Choice Hotels International downgraded its full-year outlook slightly, but company executives expressed optimism that its business model better positions the hotel brand in the face of economic uncertainty compared to its competitors.
During the company's first-quarter earnings call, President and CEO Pat Pacious said Choice's portfolio is increasingly diverse across the different hotel segments, making its business more resilient to outside pressures.
"The versatile business model we have built has allowed us to deliver stable returns and provide diversified avenues of growth throughout different economic cycles," he said. "Historically, in periods of economic uncertainty, our differentiated positioning has enabled us to outperform our peers, gain market share and emerge stronger."
Choice has been attracting higher-income customers who have the means to travel through economic uncertainty, Pacious said. He added half of Choice's customers have household incomes that surpass $100,000 and nearly 20% surpass $200,000.
At the same time, Choice is also growing its "cycle-resistant" extended-stay portfolio. Over the past five years, its room count in the segment is up 19%.
"By successfully executing our strategy, we have transformed the company to be future-ready and have established a strong foundation for near-term stability and long-term growth," Pacious said. "Our proactive investments and a versatile asset-light, fee-based model have meaningfully enhanced our company's growth profile and allow us to generate multiple avenues of growth throughout various economic cycles."
In the first quarter of 2025, domestic revenue per available room at Choice's economy hotels was up 7.1% year over year, 4% higher than the broader economy chain-scale segment, Pacious said. RevPAR at its extended-stay properties was up 6.8%, which also outperformed its peers.
The amount of business travelers in Choice's overall travel mix has grown to 40%. Pacious said these travelers are "relatively resilient" and have jobs in industries such as construction, sales, utilities and medical staffing, meaning their jobs require travel.
There's been talk around the industry about softening leisure demand amid the economic uncertainty, but Pacious said Choice hasn't seen it yet.
"We're not actually being impacted in a meaningful way by that," he said. "In these times when things get softer, we are taking share, and that has historically happened."
Choice's global rooms portfolio increased by 2.8% year over year by the end of the first quarter. Its international room count was up 4.4% while its U.S. room count was up 2.3%.
Choice has an opportunity to further gain international market share in the coming years, highlighted by first quarter year-over-year rooms growth in its portfolio by 4% and quarter-over-quarter pipeline growth of 13%, Pacious said.
Choice is growing in the Caribbean and Latin America region thanks to its acquisition of Radisson Hotels Americas back in 2022.
"[Radisson has] a very high brand awareness down there," he said. "I think now, being attached to our business delivery engine, we're getting a lot of really significant interest there."
Update to 2025 full-year outlook
Like most publicly traded hotel companies, Choice also lowered its 2025 full-year outlook for net income; domestic RevPAR; and adjusted earnings before interest, taxes, depreciation and amortization.
Chief Financial Officer Scott Oaksmith said Choice started to see some softening in late March when "broader macro uncertainty intensified."
Choice's net income is now expected to fall in the range of $275 million and $290 million compared to its prior outlook of between $288 million and $300 million.
Its adjusted EBITDA is expected to fall in the range of $615 million and $635 million compared to its prior outlook of between $625 million and $640 million.
Domestic hotel RevPAR expectations for the full year range from down 1% to up 1%. Choice previously expected to domestic RevPAR growth be between 1% and 2%.
Oaksmith said the high end of Choice's RevPAR range assumes performance for the remainder of the year is mostly in line with its prior projections. The midpoint assumes a continuation of trends from late March to April, and the low end suggests that conditions would soften modestly for the rest of the year.
"While we recognize the broad macro uncertainty, we remain confident in the resilience of our portfolio, the versatility in our model and the strength of our fee-based business," he said. "We anticipate growth will be driven by organic growth across more revenue-intense hotels and markets, robust effective royalty rate growth, growth from our partnership revenue streams, strong international business and incremental revenue-generating opportunities from our expanded scale."
By the numbers
In the U.S., Choice's hotel revenue per available room increased 2.3% to $46.28 in the first quarter from 2024 levels, according to its earnings report. Average daily rate at U.S. hotels was $90.78, up 1.7% year over year, while occupancy increased 30 basis points to 51%.
Choice's adjusted EBITDA was $129.6 million in the first quarter, up 4% from $124.3 million in 2024. Its total revenues for the quarter were $333 million, a slight increase from $332 million in the first quarter last year.
The company's net income for the first quarter was $44.5 million, up 44% from $31 million in the first quarter of 2024.
As of publication time, Choice's stock price was trading at $121.26 per share, a 14.4% decrease year to date. The NYSE Composite Index was up 1.2% for the same time period.