Choice Hotels International, Inc. (CHH) Q3 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
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.
Key Financial Performance
Adjusted EBITDA $190 million, up 7% year-over-year. This increase reflects the strength of higher revenue brand mix, a surge in small and medium business traveler and group's business revenue, continued momentum across partnership revenue streams, and accelerating earnings contribution from expanding international business.
Net Global Rooms Increased by nearly 2.5% year-over-year. Growth was led by continued expansion in higher revenue segments, which grew by nearly 3.5%, along with higher revenues per hotel across all segments.
International Adjusted EBITDA Achieved 35% growth year-over-year in the third quarter. This growth was fueled by a 66% year-over-year increase in hotel openings and expansion of the international portfolio by over 8% year-over-year.
Canadian RevPAR Increased 7% year-over-year in the third quarter. This reflects the transition to a direct franchising model and growing franchisee interest across brands.
U.S. Extended Stay Room System Size Grew 12% year-over-year, highlighted by a 14% increase in openings. This growth reflects the expansion of the U.S. extended stay portfolio and strong demand in the segment.
U.S. RevPAR Declined 3.2% year-over-year in the third quarter. This decline was primarily due to softer government and international inbound demand.
International RevPAR Increased 9.5% year-over-year in the third quarter. Growth was led by the EMEA region with an 11% increase, and the Americas and Asia Pacific regions each posted 5% growth.
Average U.S. Royalty Rate Increased by 10 basis points year-over-year in the third quarter. This reflects a strategic focus on higher revenue brands and a stronger franchisee value proposition.
Partnership Revenue Increased 19% year-over-year in the third quarter. Growth was driven by strong co-brand credit card fees and increased suppliers and strategic partnership fees.
Adjusted Earnings Per Share (EPS) $2.10 for the third quarter 2025 compared to $2.23 in the prior year quarter. The year-over-year comparison reflects impacts from the acquisition of the remaining 50% interest in the Choice Hotels Canada joint venture, higher amortization expense, temporary increase in income tax expense, reevaluation of previously held ownership interest, and unrealized foreign currency adjustments.
You have reached the limit. Sign up to access full content
Get started
Operating Highlights
Everhome Suites brand expansion: 23 hotels open, 16 opened this year, 40 more U.S. projects in the pipeline, including 12 under construction. Expanded into fast-growing markets like San Antonio, Texas.
MainStay Suites in Australia: Launched mid-scale extended stay brand, marking the first expansion outside North America with nearly 600 rooms.
Ascend Collection in China: Onboarded nearly 80% of the more than 9,500 anticipated upscale rooms within 5 months, with the remainder expected by year-end.
International expansion: International portfolio expanded by over 8% year-over-year, surpassing 150,000 rooms outside the U.S. Growth fueled by a 66% year-over-year increase in hotel openings.
EMEA region growth: Portfolio grew to nearly 64,000 rooms, up 7% year-over-year. Significant progress in France with plans to onboard over 4,800 mid-scale rooms under direct franchise agreements by year-end.
Caribbean and Latin America: Expanded footprint by nearly 50% over the past 3 years to more than 25,000 rooms across 20+ countries. Entered Argentina with Radisson Blu in Patagonia and Radisson RED.
Asia Pacific: Launched Ascend Collection in China and MainStay Suites in Australia. On track to add 10,000 mid-scale rooms in China over the next 5 years.
Technology investment program: $60 million investment nearing completion, transforming technology stack into an intelligent ecosystem to optimize rate and revenue management, streamline operations, and enhance franchisee success.
Business travel strategy: Business travelers now represent 40% of stays. Group revenue rose 35% year-over-year, and small and medium business revenue grew 18%.
Loyalty program enhancements: Revamped loyalty program launching in January to accelerate member growth, increase co-brand card revenue, and strengthen direct bookings.
Portfolio optimization: Strategically replacing lower-performing assets with higher quality, more profitable hotels, lifting guest satisfaction and brand equity.
Focus on higher revenue segments: 90% of global portfolio consists of higher revenue-generating rooms. Pipeline includes 98% higher revenue brands, expected to be 1.7x more accretive than current portfolio.
Extended stay segment growth: U.S. extended stay portfolio expanded by over 20% in 5 years, now exceeding 55,000 rooms. Everhome Suites brand gaining traction with 40% of economy and mid-scale extended stay rooms under construction belonging to Choice brands.
You have reached the limit. Sign up to access full content
Get started
Risk or Challenges
Interest Rate Environment: The current interest rate environment poses challenges for new construction and hotel transaction markets, potentially impacting growth and capital recycling activities.
