CHH

The end of an earnings season can be a great time to discover new stocks and assess how companies are handling the current business environment. Let’s take a look at how Choice Hotels (NYSE:CHH) and the rest of the consumer discretionary - travel and vacation providers stocks fared in Q2. The Consumer Discretionary sector, by definition, is made up of companies selling non-essential goods and services. When economic conditions deteriorate or tastes shift, consumers can easily cut back or eliminate these purchases. For long-term investors with five-year holding periods, this creates a structural challenge: the sector is inherently hit-driven, with low switching costs and fickle customers. As a result, only a handful of companies can reliably grow demand and compound earnings over long periods, which is why our bar is high and High Quality ratings are rare. Travel and vacation providers operate tour packages, cruise lines, online travel agencies, and vacation rental platforms, connecting consumers with leisure and business travel experiences. Tailwinds include robust post-pandemic travel demand, a consumer preference shift toward experiences over goods, and technology-enabled personalization improving conversion and loyalty. However, headwinds are significant: the industry is acutely sensitive to macroeconomic cycles, geopolitical instability, and fuel price volatility. Low switching costs mean fierce price competition, while capacity additions in segments like cruises can lead to oversupply. Regulatory burdens, weather disruptions, and public health risks further create episodic but potentially severe demand shocks. The 19 consumer discretionary - travel and vacation providers stocks we track reported a satisfactory Q2. As a group, revenues beat analysts’ consensus estimates by 1.3% while next quarter’s revenue guidance was 0.6% above. Amidst this news, share prices of the companies have had a rough stretch. On average, they are down 7.7% since the latest earnings results. With almost 100% of its properties under franchise agreements, Choice Hotels (NYSE:CHH) is a hotel franchisor known for its diverse brand portfolio including Comfort Inn, Quality Inn, and Clarion. Choice Hotels reported revenues of $440.8 million, up 3.4% year on year. This print exceeded analysts’ expectations by 2.9%. Overall, it was a satisfactory quarter for the company with a decent beat of analysts’ EBITDA estimates. "Our second quarter results reflect encouraging progress across our key priorities, with U.S. net rooms growth improving for the second consecutive quarter to its strongest first-half performance since 2021 and U.S. RevPAR trends strengthening," said Dom Dragisich, Interim Chief Executive Officer. Even though it had a relatively good quarter, the market seems discontent with the results. The stock is down 4.8% since reporting and currently trades at $103.38. Is now the time to buy Choice Hotels? Access our full analysis of the earnings results here, it’s free. Building mini-communities at places such as oil drilling sites, Target Hospitality (NASDAQ:TH) is a provider of specialty workforce lodging accommodations and services. Target Hospitality reported revenues of $85.46 million, up 38.7% year on year, outperforming analysts’ expectations by 7.8%. The business had an incredible quarter with a beat of analysts’ EPS estimates and a solid beat of analysts’ EBITDA estimates. Target Hospitality delivered the biggest analyst estimate beat, fastest revenue growth, and highest full-year guidance raise in the group. The market seems happy with the results as the stock is up 10.5% since reporting. It currently trades at $18.25. Is now the time to buy Target Hospitality? Access our full analysis of the earnings results here, it’s free. Spun off from Hilton Worldwide in 2017, Hilton Grand Vacations (NYSE:HGV) is a global timeshare company that provides travel experiences for its customers through its timeshare resorts and club membership programs. Hilton Grand Vacations reported revenues of $1.36 billion, up 7.3% year on year, falling short of analysts’ expectations by 2.7%. It was a softer quarter as it posted a significant miss of analysts’ EPS estimates and a miss of analysts’ EBITDA estimates. As expected, the stock is down 17.5% since the results and currently trades at $42.40. Read our full analysis of Hilton Grand Vacations’s results here. Formerly known as Wyndham Destinations, Travel + Leisure (NYSE:TNL) is a global vacation company that provides travelers with vacation ownership, exchange, and travel services. Travel + Leisure reported revenues of $1.06 billion, up 4.4% year on year. This print beat analysts’ expectations by 1.6%. Aside from that, it was a satisfactory quarter as it also logged EBITDA guidance for next quarter topping analysts’ expectations but a miss of analysts’ EPS estimates. The stock is down 6.3% since reporting and currently trades at $68.76. Read our full, actionable report on Travel + Leisure here, it’s free. Founded by explorer Sven-Olof Lindblad in 1979, Lindblad Expeditions (NASDAQ:LIND) offers cruising experiences to remote destinations in partnership with National Geographic. Lindblad Expeditions reported revenues of $199.2 million, up 18.6% year on year. This number surpassed analysts’ expectations by 7.2%. Overall, it was a strong quarter as it also logged a beat of analysts’ EPS estimates and a solid beat of analysts’ EBITDA estimates. Lindblad Expeditions had the weakest full-year guidance update among its peers. The stock is down 11.3% since reporting and currently trades at $26.25. Read our full, actionable report on Lindblad Expeditions here, it’s free. Over the past year, investors have been forced to repeatedly answer the same question: what is the market’s biggest risk? The answer has changed several times, and each shift has reshaped market leadership. Late in 2025 and early 2026, artificial intelligence became the market’s primary uncertainty. Investors questioned whether AI would erode software pricing power and weaken competitive moats as AI made it easier to replicate once-differentiated products. By the spring, technology took a back seat to geopolitics. The U.S. conflict with Iran briefly became the market’s dominant narrative, raising concerns about oil prices, inflation, and global growth. But as energy markets remained orderly and fears of a prolonged supply disruption faded, investors quickly turned their focus back to fundamentals. Want to invest in winners with rock-solid fundamentals? Check out our Top 6 Stocks and add them to your watchlist. These companies are poised for growth regardless of the political or macroeconomic climate.

Choice Hotels’ second quarter was met with a positive market response, reflecting outperformance on both revenue and non-GAAP profit relative to Wall Street expectations. Management attributed the results to improving U.S. net rooms growth, stronger international momentum, and effective execution of an asset-light franchising model. Interim CEO Dominic Dragisich underscored the benefit of investments in technology and commercial capabilities, pointing to rising franchise agreements and the successful relaunch of the Choice Privileges loyalty program as key contributors to demand and franchisee engagement. Is now the time to buy CHH? Find out in our full research report (it’s free). Revenue: $440.8 million vs analyst estimates of $428.4 million (3.4% year-on-year growth, 2.9% beat) Adjusted EPS: $2.02 vs analyst estimates of $1.97 (2.8% beat) Adjusted EBITDA: $175.4 million vs analyst estimates of $170.8 million (39.8% margin, 2.7% beat) Management lowered its full-year Adjusted EPS guidance to $6.98 at the midpoint, a 0.7% decrease EBITDA guidance for the full year is $642.5 million at the midpoint, in line with analyst expectations Operating Margin: 23.6%, down from 29.2% in the same quarter last year RevPAR: $61.95 at quarter end, up 6.4% year on year Market Capitalization: $4.58 billion While we enjoy listening to the management’s commentary, our favorite part of earnings calls is 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. David Katz (Jefferies) pressed for detail on how royalty rate increases align with franchisee value. Interim CEO Dominic Dragisich explained that rate increases are due to portfolio mix shifts and new contracts, not higher charges to existing owners. Elizabeth Dove (Goldman Sachs) asked about U.S. rooms growth sustainability and exit trends. Dragisich highlighted sequential improvement in openings and reduced exits, crediting improved franchisee engagement and faster conversion processes. Daniel Politzer (JPMorgan) questioned the lag in U.S. RevPAR versus peers and fourth-quarter RevPAR expectations. Dragisich cited underrepresentation in urban and business transient markets but noted improving occupancy and plans to further leverage commercial investments. Michael Bellisario (Baird) sought clarification on organizational changes to accelerate execution. Dragisich pointed to greater accountability, realignment of teams, and faster decision-making as current and future drivers of improvement. Charles Scholes (Truist Securities) raised concerns about franchisee satisfaction and industry relationships post-Wyndham bid. Dragisich emphasized improved franchisee retention and more collaborative industry engagement. In the coming quarters, our analysts will be watching (1) the pace of asset sales and conversion to a fully franchised model, (2) sustained improvements in net rooms growth and franchisee retention, and (3) further adoption and financial impact of AI-enabled tools on franchisee economics. The ongoing expansion of extended stay and international segments will also be important indicators of long-term growth potential. Choice Hotels currently trades at $102.63, down from $108.61 just before the earnings. Is there an opportunity in the stock? The answer lies in our full research report (it’s free for active Edge members). ONE MORE THING: Top 5 Growth Stocks. The biggest stock winners almost always had one thing in common before they ran. Revenue growing like crazy. Meta. CrowdStrike. Broadcom. Our AI flagged all three. They returned 315%, 314%, and 455%, respectively. Find out which 5 stocks it’s flagging this month — FREE. Get Our Top 5 Growth Stocks for Free HERE. Stocks that have made our list include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+271% between June 2020 and June 2025). Find your next big winner with StockStory today.

