Why Choice optimistic in 2025: Better customers

NORTH BETHESDA, Maryland — In a time of economic uncertainty, Patrick Pacious, like many of his public hotel company CEO counterparts, struck a tone of optimism.

The main reason was simple for Pacious, president and CEO of Choice Hotels International: his customers are getting better.

During Choice’s first-quarter earnings call, Pacious several times noted the increased quality of the customer for the company, which has been making a concerted push into its upscale business after its purchase of Radisson Americas in 2022.

That average consumer is reporting that they have 24% higher national median household income than the U.S. average, and 20% are over $200,000. So, we have a stronger consumer in our business.

Patrick Pacious

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“You look at the diversified places where our consumers are coming from now, we have a higher income consumer today than we’ve had in the past,” he said. “That average consumer is reporting that they have 24% higher national median household income than the U.S. average, and 20% are over $200,000. So, we have a stronger consumer in our business.”

Pacious also said Choice is seeing market share gains in Q1, especially in its economy and extended-stay brands.

“I want to particularly point to our economy segment, which was up 7%, which is 4% higher than the chain scale, and extended-stay, which was also up 7%, which is 4% higher than what the chain scale did,” he said. “So, we are taking share. That’s clearly what we saw in the early part of the year.”

That trend didn’t slow down in April, Pacious said. “We again saw RevPAR index gains primarily in occupancy, which is a positive signal for us,” he said. “When you look at the sentiment out there, that leisure is softening. We’re not actually being impacted in a meaningful way by that, because… when things get softer, we are taking share, and that has historically happened.”

These numbers leave Pacious optimistic about the rest of 2025, despite the fact that Choice, like its public hotel counterparts, cut its RevPAR guidance for the rest of 2025.

“While we’re in the early days of this sort of softening cycle, we’re pretty optimistic that the way we’ve repositioned our brand, the way that our consumer has gotten that much more resilient from an income perspective and then the diversification between business and leisure travel is really going to benefit us as we move throughout the rest of the year,” he said.

Choice also increased net global rooms system size by 2.8%, YOY, including 3.9% growth for what it calls its “revenue-intensive portfolio,” including upscale, extended-stay, and midscale rooms.

Pacious said he’s confident that the net room growth will hold, especially considering how fast it can get conversions into its system, often in the same quarter.

“We’re confident in our guidance,” he said. “International continues to be a key driver of that growth, and then the second piece of it is our historical competency around conversions. The real focus is the velocity with which we’re able to move projects from pipeline into our system.”

When asked what his fr

Gas prices are the lowest they’ve been in three years. So, we are seeing those hotels that are in more drive-to locations performing well.

Patrick Pacious

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anchisees are telling him, Pacious said he heard the same notes of optimism at the company’s annual convention.

“We were really happy with how optimistic they were relative to everything that you’re reading in the headlines,” he said. “They were telling us is what we saw in Q1, which is that their hotels are doing better than their peers in the market. [That] reflects the investments we made in the back half of 2024, things like our loyalty program, website and revenue optimization service… That’s flowing into development.”

Pacious said Choice is also talking to consumers, and while they say their behavior is changing, it’s not in a way that will hurt business.

“Gas prices are the lowest they’ve been in three years. So, we are seeing those hotels that are in more drive-to locations performing well,” he said.

Choice surveyed its customers in the past month and 90% of the respondents said they were planning to travel as much or more this summer than they did last year, Pacious said.

“They said that they see prices are rising, but they said they’re going to find ways to cut back by basically driving instead of flying, taking vacations in more affordable places and traveling domestically, as opposed to internationally,” he said.

Choice increased its net rooms portfolio for its domestic extended-stay segment, including the Everhome Suites Huntsville, by 10.8%.

Other Q1 highlights

• Choice reclassified certain revenues into partnership services and fees (they were formerly known as platform and procurement fees). Those numbers increased 28% YOY to $25.4 million in Q1. Franchise and management fees were also reclassified, increasing 2.4% YOY to $150.5 million. 
• The company’s domestic portfolio increased 2.3% YOY while its international portfolio increased 4.4%. Choice’s global upscale net rooms portfolio grew by 16.2% YOY, including 8% in the first quarter alone. The company’s global pipeline was over 95,000 rooms through Q1, of which nearly 79,000 were domestic.
• Choice’s extended-stay portfolio increased domestic RevPAR by 6.8% YOY in Q1, saying it outperformed the industry by 410 bps.
• The company’s increased domestic RevPAR YOY for its midscale (+1.7%) and economy (+7.1%) portfolios in Q1, stating it outperformed its respective chain scales by 30 bps and 440 bps.
• Net income increased 44% YOY to $44.5 million for the first quarter of 2025, representing diluted earnings per share (EPS) of $0.94, a 52% increase YOY. 
• EBITDA for Q1 grew to $129.6 million, a first quarter record and a 4% increase YOY.
• Adjusted diluted EPS for the first quarter of 2025 grew to $1.34, a first-quarter record and a 5% YOY increase.
• Through the first quarter, the company had a total available liquidity of $593.8 million. 
• In Q1, Choice also paid cash dividends totaling $13.5 million and repurchased 456,000 shares of common stock for $64.6 million under its stock repurchase program.

What the analysts said

Analyst Michael Bellisario of R.W. Baird said Choice’s Q1 earnings slightly beat Street expectations on better-than-expected domestic RevPAR growth.

“Earnings generally were in line with Baird/Street expectations,” he said. “Full-year guidance is being cut and reflects RevPAR -150 bps (perhaps not as big of a cut as feared, in our opinion) and adjusted EBITDA -120 bps (which now brackets Baird/Street forecasts). Positively, free cash flow improved year-over-year, although capex and investment spending remained elevated... Negatively, system rooms and the pipeline declined sequentially and a bit more than we expected (although 1Q sequential declines are typical given timing/seasonality).”

Analyst Patrick Scholes of Truist Securities said while net rooms growth grew, there was continued room loss versus the fourth quarter with domestic down 1.2% and international flattish to slightly down.

“Interestingly, Radisson domestic maintained 57 hotels, but the room count declined by 2,797 rooms. We do not know why,” Scholes said. “There was sequential improvement in emerging brands such as Everhome (nominally impactful to room count with four more hotels open) and WoodSpring rooms at +3.5% [quarter-over-quarter].”