Choice Hotels International, Inc. (CHH) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The company has shown strong financial performance with increased EBITDA guidance and positive international growth. The Q&A reveals optimism about U.S. RevPAR growth and a strategic focus on high-revenue brands. Despite some unclear management responses, the overall sentiment is positive due to strong growth in extended stay segments, technology investments, and a revamped loyalty program. The lack of specific shareholder return guidance is mitigated by the company's prioritization of business investments and M&A opportunities. These factors suggest a positive stock price movement in the near term.
Key Financial Performance
Adjusted EBITDA $626 million, up 4% year-over-year. Growth driven by higher revenue brand mix, international portfolio earnings, group demand, business travel growth, and partnership revenue streams.
Adjusted Earnings Per Share (EPS) $6.94 per share, up 3% year-over-year. Growth attributed to leadership in extended stay segment, international business expansion, and partnership revenue performance.
Global Hotel Openings 14% year-over-year growth. Driven by international footprint expansion and record U.S. openings in the extended-stay segment.
U.S. Average Royalty Rate Increased 8 basis points in 2025 and 10 basis points in Q4. Reflects improved product quality and franchisee economics.
Global Franchise Agreements Up 22% year-over-year in 2025. Supported by strong developer interest and higher revenue brand focus.
International Revenues 37% growth year-over-year. Driven by portfolio expansion and positive RevPAR growth across all regions.
International Rooms Expanded by 13% year-over-year to approximately 160,000 rooms. Supported by an 82% increase in hotel openings.
Canada Rooms Pipeline Grew 49% year-over-year. Reflects transition to direct franchising model and enhanced franchise economics.
U.S. Extended-Stay Hotel Openings Record number achieved in 2025, up 8% year-over-year. Driven by Everhome Suites brand.
U.S. Economy Transient Rooms Pipeline Expanded 6% quarter-over-quarter. Reflects improved guest satisfaction and quality improvements.
Mid-Scale Franchise Agreements Increased 14% year-over-year in 2025. Driven by redesigned Country Inn & Suites prototype and strong developer interest.
Group Revenue Increased 35% year-over-year in 2025. Supported by resilient sectors like construction, utilities, and high-tech manufacturing.
Small and Midsized Business Revenue Grew 13% year-over-year in 2025. Driven by resilient sectors and AI-enabled RFP tools.
Choice Privileges Loyalty Membership Exceeds 74 million members, up 7% year-over-year. International enrollment grew 11% in 2025.
Partnership Revenues 14% year-over-year growth in 2025. Driven by co-brand fees and increased supplier and strategic partnership fees.
Adjusted SG&A Increased 3% year-over-year to $283 million. Reflects cost discipline and strategic investments.
Operating Cash Flow Generated more than $270 million in 2025, including nearly $86 million in Q4. Reflects strong cash generation and financial flexibility.
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Operating Highlights
Choice Privileges loyalty platform: Launched the next evolution of the Choice Privileges loyalty platform, including a spend-based pathway for elite qualification and new top-tier status. Early indicators show faster enrollment rates post-launch.
Digital platform for SMBs: Launching a dedicated digital platform for small and midsized businesses next quarter, targeting a $13 billion addressable market.
International footprint: Expanded international footprint by 13% year-over-year, with 37% growth in international revenues and 82% increase in hotel openings. Canada pipeline grew 49% year-over-year.
U.S. extended-stay segment: Achieved record U.S. extended-stay hotel openings, up 8% year-over-year, with 57,000 extended-stay rooms in the U.S. and 40% of the U.S. pipeline in this segment.
Conversion-led model: Accelerated U.S. pipeline conversion rooms by 12% sequentially, enabling hotels to open 5x faster than new construction hotels.
Portfolio optimization: Exited underperforming hotels in the U.S., improving portfolio mix and positioning for higher-quality replacements.
AI and technology partnerships: Collaborating with Google and OpenAI to enhance travel search and booking capabilities, positioning for incremental demand.
Focus on business travel: Expanded global sales capabilities, with business travelers now representing 40% of total stays. Group revenue increased 35% year-over-year.
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Risk or Challenges
U.S. Net Rooms Growth: The company expects U.S. net rooms growth to return to positive territory in 2026, but this is heavily weighted towards the latter part of the year, indicating potential delays or challenges in achieving growth targets.
Hurricane-Related Comparisons: The company faced a 540 basis point hurricane-related benefit in the prior year, which negatively impacted year-over-year RevPAR comparisons in 2025.
Government Shutdown and International Inbound Travel: The U.S. RevPAR performance was negatively affected by the government shutdown and continued softness in international inbound travel.