Image source: The Motley Fool. Tuesday, Aug. 4, 2026 at 10 a.m. ET Interim Chief Executive Officer - Dominic Dragisich Chief Financial Officer - Scott Oaksmith Senior Director of Investor Relations - Allie Summers Operator: Ladies and gentlemen, thank you for standing by. Welcome to Choice Hotels International Second Quarter 2026 Earnings Call. [Operator Instructions] I will now turn the call over to Allie Summers, Senior Director of Investor Relations. Allie Summers: Good morning, and thank you for joining us. Before we begin, please note that today's discussion includes forward-looking statements as defined under U.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. A reconciliation of any non-GAAP financial measures used in today's remarks is included in our earnings press release available in the Investor Relations section of choicehotels.com. Joining me this morning are Dom 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: Thank you, Allie, 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. Most importantly, U.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. These improving net rooms growth trends in the U.S. and continued international momentum led to global rooms growth of 2.6% in the second quarter. We also continued to drive strong franchise agreement results during the quarter, reinforcing our confidence in future global and U.S. rooms growth. U.S. RevPAR increased 1.3% 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 trends since quarter end, show 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. As a result, we're raising our full year outlook across several metrics, including adjusted EBITDA, U.S. and global RevPAR, U.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 spent most of my time listening to our franchisees and teams across the company. Those conversations have reinforced 3 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 mid-scale 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 is more ahead in how AI reshapes hotel discovery and booking. We're 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 2 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. U.S. net rooms growth improved sequentially as second quarter openings reached a 7-year high, while exits declined to their lowest level in 6 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. That advantage was evident again this quarter as our U.S. conversion pipeline expanded 6% sequentially. Importantly, about 75% of the U.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. Taken together, these trends reinforce my confidence that we're building a stronger foundation for sustained global and U.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 towards 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: Good morning, everyone, and thanks, Dom. It's great to have you back on our quarterly earnings calls in your new role. Our second quarter results demonstrate that improving U.S. operating fundamentals and the increasing contribution from our international business are translating into solid earnings growth. For the second quarter, adjusted EBITDA increased 6% to $175 million, primarily reflecting higher U.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. Our adjusted earnings per share increased 5% to $2.02, while revenues, excluding reimbursable revenue from franchised and managed properties increased 7% year-over-year to $277 million. I will focus on 3 key operating priorities before discussing how they are shaping our updated earnings outlook. First, the improving trajectory of U.S. net rooms growth, supported by our stronger openings and lower exits. Second, the acceleration of RevPAR from the first quarter and continued U.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. Global rooms increased 2.6% year-over-year, driven by a 16% increase in room openings. In the U.S., gross room openings increased 27% year-over-year and 9% sequentially. At the same time, room exits declined 50% year-over-year. Franchise agreements awarded in the U.S. increased 30% year-over-year in the second quarter. We also shortened the average time from signing to opening for conversions by nearly 1 month, reinforcing the speed and efficiency of our development model. The important point is that the key stages of our U.S. development funnel are moving in the right direction from stronger signings and faster conversions to higher openings and lower exits. Additional information on our U.S. net rooms trends is included in today's supplemental materials on our Investor Relations website. Choice's conversion capabilities continue to provide an important competitive advantage with conversions expected to represent approximately 90% of our 2026 U.