Choice Hotels Intl Reports Q2 2026 Results: Full Earnings Call Transcript

Choice Hotels Intl (NYSE: CHH ) reported second-quarter financial results on Wednesday. The transcript from the company's second-quarter earnings call has been provided below. This transcript is brought to you APIs. For real-time access to our entire catalog, please visit for a consultation.

The full earnings call is available at Summary Full Transcript OPERATOR Ladies and gentlemen, thank you for standing by. Welcome to Choice Hotels Intl's second quarter 2026 earnings call. At this time, all participants are in a listen-only mode. Following the prepared remarks, we will open the line for questions.

I will now turn the call over to Ali Summers, Senior Director of Investor Relations. Ali Summers, Senior Director of Investor Relations Good morning and thank you for joining us. S. securities laws.

These statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied. For more information, please refer to our filings with the SEC, including our most recent Forms 10-K and 10-Q. These statements speak only as of today and we undertake no obligation to update them. com.

Joining me this morning are Dominic Dragisich, our Interim Chief Executive Officer, and Scott Oaksmith, our Chief Financial Officer. Dom will discuss our business performance and strategic progress, and Scott will review our financial results and outlook. And with that, I'll turn the call over to Dom. Dominic Dragisich, President and CEO Thank you, Ali, and good morning, everyone.

The second quarter marked encouraging progress across our key priorities, highlighted by a 6% year-over-year increase in adjusted EBITDA. S. net rooms growth improved sequentially for the second consecutive quarter and is now nearly flat year over year. This reflects our strongest first-half performance since 2021.

S. 6% in the second quarter. S. rooms growth.

S. 3% year over year, reflecting strengthening demand trends and benefiting in part from the FIFA World Cup. The RevPAR improvement we saw during the second quarter, together with the trend since quarter end, shows we are moving in the right direction. I am confident this business can perform at an even higher level as we continue to realize greater value from the investments we've made in our commercial engine and technology platform while maintaining a renewed focus on execution.

Disciplined capital allocation also remains a key priority for Choice. In the first half of the year, capital outlays for hotel development declined 80% year over year as we continued our transition back to a pure-play, asset-light franchising model while maintaining flexibility to make targeted investments in attractive franchise growth opportunities. There is still more work to do, but the progress we have made this quarter and the underlying operating trends we're seeing give us greater confidence in the outlook for the balance of the year. S.

S. royalty rate, and global net rooms growth, which Scott will cover shortly. Now, before I go into the quarter in more detail, I'd like to briefly share how I'm approaching this role. My focus is simple: execution.

We have a meaningful opportunity to improve, and my job is to close the gap between where we are today and where I believe this business can perform. Since stepping in, I've spent most of my time listening to our franchisees and teams across the company. Those conversations have reinforced three priorities for me: staying close to our franchisees and the guests they serve, moving with greater urgency across the business, and being disciplined about where we invest our time and capital. Years of working across the business have given me firsthand insight into our strengths, where we can perform at a higher level, and where better execution will make the biggest difference.

What's needed now is greater speed, discipline, and accountability to deliver stronger results for our franchisees and shareholders. Over the past several years we've invested in building a stronger commercial engine and technology platform. Today, I believe our biggest opportunity is realizing the full potential of what we've already built—turning those investments into stronger operating performance, improved franchisee profitability, better guest experience, and ultimately greater long-term shareholder value. We'll be candid about where we're making progress and where we still have work to do.

Ultimately, you'll measure us by the results we deliver, and that's the standard I hold us to. The way we'll achieve those results is by executing a business model that creates value for our franchisees and in turn our shareholders. At Choice, we strengthen franchisee economics by lowering owners' costs and delivering higher RevPAR through our commercial capabilities. Stronger franchisee economics support rooms growth and in turn more durable earnings and free cash flow that gives us the flexibility to invest in the business while continuing to return capital to shareholders.

