Given rising fuel prices, has there been any impact on consumer sentiment or bookings? What are the RevPAR expectations for Q2 and H2, considering Q1 hurricane impacts?

Management stated they've seen the opposite, with continued consumer strength in March and April, despite rising gas prices. They attribute this to affordability trends, workforce travel, extended stay demand, and rising retirees. While Q1 RevPAR was impacted by hurricanes, preliminary April trends are positive. They are maintaining full-year guidance due to macroeconomic uncertainty but are well-positioned for the higher end if conditions improve. “Yes. We're encouraged by the strengthening trends we saw throughout the first quarter and really saw occupancy strengthen, and that positive momentum really continued into April. At the same time, we're still early in the year and being mindful of the broader macroeconomic environment.”

Why did RevPAR underperform, even on a 2-year stack, suggesting market share loss, and when will this recover? How will the company improve communication regarding model complexities?

Management explained that Q1 RevPAR was heavily impacted by hurricane comparisons, particularly in the 20% of their portfolio in affected states. They noted positive RevPAR in other regions and emphasized occupancy gains as a leading indicator. They reiterated satisfaction with underlying trends and committed to communicating the positive business trajectory, despite the stock's reaction to the year-over-year comparisons. “I think we're -- like we said, we're very happy with the improving underlying trends that we're seeing. We're seeing unit growth inflecting. We're seeing RevPAR improving, capital intensity declining.”

How will international operations contribute to profitability as they scale? What is driving the heavier losses in the 'equity and loss of affiliates' line?

Management explained that the shift to a direct franchise model in international markets (like Canada) is driving significantly higher contributions and margins, with international business currently contributing about 10% of EBITDA. The losses in 'equity and loss of affiliates' are primarily due to the timing of ramping up Everhome properties, which are expected to turn profitable as they mature, coinciding with a step-down in investment. “So it's really a story around looking at the markets where we feel like it's more opportunistic for us to be or strategic rather for us to be in that geography in a more direct franchise world as opposed to what we might have been doing prior to that.”

CHH

Choice Hotels (CHH) Q1 FY26 earnings call: guidance and Q&A

Earnings call· Mar 2026 (Q1 FY26)· Consumer Discretionary· Apr 30, 2026

Source: earnings call transcript

Executive summary

Choice Hotels Q1 FY26 — Rooms Growth Inflection and Declining Capital Intensity

Choice Hotels delivered Q1 FY26 results in line with expectations, signaling an inflection point in underlying trends toward rooms growth, RevPAR improvement, and lower capital intensity. The company is transitioning to a more accretive asset-light growth model, driving improved franchisee economics and consistent earnings growth, while maintaining a cautious outlook on the broader macroeconomic environment.

Highlights

U.S. net rooms growth is inflecting, with gross openings up 32% year-over-year and Q1 hotel openings at a 5-year high.
Global rooms grew 1.7% year-over-year, led by 2.5% growth in higher revenue segments and a 37% increase in room openings.
Loyalty contribution increased over 300 basis points in March year-over-year, with Choice Privileges program exceeding 75 million members, up 7% year-over-year.
Small and midsized business revenue was up 14% year-over-year, and group revenue was up 9% year-over-year.
Capital intensity declined materially, with development outlays reduced by 51% year-over-year and net capital outlays expected to be approximately 70% lower at the midpoint for the full year 2026.

Concerns

Adjusted EBITDA decreased to $126 million compared to $130 million a year ago, primarily due to timing of certain SG&A costs.
Adjusted earnings per share declined to $1.07 compared to $1.34 a year ago, further reflecting a temporary adjustment to the effective income tax rate.
Global RevPAR declined 80 basis points year-over-year on a currency-neutral basis, primarily reflecting the lapping of hurricane-related impacts in the prior year.
Partnership revenues decreased to $24.7 million in the first quarter compared to $25.4 million a year ago, reflecting timing of transactions in certain programs.

Guidance & targets

Category	Target	Timeline	Confidence
Adjusted EBITDA	$632 million to $647 million high materiality	Full Year 2026 · FY26	High
Adjusted Diluted Earnings Per Share	$6.92 to $7.14 high materiality	Full Year 2026 · FY26	High
Net Capital Outlays	$20 million to $45 million medium materiality	Full Year 2026 · FY26	High
Share Repurchases	$175 million to $225 million high materiality	Full Year 2026 · FY26	High
Partnership Service and Fees Growth	mid-single digits low materiality	Full Year 2026 · FY26	Medium
Adjusted SG&A Growth	mid-single digits low materiality	Full Year 2026 · FY26	Medium
U.S. Net Rooms Growth	returns to positive territory high materiality	Full Year 2026 · FY26	High
Free Cash Flow Conversion (excluding franchise agreement acquisition costs)	moving towards 60% to 65% medium materiality	Next several years	Medium