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. During the quarter, U.S. conversion franchise agreements increased 82% year-over-year, reflecting the value of our conversion model delivers to hotel owners. Extended stay remains a key growth driver with 12 consecutive quarters of double-digit rooms growth and representing more than 40% of our U.S. pipeline. Within our mid-scale and economy transient brands, developer interest also continued to strengthen. U.S. franchise agreements awarded increased more than 40% year-over-year, and the pipeline for these brands continues to build. Taken together, these trends reinforce our confidence that U.S. net rooms growth will return to positive territory in 2026. Our operations outside the U.S. continue to perform well with international net rooms increasing 13% year-over-year, reflecting growth across our EMEA, Asia Pacific and Americas regions. In Canada, net rooms increased 5.4% 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. Turning to RevPAR. Global RevPAR increased 1.7% year-over-year on a currency-neutral basis in the second quarter. In the U.S., RevPAR increased 1.3% 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. Approximately 45% of our U.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. International RevPAR was up 2.1% 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. During the second quarter, our U.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. Partnership services and fees increased 6% to $28.7 million in the quarter, mainly driven by higher procurement revenues. Together, royalty rate expansion and growth in our partnership services and fees reflect our strategy of creating more value for franchisees while generating higher fee revenue from each hotel in our system. Adjusted SG&A increased 7% during the quarter. The increase in our operating costs reflect our transition to direct franchising in Canada, which also contributed to the higher international earnings I discussed earlier. The remaining increase primarily reflected higher accounts receivable reserves. We expect adjusted SG&A growth in the second half of the year to moderate from the first half run rate, positioning us to deliver our full year guidance. Turning to capital allocation. Our framework remains unchanged. We prioritize high-return investments, maintaining a stable dividend and returning excess capital to shareholders through share repurchases. Our wholly-owned hotels were originally developed to establish and scale the Cambria and Everhome brands or were acquired as part of the Radisson Americas acquisition. Today, we wholly own 19 operating hotels and 1 hotel under construction. With no additional wholly-owned hotels in our pipeline, we have substantially completed the capital-intensive phase of building them. As a result, future growth will be driven through our franchise model rather than hotel ownership. Reflecting that transition, capital outlays for hotel development declined 80% year-over-year in the first half of the year. We are now well positioned to monetize those assets while continuing to grow through our franchise model. We currently expect the first disposition to occur in the first half of 2027, subject to market conditions. Turning to our balance sheet. We ended the quarter with total liquidity of $475 million and net leverage of 3.1x adjusted EBITDA, comfortably within our target range of 3x to 4x. During the first 6 months of the year, we generated $67 million of operating cash flow compared to $116 million in the prior year period. The year-over-year change primarily reflects 2 factors. First, franchise agreement acquisition costs increased as U.S. room openings grew 27% year-over-year. Second, operating cash flow was affected by higher marketing and reservation system reimbursable expenses, driven by increased investment in franchisee-facing tools and guest delivery capabilities. Year-to-date through July 31, we've returned $172 million to shareholders, including $133 million through share repurchases and $39 million through dividends. We continue to expect to repurchase between $175 million and $225 million of shares in 2026. Based on our second quarter performance and the underlying operating trends we've discussed today, we are raising our full year guidance for adjusted EBITDA, U.S. RevPAR, U.S. average royalty rate and global net rooms growth. We are also raising the lower end of our global RevPAR guidance range. We now expect full year 2026 adjusted EBITDA of $635 million to $650 million. The increase primarily reflects stronger U.S. RevPAR, improved global net rooms growth and continued U.S. royalty rate expansion. For modeling purposes, I'd note one item for the third quarter. The year-over-year adjusted EBITDA comparison includes approximately $9.5 million of liquidated damages within our other revenue line recognized in the prior year quarter that are not expected to recur, reflecting continued improvement in our franchisee retention. While our operating outlook has improved, we have updated our adjusted diluted earnings per share guidance to $6.86 to $7.10, primarily reflecting higher expected interest expense and a higher effective tax rate, partially offset by the benefit of share repurchases. We now expect full year 2026 U.S. RevPAR growth of 0% to 1.25% and global RevPAR growth of 0% to 1%, reflecting stronger underlying operating trends and continued commercial execution. Consistent with that outlook, U.S. RevPAR trends remain encouraging, and we currently expect third quarter U.S. RevPAR growth to exceed second quarter levels before moderating