My job is making sure we deliver on that consistently. In my conversations with franchisees, one message comes through consistently: they want a partner that lowers their costs, increases their revenue, and helps them operate more effectively. Technology has been helping us deliver on each of those priorities, building on several years of investment in our commercial engine and cloud platform. More recently, AI has helped us move even faster on costs.

We've reduced prototype costs by up to 25% across key midscale brands. Country Inn & Suites by Radisson is a good example. The redesigned, lower-cost prototype is driving renewed development momentum, with franchise agreements up 11% year over year in the first half of 2026. We're also leveraging the scale of the Choice system to lower owners' ongoing cost through a new FF&E procurement program, which is expected to reduce cost up to an average of 20% across the program's FF&E and building product categories.

On revenue, demand is strengthening, and I believe our biggest opportunity is earning a greater share of that demand by leveraging the commercial and technology investments we've made, particularly among our core value-oriented travelers. Earlier this year we relaunched Choice Privileges to better serve that traveler by making our loyalty program more rewarding and better aligned with how our members travel. While it's still early, we're seeing encouraging signs. Membership grew 7% year over year to 77 million, while loyalty contribution increased more than 250 basis points during the quarter.

Importantly, members acquired since the relaunch are already generating higher average revenue than comparable members acquired a year ago. We are also seeing early traction from our recently launched Business Direct platform for small and medium-sized businesses. Approximately 60% of enrolled businesses are new to Choice and nearly 90% of room nights occur midweek. More broadly, revenue from small and medium-sized business travelers increased 8% year over year in the second quarter.

I mentioned AI allowing us to move faster, but we are also using AI to deliver tangible benefits for our franchisees. Our AI-enabled EasyBid platform improved group RFP conversion by 360 basis points, contributing to 16% year-over-year growth in group revenue in the second quarter. Inside the hotel, our AI teammate Charlie within our property management system reduced requests for operational support by about 40% in an early pilot, freeing up staff to spend more time with guests.

And there's more ahead in how AI reshapes hotel discovery and booking, continuing to refine our content and data so Choice properties are discoverable and desirable wherever guests are searching next. And we're working directly with the major AI platforms shaping that shift. It's early, but we intend to be ahead of that curve. I believe technology and AI are becoming the engine that powers everything we do—not as separate initiatives but as capabilities embedded across every part of the business.

That's how we create more value for our franchisees and ultimately our shareholders. Turning to RevPAR, the demand environment was constructive, supported by our value-oriented brands, resilient workforce-related travel, and our extended stay portfolio. We also benefited from major event-driven travel over the past two months, including the FIFA World Cup. Importantly, the World Cup brought in a meaningful number of first-time Choice guests and international travelers, expanding our reach into segments where we have historically been underrepresented.

While the demand environment was constructive, our objective is not to rely on market tailwinds alone. We are focused on improving our competitive RevPAR performance by earning a greater share of demand through the commercial capabilities we've built and will continue to strengthen. That's how we'll deliver more consistent performance over time. Net rooms growth remains my top operating priority.

S. net rooms growth improved sequentially as second-quarter openings reached a seven-year high while exits declined to their lowest level in six years. The decline in exits reflects the growing value we're delivering to our franchisees through the Choice system, along with stronger franchisee engagement and improving owner economics. Our conversion-led development model continues to differentiate Choice through faster openings, lower owner investment requirements, and earlier royalty generation.

S. conversion pipeline expanded 6% sequentially. S. agreements we've signed year to date are expected to open this year, providing strong visibility into near-term growth.

International net rooms continue to grow in the double digits, providing another avenue for durable earnings growth over time. Global franchise agreements increased 20% year over year during the quarter, reflecting continued demand across both our conversion-led and our higher-revenue brands. S. net rooms growth.

Beyond driving net rooms growth, we're also focused on disciplined capital allocation to maximize long-term shareholder value. Returning to our pure-play, asset-light franchising roots remains an important part of that strategy. As development outlays continue to decline and market conditions improve, we expect to pursue additional capital recycling opportunities. Together, those actions strengthen our financial flexibility, allowing us to allocate capital toward the highest-return opportunities while continuing to return excess capital to shareholders.

