Choice Hotels International (NYSE:CHH) executives said first-quarter 2026 results were in line with internal expectations and pointed to what they described as an “inflection point” in underlying trends toward improving rooms growth, better RevPAR, and lower capital intensity as the company moves beyond a period of higher investment in select brands.
President and CEO Patrick Pacious told investors the company’s asset-light strategy centers on strengthening franchisee economics to drive demand and rooms growth, which then supports “higher quality earnings and free cash flow.” Pacious said the company is seeing evidence of that model translating into results, citing sequential improvement in U.S. net rooms growth, improving unit economics, and a material decline in capital intensity.
Rooms growth trends: openings up, exits down
Chief Financial Officer Scott Oaksmith reported that global rooms grew 1.7% year-over-year in the quarter, led by 2.5% growth in higher revenue segments. Oaksmith said room openings increased 37% year-over-year, and developer demand remained strong with global franchise agreements awarded up 72% year-over-year.
In the U.S., Oaksmith said nearly 6,000 gross rooms opened in the quarter, while net exits declined 52% year-over-year and improved sequentially to the “lowest level in recent years.” He added that March accounted for about 70% of first-quarter U.S. franchise agreements executed, describing development momentum as accelerating later in the quarter.
Choice emphasized its conversion-led development model. Oaksmith said conversion activity is expected to account for more than 80% of openings for the full year. He added that U.S. conversion franchise agreements increased 63% year-over-year, while the U.S. conversion pipeline grew 17% year-over-year and expanded sequentially.
On the question of longer-term net unit growth, Pacious said the company’s conversion-led model provides speed and visibility, but also acknowledged the role of new construction. “It is possible to get back to those levels…when the new construction environment comes back,” he said, adding that muted new construction has been tied to the interest-rate environment.
RevPAR: hurricane comparisons and improving occupancy
Choice’s executives repeatedly pointed to hurricane-related comparisons as a key factor affecting reported RevPAR trends. Pacious said that in the 46 states not impacted by hurricanes, RevPAR rose 1.8% year-over-year in the quarter, driven by gains in occupancy.
Oaksmith said global RevPAR declined 80 basis points year-over-year on a currency-neutral basis in the first quarter, “primarily reflecting the lapping of hurricane related impacts in the prior year.” He said international RevPAR increased 2.6% year-over-year on a currency-neutral basis, led by Canada and the Caribbean and Latin American region.
In the U.S., Oaksmith said that excluding a 410 basis point impact from prior-year hurricane-related demand, first-quarter RevPAR increased 1.8% year-over-year. He added that RevPAR turned positive on a comparable basis in February and remained positive in March, with “preliminary April trends” also positive.
Addressing questions about performance versus peers and market share, management emphasized localized performance outside hurricane-impacted states. Oaksmith said that excluding those states, Choice was “generally in line with the performance in the various local markets” where it operates, but he did not provide a consolidated market-share number on the call.
When asked about why the company did not raise RevPAR guidance amid improving trends, Oaksmith said management remained mindful of macroeconomic uncertainty and kept guidance unchanged, noting that if conditions remain favorable, the company believes it is “well positioned to trend towards the higher end” of its forecasted range. Pacious added that Choice’s close-in booking window affects visibility and that management preferred to be “very prudent” early in the year.
Financial results and guidance
Oaksmith said first-quarter revenues excluding reimbursable revenue from franchised and managed properties increased 3% year-over-year to $217 million, driven by global rooms growth and expansion in the average royalty rate. He highlighted international performance, saying the same revenue measure increased 63% year-over-year internationally.
Adjusted EBITDA was $126 million versus $130 million a year ago, and adjusted EPS was $1.07 compared to $1.34 a year ago. Oaksmith attributed the adjusted EBITDA decline primarily to timing of certain SG&A costs and said the adjusted EPS decline also reflected a “temporary adjustment” to the company’s effective income tax rate in the first quarter. He said these items were anticipated and expected to normalize over the balance of the year.