in the fourth quarter. We now expect U.S. average royalty rate expansion of 7 to 9 basis points for the full year, a range that incorporates tougher comparisons in the second half of the year. On net rooms growth, we now expect global net rooms growth of approximately 1.5% for full year, up from our prior expectation of approximately 1%. This reflects increasing confidence in the trajectory of U.S. net rooms growth together with stronger international performance. We remain on track to deliver positive U.S. net rooms growth for the full year, supported by both stronger gross openings and an expected 250 basis point improvement in our U.S. net exit rate compared with last year. We expect the third quarter U.S. net rooms growth to remain broadly consistent with the second quarter levels with a more meaningful step-up expected in the fourth quarter as conversion openings seasonally increase and comparisons become more favorable. Adjusted SG&A for the full year is expected to continue to grow in the mid-single digits, benefiting from operating efficiencies across the business, including the continued scaling of AI-enabled tools. We are also investing more this year in franchisee-facing tools and guest delivery capabilities, which has increased our net reimbursable deficit expectations relative to last year. As a reminder, these programs are structured to operate at a breakeven over time. Overall, the progress we've discussed this morning reinforces our confidence that improving execution is translating into stronger operating performance, positioning us to create long-term shareholder value. With that, Dom and I are happy to take your questions. Operator? Operator: [Operator Instructions] Your first question comes from the line of David Katz with Jefferies. David Katz: Thanks for the comment. I appreciate it. I'm sure that there's some nuance and complexity to having royalty rates go up and at the same time, delivering greater value to franchisees. Can you help us unpack, right, how that exactly works and why the royalty rate is up during a period of time where you're very obviously trying to increase the value proposition to franchisees? Dominic Dragisich: Thanks, David. I'll kick things off. And if Scott wants to add any color, he certainly can. But I think first and foremost, this really goes back to the higher revenue per unit algorithm that we have. So when you take a look at the effective royalty rates increasing, a lot of that is really represented by the mix shift, right? So you're basically what's turning out of the portfolio is effectively your transient economy brands more heavily than what's coming into the portfolio. So when you think about adding Comfort, et cetera, in kind of that mid-scale, upper mid-scale segment, you effectively have that higher royalty rate across that portfolio. I think the other is really just the value that we are driving for our franchisees. The focus has always been on driving franchisee profitability. That comes through a lot of different approaches. I think you heard that in the prepared remarks with regards to prototype costs being down 25%. Our loyalty contribution has increased 250 basis points. FF&E is down 20%. You've got Charlie sitting in the property management system at this point. And there's a lot of other things that we've done to work with our franchisees to reduce their fees. I know one question has been in the past just with regards to how do you incentivize higher guest review scores. And we do have programs out there right now to reduce business as usual fees and other loyalty fees associated with those properties that are driving those higher guest demand scores. So again, we're working very closely with our franchisees. And candidly, we think that the increased value that we're providing is showing up in the stronger development results. Scott Oaksmith: The only thing I'd add is these are contractual rates. As some of our older fee contracts have burned off or have been replaced with these new higher royalty rates that were put in really back in 2016, 2017, you're seeing that moved to more of the franchise agreements in the construct that we have today. So this isn't raising rates on existing franchisees, but more contractual as new hotel owners come into the system and pay the published rack rates that we have today. Operator: Your next question comes from the line of Lizzie Dove with Goldman Sachs. Elizabeth Dove: I just wanted to ask about the U.S. rooms growth trends, which looks pretty encouraging this quarter. And in the deck you posted, I think there was some interesting information about U.S. rooms exit this year versus last year, which seemed to improve a lot. So could you maybe just unpack that a little more? I'm curious how much of this is maybe that revenue intense strategy coming to an end versus just kind of underlying improvement under the hood and kind of what you're seeing there? Dominic Dragisich: Yes. Thanks for the question. And as I mentioned, just with regards to the net rooms growth, this continues to be my top priority. I think the entire management team's top priority. And the first thing I would just say is consistent progress leads to our confidence. Right