Summary of Choice Hotels International (CHH) Q2 2026 Earnings Call

1Key Financial Results and Metrics

Adjusted EBITDA: Increased by 6% year-over-year to $175 million.

Adjusted Earnings Per Share (EPS): Rose by 5% to $2.02.

Revenue: Excluding reimbursable revenue, increased by 7% year-over-year to $277 million.

U.S. RevPAR: Grew by 1.3% year-over-year, supported by improved occupancy and rates.

Global Rooms Growth: Increased by 2.6% year-over-year, with U.S. net rooms growth nearly flat year-over-year.

Franchise Agreements: U.S. franchise agreements awarded rose by 30% year-over-year.

SG&A Expenses: Increased by 7%, attributed to higher accounts receivable reserves and the transition to direct franchising in Canada.

2Strategic Updates and Business Highlights

Franchise Focus: Continued emphasis on a pure-play asset-light franchising model with an 80% year-over-year decline in capital outlays for hotel development.

Technology Investments: Leveraging AI and technology to enhance franchisee profitability, including a new FF&E procurement program expected to reduce costs by 20%.

Loyalty Program: Relaunched Choice Privileges, resulting in a 7% membership growth to 77 million and a 250 basis point increase in loyalty contribution.

Operational Improvements: Enhanced conversion capabilities, with a 27% increase in U.S. gross room openings and a 50% reduction in room exits year-over-year.

3Forward Guidance and Outlook

Adjusted EBITDA Guidance: Raised to $635 million to $650 million for the full year 2026.

U.S. RevPAR Growth: Expected to range from 0% to 1.25% for the full year.

Global Net Rooms Growth: Guidance increased to approximately 1.5%, up from 1%.

Adjusted EPS Guidance: Updated to $6.86 to $7.10, reflecting higher expected interest expense and tax rates.

4Bad News, Challenges, or Points of Concern

Higher SG&A Expenses: The increase in operating costs may impact profitability.

RevPAR Lag: U.S. RevPAR growth of 1.3% lagged behind weighted chain scale mix, indicating potential competitive pressures.

Market Conditions: Caution expressed regarding EMEA, particularly Europe, amid uncertain economic conditions.

Visibility Issues: Limited visibility into Q4 RevPAR performance due to short booking windows.

5Notable Q&A Insights

Royalty Rate Increases: Management explained that higher royalty rates are due to a favorable mix shift towards higher revenue brands, not an increase on existing franchisees.

Churn Rate: The 250 basis point reduction in U.S. churn is expected to apply similarly to international operations, though specific metrics were not disclosed.

Key Money Environment: While key money investment is expected to increase due to a healthier pipeline, capital intensity is decreasing as the company transitions to asset-light franchising.

Franchisee Relationships: Management emphasized improved franchisee relationships and retention, with a focus on lowering costs and enhancing profitability through technology and operational efficiencies. Overall, Choice Hotels demonstrated solid financial performance with strategic initiatives aimed at enhancing franchisee value and operational efficiency, while also navigating challenges related to market conditions and competitive pressures.