We're encouraged by the progress we've made this quarter. Our focus now is on staying disciplined, holding ourselves accountable, and following through on the commitments we make. Stronger franchisee economics and thoughtful capital allocation put us in a better position to deliver durable earnings growth and long-term shareholder value. I believe this business has significantly more potential, and delivering on that potential is what I'm focused on every day.

With that, I'll turn the call over to Scott. Scott Oaksmith, Chief Financial Officer Good morning, everyone, and thanks, Dom. It's great to have you back on our quarterly earnings calls in your new role. S.

operating fundamentals and the increasing contribution from our international business are translating into solid earnings growth. S. royalties from improving RevPAR and royalty rate expansion, growth in our franchisee programs and services revenues, and higher partnership revenues, as well as the continued benefit of our transition to direct franchising in Canada. These benefits were partially offset by higher SG&A expenses, which I'll discuss in more detail shortly.

02, while revenues excluding reimbursable revenue from franchise and managed properties increased 7% year over year to $277 million. S. S. royalty rate expansion; and third, lower development spend as investments associated with Cambria and Everhome continue to moderate.

Net rooms growth remains one of our most important drivers of our long-term earnings growth, and operating indicators across our development funnel continued to improve during the second quarter. 6% year over year, driven by a 16% increase in room openings. , gross room openings increased 27% year over year and 9% sequentially. At the same time, room exits declined 50% year over year.

S. increased 30% year over year in the second quarter. We also shortened the average time from signing to opening for conversions by nearly one month, reinforcing the speed and efficiency of our development model. S.

development funnel are moving in the right direction—from stronger signings and faster conversions to higher openings and lower exits. S. net rooms trends is included in today's supplemental materials on our investor relations website. S.

openings. Conversions generally enable owners to open hotels faster and with less capital than new construction, which remains important in the current development environment. S. conversion franchise agreements increased 82% year over year, reflecting the value our conversion model delivers to hotel owners.

S. pipeline. Within our midscale and economy transient brands, developer interest also continues to strengthen. S.

franchise agreements awarded increased more than 40% year over year, and the pipeline for these brands continues to build. S. net rooms growth will return to positive territory in 2026. S.

continue to perform well, with international net rooms increasing 13% year over year, reflecting growth across our EMEA, Asia Pacific, and Americas regions. 4% year over year. Our transition to a direct franchising model is producing both an immediate earnings benefit and a longer-term growth opportunity as the pipeline continues to expand. 7% year over year on a currency-neutral basis in the second quarter.

3% year over year during the quarter, supported by improving occupancy and rate trends. Together with encouraging preliminary third quarter trends, this supports our improved full-year outlook. As anticipated, the FIFA World Cup contributed approximately 60 basis points to second quarter RevPAR. Because the event was concentrated in the second quarter, with only limited activity in our markets during the third quarter, we estimate the full-year benefit at approximately 30 basis points.

Extended stay continues to benefit from a diverse mix of longer-stay demand drivers, including workforce-related travel, relocations, infrastructure investment, and manufacturing activity. S. extended stay portfolio is located within 10 miles of major data centers, where those hotels generated approximately 100 basis points higher RevPAR growth than the system average during the second quarter. This highlights the benefits of our portfolio's exposure to durable, project-based sources of demand.

1% year over year on a currency-neutral basis, led by the Caribbean and Latin America and supported by continued strength across Canada and Asia Pacific. In addition to RevPAR and net rooms growth, we are also increasing the earnings contribution from each hotel in our system. S. average royalty rate increased 11 basis points.

The increase reflects continued mix shift towards higher revenue brands and the benefits of the franchisee-focused initiatives Dom discussed. Our non-RevPAR fee streams also further diversify our earnings base. Franchisee adoption of our services continued to grow during the quarter, particularly our cloud-based property management system and revenue management solutions. 7 million in the quarter, mainly driven by higher procurement revenues.