now, we are confident that we're doing the right things to drive that sustained net rooms growth well into the future. I think you mentioned the Q2 results specifically that we posted on the website. And really, it's the strength that we saw in Q2 that reinforces that confidence. Our openings for the quarter were up 27%. Our exits were down about 50%. Franchise agreements were up 30%. And what's great about the franchise agreements is we have visibility, very strong visibility for the remainder of the year because 75% of those agreements that we sold this year, given the speed of the conversion engine will open this year. So again, we've got pretty good line of sight here over the course of the next 6 months. Obviously, it's early innings, but we're very much encouraged by that progress. I do believe that we're going to continue to see that acceleration. One thing you did mention, Lizzie, obviously, the confidence is even better because of the mix, right? You talked about the revenue intensity. And when you take a look at those net rooms growth figures that are in the higher revenue intense segments, we're actually seeing about 100 basis points higher. So it's 3.6% versus the 2.6%. And one of the things also you mentioned is that coming to an end. And I think this is really important, just kind of sitting in the seat that I'm sitting in today. I absolutely think the net rooms growth algorithm can and should be a both/and. We're going to continue to drive higher quality units with a higher revenue per unit, but there's no reason why we shouldn't be winning in the economy segment and kind of that lower mid-scale segment as well. And so we're going to continue to see improvements there. That's the goal. And the reality is we're going to continue to see improvements on the retention side as well because retention is equally as important as the development algorithm. So again, overall, this is an area that we're very satisfied with the continued progress. We are going to continue to push on this and then try to drive acceleration in the back half. Operator: Your next question comes from the line of Daniel Politzer with JPMorgan. Daniel Politzer: I wanted to talk about the RevPAR for the quarter, I think domestically up 1.3%, which lagged your weighted chain scale mix. I guess, how do we kind of reconcile that? And then similarly, I think you mentioned on the third quarter and fourth quarter, the cadence. It looks like the fourth quarter RevPAR comparison is by far the easiest of the year. So why should we think about RevPAR decelerating from 3Q to 4Q, if I had that right? Dominic Dragisich: Yes. I'll start at kind of the top and just with regards to what we're seeing in the context of the current RevPAR performance, and then Scott can walk you through the Q3 and Q4 in terms of what we're assuming from a modeling perspective. But on the RevPAR side, I would say we're encouraged by the sequential progress totally agree with there's still more work to do here as well. And the reality is when you think about what we've invested in, we talked a lot about the $60 million of investments in the commercial engine that ultimately will be a huge driver for sustained RevPAR growth in the future. So now it's just a matter of really executing, activating. We talked about EasyBid, business direct loyalty. Those are the types of things that we're encouraged by. And candidly, we're encouraged by the broader macro backdrop, which we can certainly get into as well. But while we saw the sequential improvement, when you take a look at just from an index perspective, there was a gap, right? And so I think when you peel back the onion, we are under-indexed in urban markets. We're under-indexed in business transient, which had a pretty big bounce back in Q2. And obviously, there was a World Cup tailwind as well. So having a lower number of units in those markets created that sort of gap. We are encouraged by one trend that we are seeing very much in that occupancy. So we're continuing to drive occupancy index gains. And so our biggest opportunity at this point right now is rate. And when you take a look at the sequential improvements, it wasn't just quarter-over-quarter. We actually saw July improved by about 100 basis points versus June as well. So we're seeing progression there. There is some lumpiness and some timing phenomenon in the back half of the year that I think Scott can hit on as well. Scott Oaksmith: Yes, Dan. So our second half of the year RevPAR guidance for the full 6 months is about 1.5%. As we mentioned on the call, we think that will be a little stronger in Q3. As Dom mentioned, we did see July up about 100 basis points. There are some calendar shifts in the August time frame with the Labor Day holiday pushed deeper into September and fewer weekend days in August than previous, which mitigates a little bit of our RevPAR performance given the higher concentration of leisure travel that we have. We do see that moderating a little bit in Q4. As we've talked about in the past, our booking windows are fairly short. So we don't have a lot of visibility into that Q4. So I think when we gave our guidance of up to 1.25%, that does assume a little bit stronger