Analyst Note
| Dan Wasiolek |We believe Choice’s acquisition of Radisson is strategically sound for a few reasons. First, we calculate that Radisson’s portfolio stands to increase Choice’s upscale presence to around 12% of total rooms up from about 8% prior, while extending its upper-midscale room count to roughly 40%, from a high 30% prior. This harmonizes with Choice’s focus on expanding its higher revenue-generating brands (such as the existing Ascend and Cambria) versus its lower economy scale and underperforming assets, which we think supports its intangible brand asset (source of its narrow moat). Second, the deal will expand Choice’s existing 53 million loyalty members by over 10 million, adding an incremental incentive for third-party hotel owners to join the operator’s platform to tap into this demand channel, which again buoys the hotelier's brand advantage. Finally, the added scale of Radisson’s 68,000 rooms on Choice’s sizable base of 575,000 should improve distribution and procurement costs, while adding incremental data to aid revenue optimization tools.