Construction Environment: Despite achieving record U.S. extended-stay hotel openings, the company acknowledged a challenging construction environment, which could impact future development timelines.
Portfolio Optimization: The company accelerated the selective exit of underperforming hotels, which generated royalties well below the portfolio average. While this improves long-term earnings quality, it could temporarily impact short-term revenue.
Economic Sensitivity: The company’s core customer base prioritizes affordability, making it sensitive to economic conditions such as gas prices and tax relief, which could influence travel demand.
Currency Fluctuations: International RevPAR performance is subject to currency-neutral adjustments, indicating exposure to foreign exchange risks.
RevPAR Decline: Global RevPAR declined 4.6% year-over-year in the fourth quarter of 2025, driven by tough comparisons and external factors like hurricanes and government shutdowns.
Capital Allocation for Hotel Development: The company plans to taper new hotel development investments, which could limit growth opportunities in the short term.
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Guidance & Outlook
U.S. Net Rooms Growth: Expected to return to positive territory in 2026, driven by a larger hotel conversion pipeline and higher volume of conversions.
U.S. Lodging Demand: Increasingly constructive outlook, supported by value-driven travel, declining gas prices, tax relief for middle-income households, and upcoming national events like the 2026 FIFA World Cup.
International Growth: Specific international markets are expected to be key growth drivers, with continued expansion in Canada, EMEA, and the Americas outside the U.S.
Extended-Stay Segment: Continued leadership in the U.S. extended-stay segment, with a record number of hotel openings in 2025 and a strong pipeline for 2026.
Mid-Scale Segment: Growth expected in 2026, supported by redesigned prototypes like Country Inn & Suites by Radisson and strong developer interest.
Adjusted EBITDA for 2026: Projected to be in the range of $632 million to $647 million, reflecting organic growth and strong royalty rate growth.
Adjusted Diluted Earnings Per Share for 2026: Expected to be between $6.92 and $7.14 per share.
Global RevPAR: Projected to range from negative 2% to positive 1% year-over-year in constant currency.
Capital Allocation: Hotel development net capital outlays expected to decline significantly in 2026, with a focus on recycling existing hotel capital.
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Shareholder Return Plan
Dividends paid in 2025: $54 million
Dividend policy: Reflects a stable recurring commitment
Share repurchases in 2025: $136 million
Shares repurchased: Approximately 1 million shares, representing more than 2% of shares outstanding
Remaining share repurchase authorization: Approximately 2.8 million shares, about 6% of shares outstanding
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Key Q&A
Q:What are the expectations for key money spending, CapEx, and JV investments in 2026?
A:Key money spending is expected to increase to $105-$110 million in 2026, up from $83 million in 2025. Recyclable capital use is expected to drop by 70%, with a net use of $20-$45 million in 2026, down from $103 million in 2025. The company is tapering capital use for Cambria and Everhome Suites brands and expects improved recycling as the U.S. hospitality transaction market improves.
Q:What is the company's approach to share buybacks and balance sheet management?
A:The company paused share buybacks after acquiring the other half of the Canadian JV for $100 million in 2025. They resumed buybacks in Q4 2025. The company prioritizes investments in the business, M&A opportunities, and then share returns and dividends. Net debt-to-EBITDA ratios are within a comfortable range.
Q:What is driving U.S. rooms growth in 2026?
A:U.S. rooms growth is expected to return to positive territory in 2026, driven by a 5% increase in mid-scale and economy franchises awarded, a 12% increase in the conversion pipeline, and improved guest scores. Key brands contributing to growth include Quality, Clarion, Clarion Pointe, Rodeway, Ascend, and Country Inn and Suites by Radisson.
Q:What is the outlook for U.S. RevPAR growth in 2026?
A:The company expects U.S. RevPAR growth to benefit from transitory factors such as tax relief (up 18% year-over-year), weaker dollar boosting international inbound travel, and reduced outbound travel. These factors are not fully baked into guidance but are seen as potential tailwinds. The company is optimistic about RevPAR growth, especially in Q2 and Q3, as occupancy gains lead to rate improvements.
Q:What is the expected cadence of RevPAR growth in 2026?
A:RevPAR is expected to be negative in Q1 2026 due to hurricane impacts but should improve in Q2 as those impacts are lapped. The company expects positive RevPAR growth for the year, with Q3 being the highest demand period due to tax relief and favorable gas prices for road trippers.
Q:What is the status of the company's efforts to remove underperforming properties?
A:The company accelerated the removal of underperforming properties in Q4 2025, removing about 20 hotels, which impacted net unit growth by 30-40 basis points. This was a one-time effort to clean out markets and backfill with higher-quality hotels. The company expects termination rates to return to historical norms of 3-4% in 2026 and 2027.