The company maintained full-year 2026 guidance, including:
- Adjusted EBITDA: $632 million to $647 million
- Adjusted diluted EPS: $6.92 to $7.14
Oaksmith said the outlook reflects growth in higher-revenue hotels and markets, royalty-rate expansion, sustained international momentum, and additional contribution from partnership and non-RevPAR revenues. He also said adjusted SG&A is expected to grow in the mid-single digits, supported by operating efficiencies including scaling AI-enabled tools. The outlook excludes the impact of any additional M&A, share repurchases completed after March 31, or other capital markets activity.
Royalty rate expansion, loyalty, and business mix
Oaksmith said the U.S. average royalty rate increased by 11 basis points in the first quarter, attributing the change to growth in higher revenue brands and improvements in the franchisee value proposition.
Pacious said franchisee unit economics are improving, driven by “stronger revenue delivery and lower hotel development and operating costs,” and said this is reflected in voluntary franchisee retention and continued expansion in average royalty rates. He also pointed to changes aimed at lowering development costs, including reducing prototype costs by up to 25% across key midscale brands and simplifying property improvement requirements. As an example, he said Country Inn & Suites by Radisson’s redesigned prototype is contributing to “renewed momentum,” with franchise agreement growth of 50% year-over-year for that brand.
Choice also highlighted the mix of demand it is seeing. Pacious said the company is seeing strength in small and mid-sized business travelers and group demand, as well as workforce-based travel tied to employment growth in sectors such as healthcare, construction, and utilities. Oaksmith added that overall business travel was up 3% during the quarter, while small and medium business revenue was up 14% and group revenue was up 9% year-over-year.
On loyalty, Pacious said Choice Privileges exceeded 75 million members, up 7% year-over-year. He said loyalty contribution increased more than 300 basis points in March year-over-year and that new member cohorts generated higher revenue per member than prior year cohorts. He also described a program refresh intended to make rewards more attainable, referencing “Rewards Within Reach,” where guests can “get something after five nights as opposed to 10 nights.”
Capital intensity declines; share repurchase plans outlined
Management said capital intensity is falling as the company reduces investment in Cambria and Everhome after reaching what it called key strategic objectives. Oaksmith said development outlays declined 51% year-over-year in the first quarter, and the company generated approximately $25 million of proceeds. He reiterated expectations for net capital outlays of about $20 million to $45 million for the full year, which he said is roughly 70% lower at the midpoint than 2025 levels.
Choice ended the quarter with total liquidity of $474 million and net leverage of 3.2x adjusted EBITDA, which Oaksmith said is within the company’s targeted range of 3x to 4x.
Oaksmith also addressed cash flow timing, noting that the company used $23.2 million of cash in operating activities in the first quarter, largely due to working capital timing and higher franchise agreement acquisition costs tied to the increase in openings. He said operating cash flow is tracking in line with expectations and that free cash flow conversion (excluding franchise agreement acquisition costs) is expected to move toward 60% to 65% over the next several years.
On shareholder returns, Oaksmith said the company expects to repurchase between $175 million and $225 million of shares in 2026. Through March 31, Choice returned $75 million to shareholders, including $62 million in share repurchases, and had 2.3 million shares remaining under its current authorization.
Looking ahead, Pacious said demand is expected to benefit from tax refunds and could be supported by event-driven travel this summer, including the FIFA World Cup and the U.S. 250th anniversary. Management also highlighted ongoing technology investments, including an AI-enabled group booking tool called EasyBid, which Pacious said has improved response time to group RFPs by about 30% and lifted conversion rates by roughly 250 basis points.
Pacious said Choice plans to continue emphasizing tools that improve hotel-level economics, noting that the company is focused on scalable AI deployments and the cost considerations of AI usage. “Tokens cost money,” he said, describing the company’s approach as measured and targeted toward driving productivity and franchisee returns.
About Choice Hotels International (NYSE:CHH)
Choice Hotels International, Inc is a hospitality franchisor specializing in the development and support of lodging brands across the economy, midscale and upscale segments. Through a network of franchisees, Choice Hotels supplies proprietary reservation and distribution systems, comprehensive marketing programs, and operational support services. The company’s core activities include brand management, franchise development, and technology-driven revenue optimization tools designed to enhance guest acquisition and retention for its partners.
Founded in 1939 as Quality Courts United, the company rebranded to Choice Hotels International in 1982 to reflect its expanding brand portfolio and global ambitions.
