Choice Hotels’ third quarter results were met with a positive market reaction, reflecting investor confidence in the company’s business mix and growth initiatives. Management cited continued strength in higher-revenue hotel segments, robust performance from small and medium business travelers, and a notable increase in international business as primary contributors to the quarter. CEO Patrick Pacious highlighted, “We drove adjusted EBITDA 7% higher... reflecting the strength of our higher revenue brand mix, a surge in small and medium business traveler and group's business revenue, continued momentum across our partnership revenue streams and the accelerating earnings contribution now coming from our expanding international business.”
Is now the time to buy CHH? Find out in our full research report (it’s free for active Edge members).
Choice Hotels (CHH) Q3 CY2025 Highlights:
- Revenue: $447.3 million vs analyst estimates of $415.9 million (4.5% year-on-year growth, 7.6% beat)
- Adjusted EPS: $2.10 vs analyst expectations of $2.20 (4.4% miss)
- Adjusted EBITDA: $190.1 million vs analyst estimates of $182.7 million (42.5% margin, 4% beat)
- Management lowered its full-year Adjusted EPS guidance to $6.94 at the midpoint, a 1.5% decrease
- EBITDA guidance for the full year is $626 million at the midpoint, above analyst estimates of $619.5 million
- Operating Margin: 31.8%, down from 35.5% in the same quarter last year
- RevPAR: $57.23 at quarter end, up 2% year on year
- Market Capitalization: $4.48 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Choice Hotels’s Q3 Earnings Call
- Michael Bellisario (Baird) asked about the rationale behind the Everhome joint venture structure and asset recycling strategy. CFO Scott Oaksmith explained the preference for joint ventures and clarified the long-term intent to remain an asset-light franchisor despite near-term development commitments.
- Elizabeth Dove (Goldman Sachs) questioned the outlook for U.S. rooms growth and conversion pipeline velocity. CEO Patrick Pacious emphasized the quality and quick conversion of pipeline hotels, noting most new openings are in higher-value segments.
- David Katz (Jefferies) probed the drivers of group and business travel growth and the strategy for expanding ancillary fee revenue. Pacious pointed to expanded sales teams and service offerings driving higher group bookings and franchisee adoption rates.
- Stephen Grambling (Morgan Stanley) asked about SG&A trends and the impact of AI on productivity. Oaksmith projected low single-digit SG&A growth due to efficiency gains, while Pacious described ongoing technology deployments reducing manual processes.
- Dany Asad (Bank of America) focused on the trajectory for international rooms growth and which regions would drive expansion. Pacious highlighted direct franchising gains, especially in Canada, Latin America, France, and China, as key contributors.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will be watching (1) the pace at which new international direct franchise agreements translate into hotel openings and earnings, (2) the impact of next-generation technology and AI tools on franchisee productivity and SG&A control, and (3) signs of sustained demand growth from retirees and business travelers. Execution on loyalty program enhancements and expansion in key growth regions will also be important indicators of long-term success.
Choice Hotels currently trades at $97.47, up from $91.40 just before the earnings. In the wake of this quarter, is it a buy or sell? Find out in our full research report (it’s free for active Edge members).
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