Skip to content
    CHH
    Earnings call· Mar 2026(Q1 FY26)

    CHOICE HOTELS INTERNATIONAL INC /DE Q1 FY26 earnings call CHH

    Apr 30, 2026 Source

    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

    5

    • 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

    4

    • 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

    8
    CategoryTargetConfidence
    Adjusted EBITDA
    $632 million to $647 million
    high materiality
    High
    Adjusted Diluted Earnings Per Share
    $6.92 to $7.14
    high materiality
    High
    Net Capital Outlays
    $20 million to $45 million
    medium materiality
    High
    Share Repurchases
    $175 million to $225 million
    high materiality
    High
    Partnership Service and Fees Growth
    mid-single digits
    low materiality
    Medium
    Adjusted SG&A Growth
    mid-single digits
    low materiality
    Medium
    U.S. Net Rooms Growth
    returns to positive territory
    high materiality
    High
    Free Cash Flow Conversion (excluding franchise agreement acquisition costs)
    moving towards 60% to 65%
    medium materiality
    Medium

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    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%
    		————

    Operational metrics

    33
    Revenues (excluding reimbursable revenue)
    $217 millionincreased 3% year-over-year
    Q1 FY26

    Driven by global rooms growth and expansion in average royalty rate.

    Adjusted EBITDA
    $126 millioncompared to $130 million a year ago
    Q1 FY26

    Year-over-year decline primarily reflects timing of certain SG&A costs, anticipated to normalize over the year.

    Adjusted Earnings Per Share
    $1.07compared to $1.34 a year ago
    Q1 FY26

    Decline further reflects a temporary adjustment to the effective income tax rate, anticipated to normalize over the year.

    Global Rooms Growth
    1.7%year-over-year
    Q1 FY26

    Led by 2.5% growth in higher revenue segments and a 37% increase in room openings.

    Global Room Openings
    37%increase year-over-year
    Q1 FY26

    Contributed to global rooms growth.

    Global Franchise Agreements Awarded
    72%year-over-year
    Q1 FY26

    Developer demand remained robust.

    U.S. Gross Rooms Opened
    nearly 6,000
    Q1 FY26

    Part of the improved U.S. performance.

    U.S. Net Exits
    declined 52%year-over-year
    Q1 FY26

    Improved sequentially, contributing to U.S. net rooms growth inflection.

    U.S. Conversion Room Openings
    59%year-over-year
    Q1 FY26

    Enabling faster revenue generation.

    U.S. Conversion Franchise Agreements
    63%year-over-year
    Q1 FY26

    Reinforces visibility into future openings.

    U.S. Conversion Pipeline Growth
    17%year-over-year
    Q1 FY26

    Reinforces visibility into future openings.

    U.S. Average Royalty Rate
    11 basis pointsincreased
    Q1 FY26

    Reflecting continued growth in higher revenue brands and ongoing improvement in franchisee value proposition.

    Franchisee-Facing Service Offerings Revenue Growth
    >10%year-over-year
    Q1 FY26

    These offerings are also supporting the continued expansion of non-RevPAR franchise fees.

    Partnership Revenues
    $24.7 millioncompared to $25.4 million a year ago
    Q1 FY26

    Primarily reflecting the timing of transactions in certain programs.

    Development Outlays Reduction
    51%year-over-year
    Q1 FY26

    Reflects declining capital intensity as peak investment for Cambria and Everhome winds down.

    Capital Recycling Proceeds
    approximately $25 million
    Q1 FY26

    Generated in the first quarter.

    Net Capital Outlays
    $4 million net back to Choicecompared to $40 million outflow prior year
    Q1 FY26

    Reflects a strong quarter for capital deployment, with outflows down 50%.

    Total Liquidity
    $474 million
    end of Q1 FY26

    Provides strong financial flexibility.

    Net Leverage
    3.2x
    end of Q1 FY26

    Comfortably within the targeted leverage range of 3 to 4x.

    Shares Repurchased
    $62 million
    YTD through March 31

    Part of $75 million returned to shareholders year-to-date.

    Shares Remaining Under Authorization
    2.3 million
    YTD through March 31

    Reflects remaining capacity for share repurchases.

    Loyalty Program Members
    >75 millionup 7% year-over-year
    Q1 FY26

    Choice Privileges program continues to grow.

    Loyalty Contribution
    >300 basis pointsincreased year-over-year
    March

    New members generated higher revenue per member than prior year cohorts.

    Small and Midsized Business Revenue Growth
    14%year-over-year
    Q1 FY26

    Reflects strong performance in business travel.

    Group Revenue Growth
    9%year-over-year
    Q1 FY26

    Supported by recurring event-driven demand such as youth sports.

    Prototype Costs Reduction
    up to 25%
    current

    Reduced across key mid-scale brands, simplifying property improvement requirements.

    Country Inn and Suites Franchise Agreement Growth
    50%year-over-year
    Q1 FY26

    Driven by the redesigned lower-cost prototype.

    Economy Transient Pipeline Growth
    26%sequentially
    Q1 FY26

    Supported by continued developer engagement and improved system quality.

    Global Pipeline Rooms in Higher Revenue Brands
    97%
    Q1 FY26

    These brands are expected to be approximately 1.7x more accretive than the current portfolio.

    International Business Contribution to EBITDA
    approximately 10%
    current

    Expected to become a much bigger contributor over time as it scales up.

    Extended Stay Rooms Growth
    double-digit growth
    11 consecutive quarters

    Remains a key growth driver.

    Extended Stay in U.S. Pipeline
    >40%
    Q1 FY26

    Well positioned to extend leadership in this category.

    Mid-scale and Economy Transient U.S. Franchise Agreements Awarded
    38%year-over-year
    Q1 FY26

    Driven by improving unit level economics and owner returns.

    Industry KPIs

    3
    MetricValueDetails
    Comparable sales compsdeclined 80 basis pointsbps
    Group booking pace booking window9%%
    Net unit growth development pipeline1.7%%

    Product announcements

    2
    ProductTypeDetails
    AI-enabled easy bid platformlaunch
    Choice Privileges loyalty program refreshupdate

    Risks & headwinds

    4
    Broader Macroeconomic Environment UncertaintyNear-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 CostsQ1 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 RateQ1 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 YearQ1 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

    5

    U.S. Net Rooms Growth

    2026
    CurrentSequential improvement evident in Q1
    TargetPositive 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.

    Q&A highlights

    5

    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 read5 chapters

    Detailed Narrative

    01

    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.

    02

    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.

    03

    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.

    04

    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.

    05

    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.

    AI-generated summary of the company’s earnings call. Not investment advice.