Choice Hotels delivered results in line with Wall Street’s expectations for the second quarter, as international expansion and continued investments in higher-value segments helped offset domestic revenue declines. Management attributed the quarter’s performance to robust growth in its global rooms portfolio, particularly in extended stay and upscale brands, as well as strong contributions from its recently acquired Canadian operations. CEO Patrick Pacious highlighted, “We drove 10% growth in adjusted EBITDA internationally and expanded our rooms portfolio by 5% year-over-year, highlighted by a 15% increase in hotel openings.”
Is now the time to buy CHH? Find out in our full research report (it’s free).
Choice Hotels (CHH) Q2 CY2025 Highlights:
- Revenue: $426.4 million vs analyst estimates of $428.3 million (2% year-on-year decline, in line)
- Adjusted EPS: $1.92 vs analyst estimates of $1.90 (1% beat)
- Adjusted EBITDA: $165 million vs analyst estimates of $165.8 million (38.7% margin, in line)
- Management reiterated its full-year Adjusted EPS guidance of $7.04 at the midpoint
- EBITDA guidance for the full year is $625 million at the midpoint, above analyst estimates of $617.7 million
- Operating Margin: 29.2%, down from 30.5% in the same quarter last year
- RevPAR: $58.36 at quarter end, up 10.8% year on year
- Market Capitalization: $5.59 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 Q2 Earnings Call
- Dany Asad (Bank of America) asked about the strategic rationale for direct vs. master franchising in international markets. CEO Patrick Pacious explained that direct franchising is pursued where local ownership and regulatory conditions favor it, with a shift toward more direct franchising globally after the Canada acquisition.
- Michael Joseph Bellisario (Baird) inquired about Canada’s growth outlook and synergy potential. Pacious responded that Canada’s development dynamics mirror the U.S., with extended stay brands requiring more new construction and conversion brands showing quicker impact. Synergy details were deferred pending further integration.
- Daniel Brian Politzer (JPMorgan) questioned the expected evolution of international EBITDA. Pacious and CFO Scott Oaksmith noted international EBITDA is about 6% of the total (pre-Canada acquisition), with accelerated growth expected as new partnerships and markets mature.
- Charles Patrick Scholes (Truist Securities) asked why RevPAR guidance was lowered despite positive commentary. Pacious cited continued softness in government and inbound international travel, but pointed to positive consumer fundamentals and limited hotel supply as supporting future RevPAR gains.
- Robin Margaret Farley (UBS) sought clarity on global net system room guidance considering the China agreement. Oaksmith explained that the new China rooms are still in the pipeline and not yet included in the year-over-year growth figures.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will watch (1) the pace of direct franchising adoption and integration in Canada and new international markets, (2) execution of the global pipeline in revenue-intense segments and realization of higher royalty rates, and (3) resilience in extended stay and business travel segments amid continued U.S. macroeconomic uncertainty. Progress on technology adoption by franchisees will also be a key signpost.
Choice Hotels currently trades at $121.65, down from $125.11 just before the earnings. Is the company at an inflection point that warrants a buy or sell? See for yourself in our full research report (it’s free).
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