U.S. RevPAR Decline: U.S. RevPAR declined by 3.2% year-over-year in Q3 2025, reflecting softer government and international inbound demand, which could impact revenue growth.
Economic Uncertainty: The macroeconomic environment remains dynamic, which could affect demand and operational performance.
Construction Challenges: The challenging new construction environment for the industry could slow down the development of new hotels, particularly in the U.S.
Regulatory and Tax Impacts: Potential impacts from government shutdowns and changes in tax recognition timing could affect financial performance.
International Expansion Risks: While international operations are growing, entering new markets like Africa and Argentina carries risks related to market acceptance, operational challenges, and geopolitical factors.
Technology Investment Risks: The $60 million technology investment program nearing completion carries risks related to implementation, adoption by franchisees, and achieving the expected ROI.
Franchisee Performance: Strategic exits of underperforming assets and reliance on franchisee success could pose risks if franchisees fail to meet performance expectations.
You have reached the limit. Sign up to access full content
Get started
Guidance & Outlook
Full Year Adjusted EBITDA: The company has raised the midpoint of its full-year adjusted EBITDA outlook to range between $620 million and $632 million, reflecting confidence in the growth of its global business.
U.S. RevPAR: The company expects U.S. RevPAR to range between -3% and -2% for the full year, with fourth-quarter comparisons impacted by elevated hurricane-related demand in the prior year and potential government shutdown effects.
International Adjusted EBITDA: The company expects to generate more than $50 million in international adjusted EBITDA by 2027, doubling from its 2024 baseline.
International Portfolio Growth: The international portfolio expanded by over 8% year-over-year in the third quarter, surpassing 150,000 rooms outside the U.S., with a 66% year-over-year increase in hotel openings.
U.S. Extended Stay Segment: The U.S. extended stay portfolio has grown by more than 20% over the past five years, now exceeding 55,000 rooms. The company expects continued strong demand fueled by manufacturing and data center build-outs.
Pipeline and New Construction: 98% of rooms in the global pipeline are in higher revenue brands, with new construction franchise agreements and openings expected to grow in 2026.
Technology Investments: The company is nearing completion of a $60 million technology investment program, expected to conclude next year, aimed at enhancing franchisee success systems and driving durable RevPAR growth.
Loyalty Program Enhancements: A revamped loyalty program launching in January 2026 is expected to accelerate member growth, increase co-brand card revenue, and strengthen direct bookings.
Demographic Trends: The company anticipates significant demand from retirees and near-retirees, who represent nearly 30% of revenue and are expected to drive travel demand well into the future.
You have reached the limit. Sign up to access full content
Get started
Shareholder Return Plan
Dividends and Share Repurchases: Year-to-date through September, we returned $150 million to shareholders in dividends and share repurchases.
Share Repurchase Program: Year-to-date through September, we returned $150 million to shareholders in dividends and share repurchases.
You have reached the limit. Sign up to access full content
Get started
Key Q&A
Q:What was the motivation and thought process behind the Everhome joint venture deal, and how are its economics different from previously owning and developing assets?
A:The Everhome joint venture was primarily a timing decision. Some hotels were started on the company's balance sheet but were always intended to go into the joint venture. The transaction netted about $25 million in recycling proceeds. The company remains focused on selling assets over time, either to JV partners or third parties, encumbered with long-term franchise agreements. The company is nearing the end of its capital investment in Cambria and Everhome, with no new Cambria developments after this year and Everhome developments wrapping up in 2026. Capital outlays have already decreased by $50 million in Q3 compared to the previous year.
Q:Why did the company not buy back stock during the quarter despite its low price?
A:The company prioritized capital allocation towards investing in the business and accretive M&A, such as acquiring the other half of Canada it did not own. This acquisition was deemed to create more long-term value for shareholders. The company is on pace with its capital deployment strategy, including share repurchases earlier in the year.
Q:What is the longer-term outlook for U.S. rooms growth, and what factors are driving it?
A:The company is focused on bringing higher-quality products into the pipeline, with 98% of the current pipeline in higher-value segments. Conversions, which open quickly (3-6 months), are a significant driver of growth. Limited supply growth in the U.S. from new construction is expected to continue through 2026, supporting the company's strategy of conversions and net rooms growth.
Q:How does the company view the RevPAR environment and its long-term trajectory?
A:The company views the RevPAR environment as cyclical. Early indicators, such as stabilizing occupancy, suggest a turning point. The economy segment, which typically leads out of downturns, is showing positive signs. The company is optimistic about demand drivers like small and medium-sized business travelers, retirees, and road trippers, who are expected to grow in numbers and spending. Investments in loyalty programs are aimed at capturing more of this demand.
