Choice Hotels International (NYSE:CHH) reported third-quarter adjusted EBITDA of approximately $193 million, up 1% from a year earlier, as higher royalty and management fees helped offset increased operating expenses and a decline in liquidated-damages revenue.
Adjusted diluted earnings per share rose about 11% year over year to $2.33, while revenue excluding reimbursable revenue from franchised and managed properties increased 3% to $285 million. Excluding liquidated damages in both periods, adjusted EBITDA and revenue each increased approximately 5%, Chief Financial Officer Scott Oaksmith said.
The company raised its full-year outlook for RevPAR and adjusted EBITDA after U.S. RevPAR rose 3.8% in the third quarter, exceeding management’s expectations. Choice now expects full-year adjusted EBITDA of $641 million to $651 million and adjusted diluted EPS of $6.92 to $7.07.
RevPAR Momentum and Rooms Growth
Global RevPAR increased 3.9% year over year on a currency-neutral basis, including a 3.8% increase in the U.S. and a 3.7% gain internationally. U.S. performance was driven by a 160-basis-point rise in occupancy and 1% rate growth, with the West, South Central and Midwest regions posting the strongest results.
President and CEO Dom Dragisich said U.S. RevPAR was aided by business travel demand, improving leisure trends, FIFA World Cup-related demand and infrastructure development activity. FIFA World Cup demand contributed about 40 basis points to quarterly RevPAR growth, while hotels within 10 miles of major data centers delivered more than 400 basis points of higher RevPAR growth than the rest of the U.S. system.
October trends remained favorable, with U.S. RevPAR up approximately 7% from a year earlier, supported by both occupancy and rate gains. Management said it expects fourth-quarter U.S. RevPAR growth to exceed the third-quarter result.
Global net rooms increased 1.7% year over year, driven by international expansion, while U.S. net rooms were approximately flat. Dragisich said the company expects U.S. net rooms growth to accelerate to about 1% by year-end, supported by historically stronger fourth-quarter openings and improved retention.
U.S. room openings increased 17% year to date, although they declined in the third quarter against strong prior-year comparisons. Conversions are expected to account for roughly 90% of U.S. openings in 2026. About two-thirds of conversion rooms opened year to date entered the system within three months of signing, according to the company.
Choice said U.S. franchise agreements increased 24% year over year in the quarter, while its U.S. conversion pipeline grew 29%. Extended-stay properties represented more than 40% of the U.S. pipeline and delivered their 13th consecutive quarter of double-digit rooms growth.
Commercial Programs Target Franchisee Economics
Dragisich, who highlighted U.S. net rooms growth as his top operating priority, said the company is pursuing stronger franchisee economics by improving demand generation and reducing costs. Approximately two-thirds of rooms leaving the U.S. system came from hotels in the bottom quartile for guest satisfaction, and those properties generated about 25% less royalty revenue per hotel than the system average.
The company said its relaunched Choice Privileges loyalty program grew 7% to 78 million members. New members who stayed at Choice hotels generated 12% more revenue per member than comparable new members a year earlier, while loyalty members’ share of revenue increased by more than 140 basis points in the third quarter.
Choice Business Direct, a platform aimed at small and medium-sized businesses, generated a 25% year-over-year increase in revenue from existing customers that adopted the product. Revenue in the broader small- and medium-sized business segment rose 18% during the quarter. The company also said its AI-enabled EasyBid platform improved request-for-proposal win rates by 210 basis points and helped support 27% growth in group revenue.
Management said it is rolling out its RAISE revenue-management platform during the fourth quarter. Dragisich told analysts he expects the platform’s benefits to become more evident in the first and second quarters of 2027 as adoption builds.
Asset-Light Strategy, Hotel Sales and Harvest Hosts
Choice continued to shift away from hotel development spending and toward an asset-light franchising model. Year-to-date net capital outlays for hotel development fell 56% from the prior year to $36 million. The company now expects 2026 net capital outlays related to hotel development activities of about $20 million, compared with $103 million in 2025.
After the quarter ended, Choice sold two owned hotels and retained franchise agreements for both properties, generating estimated net cash proceeds of approximately $34 million. Oaksmith said the company had 17 owned hotels after adjusting for those sales, including nine Cambria hotels, two Radisson properties and five Everhome Suites properties. An additional hotel disposition is expected in or before the first quarter of 2027, subject to closing conditions.
The company expects development capital requirements to decline substantially after the first half of 2027 and said it expects asset-sale proceeds to exceed development investment by 2027.
On Oct. 1, Choice acquired Harvest Hosts, an outdoor-travel subscription platform, for approximately $130 million in cash and revolver borrowings. For the 12 months ended Sept. 30, Harvest Hosts generated approximately $33 million in revenue and $11 million in adjusted EBITDA. The business will be consolidated beginning in the fourth quarter, with management expecting its contribution, net of hotel dispositions, to add about $1 million of fourth-quarter adjusted EBITDA.
Choice also recorded a one-time charge of approximately $24 million after terminating an agreement involving an option to acquire a European hospitality business primarily operating under a lease-based model. The charge affected reported net income but was excluded from adjusted results. Management said the termination eliminated future funding obligations and reflected its preference for asset-light opportunities.
Updated Outlook and Capital Returns
Choice now forecasts full-year U.S. and global RevPAR growth of 1.5% to 2.5%, approximately 1.5% global net rooms growth, and about 9 basis points of U.S. average royalty-rate expansion. The company expects U.S. net rooms growth of approximately 1% by year-end and an approximately 250-basis-point improvement in the U.S. net exit rate from the prior year.
Adjusted selling, general and administrative expense, excluding Harvest Hosts, is now projected to increase approximately 9% for the full year, above the prior expectation for mid-single-digit growth. Oaksmith cited strategic initiatives, AI-enabled capabilities and higher accounts-receivable reserves. He said the company expects that expense growth to moderate to the low- to mid-single digits in 2027.
Choice ended the quarter with $928 million of total liquidity and net leverage of 3.2 times adjusted EBITDA. Through Sept. 30, it returned $211 million to shareholders through $172 million of share repurchases and $39 million of dividends. The company expects approximately $200 million of repurchases for the full year.
About Choice Hotels International (NYSE:CHH)
Choice Hotels International, Inc is a global lodging franchisor that licenses its hotel brands to independent owners and operators. The company supports its franchisees through brand standards, reservation and distribution systems, marketing, loyalty programs, technology, and operational services rather than primarily owning and operating hotels itself.
Its portfolio includes brands serving a range of price points and travel needs, including Comfort, Quality Inn, Sleep Inn, Clarion, Econo Lodge, MainStay Suites, Suburban Studios, WoodSpring Suites, Cambria Hotels, and the Ascend Hotel Collection.
