complete closures to staff shortages. At the height of pandemic-related shutdowns, the industry watched as even significant players like Marriott were forced to shutter 870 of their North American properties temporarily, and as of October 2021, there are 300,000 fewer workers in the hotel industry than there were pre-2020.

But one American hospitality company was able to weather the storm: Rockville, Maryland-based Choice Hotels.

While many other hotel brands continue to struggle in the wake of the pandemic, Choice emerged victorious, reporting a profit of $106 million in net income from $368 million in revenue in the second quarter of 2022. The company's success is even more impressive, considering that Choice, which operates economy to mid-budget brands such as Comfort Inn, Quality Inn, and Clarion, charges an average rate of $95 a night for their rooms.

Now, one of the few victors of a significant industry setback is ready to take a big swing. Early this year, Choice Hotels announced plans to acquire Radisson Hotel Group Americas, a portfolio spanning 624 hotels across the U.S., Canada, Latin America, and the Caribbean, for $675 million. The deal was closed in August.

"Choice was able to rebound [from the pandemic] quickly given their existing brands were more leisure-focused and did not have a huge presence in the corporate and meeting and group space," said Kristina D'Amico, senior vice president at hospitality consulting firm HVS. "Given that the leisure segment bounced back quickly as people wanted to start traveling again, Choice was able to capitalize on this."

Indeed, as business travel numbers dwindled in the past two years and never fully recovered, domestic leisure travel has continued to surge in popularity. In late 2020, 80 percent of American vacations were reportedly domestic road trips. This trend continued into early 2022 when a substantial rise in gas prices forced Americans to prioritize budget-friendly properties when making travel plans.

The combination of domestic travel, road trips, and budget-friendly hotels being top of mind for many Americans led to a winning combination for Choice, who, alongside their marquee names, brought offerings from brands like Sleep Inn and Econo Lodge, both of which seamlessly fit the bill.

While Choice already had a presence in the upscale hotel space with upmarket choices like their Cambria Hotels and Ascend Hotel Collection, the company's overall brand is best known for its economy and mid-budget offerings. Their acquisition of Radisson will add a mix of affordable brands that will gel well with the already existing Choice brand, such as Country Inn & Suites, alongside more upscale concepts like the Radisson namesake properties and the plush Radisson Blu hotels.

"[The acquisition] gives Choice access to full-service hotels with meeting space that were not previously in the Choice portfolio," said D'Amico. "In addition to gaining full-service offerings, Choice now offers the biggest spectrum of brands in the upscale and midscale segment, which differentiates them from their competitors."

It's certainly more than just an acquisition for Choice: it's a crucial step in their future growth strategy. And Choice is banking on its loyalty program as a critical component of that growth.

By bringing new midscale and upscale brands in markets with higher-income travelers, such as the West Coast and Midwest, Choice is ready to shake up its reputation and welcome more than just the economy-minded traveler. The company already boasts a robust loyalty program that persuaded most customers to purchase directly rather than through third-party booking sites. With their acquisition of Radisson's loyalty program members, they are presented with the opportunity to take that loyalty base to new levels.

"[Radisson's] more upscale loyalty members will allow Choice to continue growing brands such as Cambria and their soft brand, Ascend Collection, with that expanded member base," said D'Amico.

And Choice has no plans to stop there. The company, which currently has its strongest hold in the southeast, southwest, and Texas, sees the Radisson acquisition as its chance to break into new destinations in the U.S. and abroad. "We'll have more... growth opportunity in Canada, as well as the Caribbean and the rest of Latin America," said Patrick Pacious, president and CEO of Choice, in a recent interview.

Could it work? "From my perspective, the biggest challenges [Choice will have] expanding out of the United States are the different governmental regulations and rules in each country, as each nation does business differently and development tends to operate at a slower pace," said D'Amico. "But Choice will benefit from the Radisson name as Radisson has a large international portfolio—the product is already known internationally."