Q:What are the early perspectives on 2026, and how does 2025 serve as a platform for growth?
A:The company expects growth in demand from retirees and small business travelers, who are resilient and growing demographics. The international business is on track to double its EBITDA contribution by 2026, with mid- to high single-digit growth expected in partnerships and services. Cost efficiencies from AI tools are expected to keep SG&A growth low, supporting overall optimism for 2026.
Q:What is the company's strategy for growth in ancillary fees and non-RevPAR revenue?
A:The company sees significant opportunities in providing more services to customers and franchisees, such as co-branded credit cards and procurement services. These areas have been earnings accretive and are expected to continue growing. The company is also focused on offering more services to franchisees, with increasing adoption rates.
Q:How is the company leveraging AI, and what are the expected benefits?
A:The company has been using AI tools for about 10 years and is now exploring partnerships with large language models like ChatGPT. AI is expected to improve workforce productivity, reduce manual processes, and enhance franchisee-facing tools. The company is also testing AI's potential in distribution channels and expects it to help franchisees and shareholders by improving efficiency and decision-making.
Q:What is the outlook for key money and its impact on growth?
A:The company expects key money to be lower in 2025 compared to 2024, reflecting the strength of its brands. Average key money per deal was down 11% in the first nine months of the year. The company believes its strong brand value reduces the need for key money to win contracts, especially in the mid-scale and upper mid-scale segments.
Q:What is the company's free cash flow conversion outlook for 2025?
A:The company expects free cash flow conversion to be similar to last year's 60-65% range. Temporary timing differences, such as investment tax credits, affected the quarter's free cash flow but are not expected to impact the full-year outlook.
Q:What is the company's international growth strategy and key regions driving growth?
A:The company is focused on direct franchising, which now accounts for 40% of its international business. Key regions include Canada, where the company recently acquired full ownership, and Latin America, where rooms have grown by 60% over four years. In EMEA, the focus is on France and Spain, while in Asia-Pacific, the company is expanding extended stay brands in Australia and New Zealand. In China, a partnership with an upscale hotel company is expected to drive growth.
Q:How does the company plan to support international growth, and what investments are required?
A:Most investments to support international growth have already been made over the past four years. The company has built the necessary systems and talent in key markets. The focus is now on execution and improving the value proposition to drive higher effective royalty rates. The company operates international markets as domestic markets, relying on local teams and domestic travelers.
Q:What is the company's approach to maintaining brand standards amid cost pressures on franchisees?
A:The company continuously evaluates brand standards to ensure they are affordable for franchisees while preserving brand hallmarks. This approach has been a long-standing practice and is key to the company's success in growing its business through conversions.
Q:Review of Unclear Management Responses
A:Management avoided providing specific numerical guidance or detailed breakdowns in several areas, including the exact growth rate for international rooms, the specific impact of AI on cost savings, and the detailed financial impact of ancillary revenue growth. Additionally, while discussing the RevPAR environment and international growth, management used broad optimistic language without providing concrete data or projections.
You have reached the limit. Sign up to access full content
Get started
Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI
Africa
Americans
Asia
Chief
Choice franchisees
Choice technology
Everhome
Officer
Radisson RED
RevPAR index
build
center
construction Choice
contribution
conversion hotel
customer lifetime
economy transient
efficiency
enhancement
evolution
expansion segment
franchising model
generation
hotel segment
hotel system
indicator
investment program
investor
material
opening Radisson
quality hotel
reach
retiree
road tripper
room expansion
segment occupancy
share term
step
team
track
transformation
travel guest
value Choice
value guest
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.
CHH Report
Frequently Asked Questions
Where does this earnings call transcript come from?
All transcripts are sourced directly from the official live webcast or the company’s official investor relations website. We use the exact words spoken during the call with no paraphrasing of the core discussion.
How soon is the transcript available after the earnings call ends?
Full verbatim transcripts are typically published within 4–12 hours after the call ends. Same-day availability is guaranteed for all S&P 500 and most mid-cap companies.
Is the transcript edited or altered in any way?
No material content is ever changed or summarized in the “Full Transcript” section. We only correct obvious spoken typos (e.g., “um”, “ah”, repeated 10 times”, or clear misspoken ticker symbols) and add speaker names/titles for readability. Every substantive sentence remains 100% as spoken.
Why do some answers appear as “Unclear” or “Inaudible”?
When audio quality is poor or multiple speakers talk over each other, we mark the section instead of guessing. This ensures complete accuracy rather than introducing potential errors.
Who creates the AI Summary and Key Q&A highlights shown above the transcript?
They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