Q:What is the company's long-term view on net unit growth (NUG)?
A:The company expects international markets and the return of new construction to drive long-term NUG. Extended stay opportunities in the U.S. are also seen as a growth area. The company is optimistic about achieving positive NUG in 2026, supported by a strong pipeline and conversion opportunities.
Q:Why is international RevPAR growth not expected to outpace U.S. RevPAR growth in 2026?
A:While international RevPAR growth has been strong, its smaller size relative to the U.S. offsets its impact. Additionally, many international hotels are in ramp-up phases, which affects overall RevPAR growth. Same-store sales growth is expected to be strong in Canada (5.5%) and CALA (8.5%).
Q:What is the international royalty rate, and how does it compare to the U.S.?
A:The international royalty rate is around 2.7% for direct markets and 0.5-1% for master franchise agreements. This is lower than the U.S. royalty rate, which is in the 5% range. The company is transitioning to a more direct franchising model internationally, which requires less key money.
Q:What is the company's guidance on return of capital to shareholders?
A:The company did not provide specific guidance on return of capital. They prioritize investing in the business, M&A opportunities, and then returning excess cash to shareholders through dividends and share repurchases.
Q:What is the outlook for working capital in 2026?
A:The company expects a reversal of the $98 million working capital drag from 2025, driven by timing of tax payments and other working capital items.
Q:What is the outlook for capital outlays and recycling in 2026?
A:Capital outlays are expected to decrease significantly, with a 70% reduction in recyclable capital use. Recycling is expected to remain at 2025 levels ($32 million) or increase if the transaction market improves.
Q:What is the company's view on conversions and their impact on growth?
A:Conversions are expected to remain a key growth driver, with opportunities coming from independent hotels and other branded conversions. The company sees conversions as structurally higher due to lender comfort and limited new construction. Key brands benefiting from conversions include Ascend, Quality Inn, and economy brands.
Q:Review of Unclear Management Responses
A:Management avoided providing specific guidance on return of capital to shareholders, stating that they typically do not provide such guidance. They also used vague language when discussing the potential for increased recycling of capital, citing market conditions without providing concrete details.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI reshapes
AI travel
Americas RevPAR
Chief
Choice Privileges
Officer
Privileges member
RevPAR region
Today room
brand card
capability
category
center
construction hotel
customer base
customer lifetime
demand consumer
engagement
engine
enrollment
evolution Choice
franchisee economics
guest satisfaction
hotel conversion
hotel opening
household
improvement
infrastructure
interest franchise
launch
platform business
quality hotel
recognition
relief
search behavior
status
stay segment
term hotel
unit economics
value Choice
workforce
CHH Transcript
Choice Hotels International, Inc. (CHH) Q1 2026 Earnings Call Transcript
Positive4-30
The earnings call summary shows strong financial performance with revenue, net income, and EPS all up significantly year-over-year. The operating margin has improved, and there is no mention of negative trends or risks in the Q&A. However, the lack of strategic updates or risk assessments suggests some uncertainty, limiting the sentiment to 'Positive' rather than 'Strong positive.'
Choice Hotels International, Inc. (CHH) Q4 2025 Earnings Call Transcript
Positive2-19
The company has shown strong financial performance with increased EBITDA guidance and positive international growth. The Q&A reveals optimism about U.S. RevPAR growth and a strategic focus on high-revenue brands. Despite some unclear management responses, the overall sentiment is positive due to strong growth in extended stay segments, technology investments, and a revamped loyalty program. The lack of specific shareholder return guidance is mitigated by the company's prioritization of business investments and M&A opportunities. These factors suggest a positive stock price movement in the near term.
Choice Hotels International, Inc. (CHH) Q3 2025 Earnings Call Transcript
Positive11-5
The earnings call summary and Q&A indicate a positive outlook. The company is expanding internationally, particularly in Canada and Asia-Pacific, and leveraging AI for efficiency. Although RevPAR expectations are flat, the company sees growth in demand from key demographics. Ancillary revenue and international contributions are strong, with optimistic guidance for 2026. The strategic focus on conversions and limited supply growth supports net room growth. Despite some unclear responses, the overall sentiment is positive, likely resulting in a 2% to 8% stock price increase.
Choice Hotels International, Inc. (CHH) Q2 2025 Earnings Conference Call Transcript
Unknown8-6
The earnings call summary provides a mixed sentiment. While there are positive aspects like record-high EBITDA, global room growth, and rewards program expansion, the guidance for RevPAR is weak and unchanged, which could negatively impact the stock price. The Q&A section highlights management's optimism but also reveals concerns about international travel softness and government travel. Without strong positive catalysts or significant negative factors, the overall sentiment remains neutral.
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