Choice touts international NUG in Q3 earnings

NORTH BETHESDA, Maryland — Choice Hotels International focused on global net room growth and increased profitability for its higher-revenue segments as it released its third-quarter earnings.

Choice's global RevPAR, which increased 0.2% YOY, was driven by international growth of 9.5% and significantly more positive than the company’s -3.2% U.S. RevPAR loss in Q3. Subsequently, the company lowered its full-year RevPAR guidance from 0 to -3% to -2% to -3%.

“Choice Hotels International delivered another quarter of record profitability, underscoring the strength of our portfolio’s continued shift toward higher-value brand segments and multiple growth avenues beyond U.S. RevPAR,” Choice Hotels President and CEO Patrick Pacious said in the company’s earnings release. “We are especially excited by the accelerating momentum in our international business, where we are on track to double profitability by 2027. With an accretive, high-quality pipeline that rapidly converts signings into openings, and an enhanced value proposition that is attracting a growing base of higher-value guests, Choice is exceptionally well-positioned to deliver long-term growth.”

Choice’s global net rooms grew 2.3% year-over-year in the quarter, including 3.3% growth across its more accretive, higher-revenue upscale, extended stay, and midscale segments. International net rooms grew 8.3% YOY, highlighted by a 66% increase in openings, and rose 5.2% from the second quarter. Choice highlighted adding over 4,800 midscale rooms in France through direct franchise agreements; entering Argentina through a direct franchise agreement; onboarding nearly 80% of the anticipated 9,500 rooms in China under a distribution agreement with SSAW Hotels and Resorts and introducing the midscale extended-stay Mainstay Suites brand to Australia through direct franchise agreements as well as the brand entering new markets in Africa and Suriname, and adding a second franchise agreement in Argentina. The company said global franchise agreements awarded grew 54% YOY in Q3.

Other Q3 RevPAR highlights included an 11% growth in EMEA and a 5% growth in the Americas (excluding the U.S.), driven by a strong 7% growth in Canada. RevPAR in Asia Pacific grew 5% YOY in Q3.

Choice put a more positive spin on its U.S. RevPAR picture by stating that its U.S. extended-stay portfolio outperformed the U.S. lodging industry by 20 basis points, while its U.S. economy transient portfolio outperformed its chain scale by 180 basis points in Q3.

The company said its global pipeline exceeded 86,000 rooms through Q3, with 98% of those rooms concentrated in its upscale, extended-stay, and midscale segments. U.S. extended-stay net rooms grew 12% YOY in the quarter, highlighted by a 14% increase in openings.

Other highlights of Choice’s global net rooms growth included its U.S. upscale, extended-stay and midscale growth of 1.6% YOY; global net upscale rooms growth of 20.8% and U.S. franchise agreement growth of 7%. Choice also said its global midscale pipeline expanded 5% in the quarter, including a 15% increase in the U.S. pipeline for the Country Inn & Suites by Radisson brand. The company said its U.S. economy transient brand rooms grew 35% YOY in the quarter, with U.S. franchise agreements increasing 27% YOY.

Other Q3 highlights

• Net income grew to $180 million in Q3 from $105.7 million in the same period of 2024, representing diluted EPS of $3.86.
• Adjusted EBITDA for Q3 increased 7% to a third-quarter record of $190.1 million.
• Adjusted diluted EPS for the third quarter was $2.10, a decrease from $2.23 YOY, reflecting the acquisition of Choice’s previously held 50% equity investment in Choice Hotels Canada, which resulted in higher amortization expenses. Choice said the temporary increase in income tax expense is expected to reverse in Q4 and said excluding those items, its third quarter adjusted EPS would have been $2.27, which would have been a 2% increase YOY.
• Total revenues increased 5% YOY to $447.3 million in Q3.
• Franchise and management fees increased 3% YOY to $193.8 million in Q3, while partnership services and fees increased 19%.
• Through Q3, Choice had total available liquidity of $564.2 million.
• Choice changed its full-year outlook primarily to reflect its $100 million gain recognized in the quarter from its fair value remeasurement of the previously held 50% equity investment in Choice Hotels Canada.

What the analysts said

Analyst Michael Bellisario of R.W. Baird said he rated Choice’s earnings as incrementally positive and ahead of projected forecasts.

“Choice’s quarterly results were highlighted by better franchise/management fees and partnership services and fees – a core operating beat despite RevPAR growth of -3.2% that was essentially in line with estimates,” he said. “Higher other revenues offset higher adjusted SG&A, and adjusted EBITDA was ~5% better than Baird/Street forecasts.”