Q4 if that were to take place. Operator: Your next question comes from the line of Michael Bellisario with Baird. Michael Bellisario: First question, can we dig into the -- I think you said moving with greater urgency as one of your priorities. Just maybe help us understand sort of what people and processes have changed so far? What have you already seen impact in 2Q? And then what's still to come? Dominic Dragisich: Yes. So I think broadly speaking, stepping into the role really just reinforced rather than fundamentally changed a lot of the thinking that I had, right? And I think one of the most important elements, and I mentioned this in my prepared remarks as well, it really is staying close to our franchisees. That's what matters most, really grounded in those relationships, the franchisee success system. Owner economics is the linchpin. I talked a little bit about the net rooms growth side of the house as well. And where we made some significant changes, frankly, was on the retention side of the equation. I think from a people, process and systems perspective, there were several investments that we made back half of last year, and that's paying dividends today. I think you see it in the 50% reduction in this quarter alone with regards to the exits. And the last is really around just the commercial and technology capabilities. I think AI is obviously the flavor of the day, so to speak. And I don't think it's just a flavor. I think it's going to be sustained. And we see that as the next part of our technology evolution, so making sure that we're holding those teams accountable. I think what has changed is really just importance of accountability and communication, both internally and with all of you. I don't think we should ever be sitting on a quarterly earnings call and have surprises. And so that's going to continue to be something that I urge the team to do as well. And we simplified parts of the organization by just realigning some of the functions that naturally work together, single points of accountability around key operating priorities. And at the end of the day, that's about reducing friction, making faster decisions and translating all the things I just talked about into results. And ultimately, you're going to evaluate us based on the results that we deliver. Michael Bellisario: Got it. That's all very helpful. And then just on your guidance, if I can ask a second one here. Just maybe remind us of your philosophy around sort of conservatism, I guess you just sort of touched on communication, too. And then any puts and takes to call out with EBITDA up only 0.5 percentage point, but RevPAR up by more than that, plus better net unit growth and higher expected royalty rate expansion. Anything to call out there in the back half? Dominic Dragisich: Sure. I think at the highest level, we did beat the internal forecast that we had, and we flowed that beat through. So very much encouraged by the trends we're seeing across every core revenue driver, rooms, RevPAR effective royalty rate. To Scott's point, some of this is timing related. There are a couple of puts and takes specifically in the back half. And I think Scott mentioned that in his prepared remarks as well. In Q3 of last year, we did have elevated liquidated damages that are tied to exits. And so we brought this number down, which actually is a good news story for the algorithm. Obviously, there's a onetime reduction in revenue associated with that. But given the fact that we are more encouraged by the rooms progress, that's going to be a better long-term value driver for us. So we're pretty excited about that one. I would say we're taking a more cautious approach to EMEA, in particular, to Europe and just given what you're seeing overseas. And the reality is if we continue to execute the way that I know we can, you could possibly push to the higher end of the guidance. But as of right now, the midpoint is effectively where we feel most comfortable. Operator: Your next question comes from the line of Shaun Kelley with Bank of America. Shaun Kelley: Dom, welcome back to the public calls. If I could just maybe have you guys elaborate on 2 areas. First one, Dom, maybe a high level sort of owner health and sort of the cost, I think, all-inclusive costs of franchising to owners has been a theme kind of throughout the entire lodging industry this quarter. So I'm kind of curious on how that impacts your philosophy or your thinking sort of how you maybe weight your brands and your offering relative to some of the other things that are being done out there as you're starting to see other franchise companies starting to kind of use some of their heft and weight to try and get, I think, slightly better deals for their franchisees or charge them all-in fees that are a little lower. So that's kind of the high level one. And then maybe one for Scott. If you could just quickly give us thought, I think, on the key money environment. On the one side, I think you said that contract acquisition costs were up pretty materially in the first half of the year. But on the other side, I think all-in capital intensity with CapEx and some of the renovation stuff you're doing is down. So just trying