Choice Hotels’ first quarter results were met with a negative market reaction, as revenue and non-GAAP profit both came in below Wall Street estimates. Management pointed to ongoing strength in business travel and robust performance in its extended stay and economy segments as key drivers, with CEO Pat Pacious noting a shift toward higher-income, resilient customers. Despite these operational positives, management acknowledged increased macroeconomic uncertainty and a softening in leisure demand. The company’s ability to outperform peers in certain segments was offset by less favorable trends in others, leading to cautious commentary on the near-term outlook.
Is now the time to buy CHH? Find out in our full research report (it’s free).
Choice Hotels (CHH) Q1 CY2025 Highlights:
- Revenue: $332.9 million vs analyst estimates of $346.7 million (flat year on year, 4% miss)
- Adjusted EPS: $1.34 vs analyst expectations of $1.37 (2% miss)
- Adjusted EBITDA: $129.6 million vs analyst estimates of $131.3 million (38.9% margin, 1.3% miss)
- Management lowered its full-year Adjusted EPS guidance to $7.06 at the midpoint, a 0.7% decrease
- EBITDA guidance for the full year is $625 million at the midpoint, in line with analyst expectations
- Operating Margin: 24%, up from 18.1% in the same quarter last year
- RevPAR: $40.46 at quarter end, up 1.1% year on year
- Market Capitalization: $5.85 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 Choice Hotels’s Q1 Earnings Call
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Shaun Kelley (Bank of America) asked about consumer profile shifts and whether “trade down” trends are driving demand. CEO Pat Pacious responded that higher-income and business travelers now make up a larger share, with market share gains more than offsetting any leisure softness.
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Shaun Kelley (Bank of America) also inquired about net unit growth. CFO Scott Oaksmith said conversion velocity is accelerating, especially in the international segment, and management remains confident in achieving 1% system growth for the year.
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Michael Bellisario (Baird) questioned the sustainability of ancillary fee growth. Oaksmith explained that partnership and platform services are expected to grow at a faster rate than core royalties and provide a stable EBITDA contribution.
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Patrick Scholes (Truist Securities) probed the outperformance in economy and midscale segments and whether location or other factors contributed. Pacious attributed results to drive-to locations, lower gas prices, and a strong value proposition for retirees and cost-conscious travelers.
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Robin Farley (UBS) asked about pipeline declines and conversion dynamics. Pacious and Oaksmith clarified that the mix of new construction versus conversions skews reported pipeline data, with conversion hotels moving through the pipeline much faster than new builds.
Catalysts in Upcoming Quarters
In coming quarters, the StockStory team will be closely monitoring (1) the pace at which extended stay and upscale hotel growth translates into higher systemwide revenue, (2) the company’s success in accelerating hotel conversions and international expansion, and (3) the trajectory of ancillary revenue streams, especially partnership services and loyalty program monetization. Trends in business travel and consumer trade-down behavior will also be critical signposts.
Choice Hotels currently trades at $127.02, in line with $125.83 just before the earnings. In the wake of this quarter, is it a buy or sell? The answer lies in our full research report (it’s free).
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