Choice Hotels International Q4 Earnings Call Highlights

Key Points

• Choice delivered adjusted EBITDA of $626 million in 2025 (up 4%) with adjusted EPS near guidance, and guided 2026 adjusted EBITDA of $632–$647 million and adjusted EPS of $6.92–$7.14, assuming ~1% net global room growth and global RevPAR of -2% to +1%.
• Management is shifting the portfolio toward higher‑quality growth — 97% of pipeline rooms are in higher‑revenue brands, conversions (which open about 5x faster than new builds) are accelerating, and selective exits of ~20 underperforming hotels (impacting ~30–40 bps of net growth) aim to support a return to positive U.S. net room growth.
• International and extended‑stay momentum strengthened: international revenue rose 37% and system size grew ~13% to ~160,000 rooms with direct franchising now >40% of that base, while extended stay logged its 10th consecutive quarter of double‑digit system growth and represents >40% of the U.S. pipeline.

Choice Hotels International NYSE: CHH executives highlighted growth in earnings, development activity, and strategic initiatives during the company’s fourth-quarter and full-year 2025 earnings call, while outlining expectations for modest improvement in 2026 as U.S. net unit growth turns positive and conversion activity accelerates.

2025 results: EBITDA up 4% as higher-revenue mix and international growth expand

President and CEO Patrick Pacious said Choice delivered adjusted EBITDA of $626 million in 2025, up 4% year-over-year, with adjusted earnings per share growth “in line with our expectations.” CFO Scott Oaksmith added that adjusted EBITDA and adjusted EPS of $6.94 both came in at the midpoint of the company’s guidance range.

Oaksmith said results were driven by extended stay leadership, a higher average royalty rate, the expansion of the international business, and partnership revenue performance. In the fourth quarter, revenue (excluding reimbursable revenue from franchised and managed properties) increased 2% year-over-year to $234 million, adjusted EBITDA was $141 million, and adjusted EPS rose 3% to $1.60.

Development, conversions, and portfolio exits: Focus on higher-quality growth

Management emphasized progress on portfolio mix and openings. Pacious said global hotel openings grew 14% in 2025, and global franchise agreements awarded rose 22%. He said 97% of rooms in the global pipeline are in “higher revenue brands,” and described those projects as expected to be about 1.7 times more accretive than the current portfolio due to RevPAR premiums, higher royalty rates, and larger average room counts.

Choice also highlighted the speed of its conversion-led approach. Pacious said conversion hotels can open about five times faster than new construction hotels and noted that some hotels open without appearing in quarter-end pipeline metrics. In the U.S., pipeline conversion rooms increased 12% sequentially from Sept. 30, 2025, and U.S. conversion franchise agreements increased 12% year-over-year in the fourth quarter.

At the same time, executives said the company accelerated selective exits of underperforming hotels late in the year. Pacious said those properties generated royalties “well below our portfolio average” and ranked predominantly in the bottom quartile of guest satisfaction within their brands. Oaksmith said hotels exiting the system produced U.S. RevPAR more than 20% below the company average in 2025, and the improved mix is intended to enhance long-term earnings quality and support a return to positive U.S. net room growth.

On the Q&A, Pacious said fourth-quarter exits totaled about 20 hotels, representing roughly 30 to 40 basis points of net unit growth impact. He characterized the fourth-quarter action as “elevated” versus normal levels, while also noting churn is typically in the 3% to 4% range.

RevPAR and demand commentary: Q4 pressured by hurricane comparisons, but management sees improving cadence

Choice reported that global RevPAR declined 4.6% year-over-year in the fourth quarter on a currency-neutral basis, which Oaksmith attributed primarily to “the tougher hurricane comparison in the U.S. Southeast from the prior year.” International RevPAR increased 3.2% on a currency-neutral basis, led by 11% growth in Asia-Pacific.

In the U.S., Oaksmith said the company lapped a 540 basis point hurricane-related benefit from the prior year; excluding that effect, U.S. RevPAR declined 2.2% year-over-year, which management described as a modest sequential improvement. Executives also cited the government shutdown and continued softness in international inbound travel as additional fourth-quarter pressures.