Segment performance

Segment	Revenue	YoY	QoQ	Margin
International Strong performance, particularly in Canada and the Caribbean and Latin American region, driven by a shift to a direct franchising model. Net rooms growth: 13% year-over-yearRevPAR growth (currency-neutral): 2.6% year-over-yearContribution to EBITDA: ~10%	increased 63% year-over-year	—	—	—
Canada Strong early returns following last year's transition to a direct franchising model, representing the strongest performance in more than a decade. RevPAR growth: >5%Net rooms growth: >30%Pipeline growth: 55% year-over-year	—	—	—	—
Higher Revenue Segments These segments are expected to be approximately 1.7x more accretive than the current portfolio, with 97% of global pipeline rooms in these brands. Rooms growth: 2.5%	—	—	—	—

Product announcements

Product	Type	Timeline	Details
AI-enabled easy bid platform	launch	recently launched
Choice Privileges loyalty program refresh	update	earlier this year

Risks & headwinds

Broader Macroeconomic Environment Uncertainty Near-term

Unquantified

Mitigation:Maintaining a cautious outlook and full-year guidance, while being positioned to trend towards the higher end if macro risks recede.

Timing of SG&A Costs Q1 FY26

Adjusted EBITDA decreased by $4 million year-over-year in Q1 FY26

Mitigation:Expected to normalize over the balance of the year, consistent with full-year guidance.

Temporary Adjustment to Effective Income Tax Rate Q1 FY26

Adjusted EPS decreased by $0.27 year-over-year in Q1 FY26

Mitigation:Expected to normalize over the balance of the year, consistent with full-year guidance.

Hurricane-Related Impacts in Prior Year Q1 FY26 comparison

Global RevPAR declined 80 basis points year-over-year currency-neutral in Q1 FY26; U.S. RevPAR had a 410-basis-point impact from prior year hurricane-related demand.

Mitigation:Impact dissipated by mid-March; preliminary April trends are positive, leading to easier year-over-year comparisons going forward.

What to watch in Q2 FY26

U.S. Net Rooms Growth

2026

Current Sequential improvement evident in Q1

Target Positive territory

Why it matters

This is a key indicator of the company's asset-light growth model and future earnings potential.

Taken together, these trends reinforce our expectation that U.S. net rooms growth returns to positive territory in 2026, with sequential improvement already evident in the quarter.

Find out whether CHH delivers this. Inve re-checks your case every morning.

Q&A highlights

What are the levers and prospects for Choice to accelerate NUG into the future, potentially reaching low to mid-single-digit levels, given its conversion-led model?

Management highlighted the sequential improvement in net rooms growth, driven by the speed and efficiency of their conversion pipeline. They noted that the current muted new construction environment impacts NUG, but expect acceleration when new construction returns, especially in extended stay. They believe low to mid-single-digit NUG is possible in the future.

“No, I think it is possible to get back to those levels that you're talking about when the new construction environment comes back.”

asked by David Katz · answered by Patrick Pacious

2 min read 5 chapters

Detailed narrative

Strategic Shift to Asset-Light Growth Model

Choice Hotels is executing a strategy focused on an asset-light growth model, aiming for significantly lower capital intensity and stronger unit economics. This approach is designed to improve franchisee economics, which in turn drives demand and rooms growth, converting into higher quality earnings and free cash flow.

The company reinvests this cash in high-return, capital-light opportunities and returns excess capital to shareholders in a disciplined manner, leading to more consistent earnings growth and increasing shareholder returns.

Durable Room Growth and Conversion-Led Model

The company's room growth is driven by a conversion-led development model, offering speed and capital efficiency. U.S. net rooms growth is inflecting, with gross openings up 32% year-over-year and first quarter hotel openings at a 5-year high, while exits are at their lowest since 2023.

The U.S. pipeline is expanding sequentially, providing strong visibility, with approximately 60% of Q1 franchise agreements expected to open this year. International portfolio also continues to scale, with net rooms up 13% year-over-year.

Improving Franchisee Unit Economics and Demand Drivers

Franchisee unit economics are strengthening due to enhanced revenue generation and reduced hotel development and operating costs. This is reflected in strong voluntary franchisee retention and expanding average royalty rates. The company is attracting more valuable customers, with business travelers and groups generating higher spend per stay, and loyalty driving repeat stays.

Small and midsized business revenue increased 14% and group revenue rose 9% year-over-year, supported by recurring event-driven demand.

Technology and AI as a Differentiator

Choice leverages its long-standing advantage in cloud infrastructure and data to deploy AI at scale across its business. The AI-enabled easy bid platform has improved response time to group RFPs by approximately 30%, leading to conversion rates that are roughly 250 basis points higher.

Partnerships with AWS and Salesforce are extending these capabilities to improve franchisee operations, capture group demand, and enable faster, data-driven decisions, ultimately enhancing franchisee returns and driving royalty rate expansion.

Disciplined Capital Allocation and Shareholder Returns

The company's capital allocation framework prioritizes high-return, capital-light organic investments, supports a stable dividend, and returns excess free cash flow to shareholders primarily through share repurchases. Capital intensity is declining significantly, with net capital outlays for FY26 expected to be 70% lower than 2025 levels.

Choice plans to repurchase between $175 million to $225 million of shares in 2026, supported by strong balance sheet capacity and expected free cash flow generation.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.