Choice Hotels International: Accelerating Growth, Enhancing Franchisee Economics, and Capital Efficiency
Choice Hotels International, a leading asset-light franchiser serving value-minded travelers, recently reported its third quarter 2026 earnings. The company's CEO, Dom Dragisich, emphasized the importance of returning to fundamentals that have driven their success for decades.
At the core of Choice Hotels' strategy is accelerating U.S. net rooms growth and establishing a sustainable growth trajectory. In Q3, the company achieved a year-over-year growth rate improvement for the third consecutive quarter, with global net rooms increasing 1.7%. This momentum is expected to continue in the fourth quarter, with approximately 1% year-over-year growth anticipated.
U.S. RevPAR (Revenue Per Available Room) increased 3.8% year-over-year, driven by higher occupancy and rate growth. The company attributes this performance to their revenue management initiatives aimed at optimizing pricing. Business travel demand led the way, while leisure trends improved as the quarter progressed. FIFA World Cup demand contributed about 40 basis points to quarterly RevPAR growth.
Infrastructure-related demand, including data center development, also played a significant role. Approximately 30% of Choice Hotels' U.S. hotels are located near major data centers, with those properties delivering more than 400 basis points higher RevPAR growth during the quarter. This indicates that the company's commercial initiatives are helping them capture a greater share of demand.
The gap between Choice Hotels' relative RevPAR performance and the industry is narrowing, offering opportunities for further improvement. Demand strength continued into October, with U.S. RevPAR up approximately 7% year-over-year for the month, supported by gains in both occupancy and rate.
In response to this acceleration in core top-line performance, Choice Hotels is raising its full-year RevPAR and adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) outlooks. However, higher in-year operating expenses have limited the full-year benefit flowing through to earnings.
Looking ahead, the company expects expense growth to step down in 2027, allowing more of their revenue growth to translate into earnings. In terms of capital allocation, Choice Hotels' historical hotel development programs are nearing completion, with capital recycling underway. This is expected to result in significantly lower net capital outlays going forward.
With a focus on retaining and adding the right hotels to their portfolio, Choice Hotels is making steady progress in retaining hotels and enhancing franchisee economics through improved commercial competitiveness.