Looking forward, management said occupancy trends were encouraging. On the call, Oaksmith said year-to-date RevPAR outside the U.S. was up 1.7%, driven by a 2.3% occupancy gain. Pacious and Oaksmith said they expect U.S. RevPAR to remain negative in the first quarter due to hurricane comparisons (Oaksmith cited roughly 340 basis points of impact), with an inflection expected in the second quarter as those comps roll off.

Pacious also discussed demand catalysts and macro factors tied to Choice’s value-oriented customer base, including lower gas prices, tax refund trends, and upcoming national events. In Q&A, he said tax refunds were running 11% higher so far, with overall year-over-year tax relief up 18%, while also noting the U.S. dollar’s relative weakness could support inbound travel and keep U.S. travelers domestic. Management said some of these factors are “harder to measure” and not necessarily fully embedded in guidance.

International and extended stay: Momentum builds, with direct franchising a key lever

International growth was a major theme. Pacious said international revenue increased 37% in 2025, supported by portfolio expansion and positive RevPAR growth across every region, while international system size grew 13% to approximately 160,000 rooms. He added that directly franchised rooms now represent more than 40% of Choice’s international portfolio, up more than 20 percentage points over the past three years, improving unit economics.

Regionally, Pacious said RevPAR in the Americas outside the U.S. rose 5.4% in 2025, and Canada’s rooms pipeline grew 49% year-over-year. In EMEA, he said rooms increased 13% to approximately 70,000, including nearly doubling the company’s footprint in France through direct franchising. Oaksmith also noted the integration of Canadian operations was completed in six months following the acquisition of the remaining half of the Canadian joint venture, and cited a multi-unit agreement for approximately 700 upscale Ascend Collection rooms in Quebec.

In extended stay, Pacious said Choice achieved its 10th consecutive quarter of double-digit system growth, and that the segment now represents more than 40% of the U.S. pipeline. The company ended 2025 with approximately 57,000 U.S. extended stay rooms and reported record U.S. extended stay openings, up 8%, driven by Everhome Suites. Oaksmith said there were 27 Everhome Suites open in the U.S., including 18 opened during 2025, with 38 additional projects in the U.S. pipeline.

2026 outlook, capital allocation, and key spending items

Choice guided to 2026 adjusted EBITDA of $632 million to $647 million and adjusted diluted EPS of $6.92 to $7.14. Key assumptions include:

• Net global rooms growth of approximately 1% year-over-year, with U.S. net rooms growth returning to positive territory and weighted more toward the second half due to conversion timing
• Global RevPAR of -2% to +1% in constant currency, with U.S. RevPAR also -2% to +1%
• Average royalty rate growth in the mid-single digits
• Adjusted SG&A increasing in the mid-single digits

In 2025, the company ended the year with total liquidity of $571 million and net debt to trailing 12-month EBITDA of 3x. Choice generated more than $270 million in operating cash flow for 2025, including nearly $86 million in the fourth quarter. Oaksmith said working capital timing items—particularly around tax payments—contributed to a drag in 2025 and he expected “most of that to reverse” in 2026.

Choice returned $189 million to shareholders in 2025, including $54 million in dividends and $136 million in share repurchases, and ended the year with about 2.8 million shares remaining under authorization (about 6% of shares outstanding). Management did not provide 2026 guidance for shareholder returns.

On spending, Oaksmith said net key money in 2025 was about $83 million (versus $112 million in 2024), and he expects 2026 key money gross outlays of roughly $105 million to $110 million as openings accelerate. For hotel development-related net outlays and lending, the company guided to $20 million to $45 million in 2026, down sharply from $103 million in 2025, as it delivers its final company-developed Cambria hotel in the third quarter of 2026 and tapers Everhome development investments.

On international royalty rates, Oaksmith said direct markets average around 2.7%, while master franchise agreements are typically 0.5% to 1%. Pacious added that international growth generally requires “much lower” key money than in the U.S.

About Choice Hotels International NYSE: CHH

Choice Hotels International, Inc is a hospitality franchisor specializing in the development and support of lodging brands across the economy, midscale and upscale segments. Through a network of franchisees, Choice Hotels supplies proprietary reservation and distribution systems, comprehensive marketing programs, and operational support services. The company's core activities include brand management, franchise development, and technology-driven revenue optimization tools designed to enhance guest acquisition and retention for its partners.

Founded in 1939 as Quality Courts United, the company rebranded to Choice Hotels International in 1982 to reflect its expanding brand portfolio and global ambitions.

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