to weigh those 2 factors and think about key money investment for the balance of the year. Dominic Dragisich: So I'll start at the high level and then Scott could hit the second part of your question. And I mentioned a little bit of this in I think the first question, but when you take a look at what we're doing to lower the cost for our owners, I mean, we don't have perfect visibility into their P&L. So I'll start with the bottom line upfront. We believe it's still in that teens in terms of owner returns and whatnot. We're seeing the improved value proposition showing up in the development results. So when you take a look at where we were last year versus this year, I mean, we're lowering the cost of customer relations. We're exploring insurance options. We've reduced -- we're in the process of having conversations with regards to reduced commissions, the cost of prototypes being down 25%, FF&E down 20%. So all in all, we feel like our value proposition is very much competitive against the competition. And that's really again showing up, I think, in the 30% higher development results this quarter versus where we were last year. So again, the profitability is going to continue to be core to who we are. And what's been very consistent in every conversation I've had with franchisees, and I've probably talked to hundreds since I've stepped into this role now at this point, they want the lower cost, and those are all the things that I just talked about. They want to see stronger top line and a lot of those commercial capabilities that I talked about as well, we are confident that it's going to show up in top line gains in the long term. And they want tools that makes their lives a lot easier. And the one piece of feedback that we've gotten, in particular, is this AI-enabled teammate, Charlie, within the property management system. And that alone has reduced operational request to corporate by 40%. So if you have the ability to replace some of those -- some of that FTE time so that they could go spend with their guests, et cetera, that's a net benefit. So again, we feel like we're well positioned. We're going to continue to pound the pavement in the context of our development this year and looking forward to continuing to drive their profitability. Scott Oaksmith: Shaun, in terms of your question about capital intensity. So as you mentioned, the key money was up from the first half of '25 into the first half of '26, was really driven by the rise in the number of room openings we've had during the quarter. So we were up about 27% in room openings in the U.S. compared to the prior year. And additionally, the mix of hotels that opened has shifted. We've seen a lot more stronger growth in our core brands of the mid-scale, upper mid-scale and upscale, which bring us higher revenues, but also sometimes slightly higher key money checks. But overall, we feel really good about where we are in terms of the amount of key money that it takes to win the deal. We haven't seen that increase. We really have a disciplined strategy against that, and we underwrite those to really attractive returns with reasonable payback period. So what you're really seeing is a healthier pipeline coming in and more openings. With that, we do believe that our use of key money will be slightly higher than we originally talked about earlier in the year, probably in the order of $15 million to $20 million higher. But on the flip side, as you also mentioned, we are seeing less capital intensity as we wind down the development programs for both our Cambria and Everhome programs, which were -- the use of that capital was down 80% for the first half of the year. We expect that to be down about 70% for the full year. And as we wind up the more capital-intensive phase of building out those brands and return to asset-light franchising, which is our core offerings, we will move now to start exploring the sale of those assets. As we said in the prepared remarks, we have started to evaluate the timing of those sales. We do expect some of the first ones to happen in the first half of 2027. Dominic Dragisich: Shaun, the only thing that I would add just on the money side of the house, too, is we've been very -- sorry, Shaun, I was just saying the only thing I would add just on the key money is that we've been pretty disciplined in the context of tying that key money more closely to our property improvement plans. And just in terms of, obviously, the cost to convert is a huge consideration for any owner. And so being able to effectively offer them a property improvement plan that allows them to convert a project that is lower in cost, but also ties that key money to ultimately improve the product and drive the better guest experience, AI benefits and otherwise, something that we're being very disciplined in doing. So again, feeling good about the way that we're using the key money to improve the product portfolio. Operator: Your next question comes from the line of Patrick Scholes with Truist Securities. Charles Scholes: Congratulations on the net rooms growth improvement. I'd like to just step back and ask a high-level question here. When I think about 2 or so years ago with the failed Wyndham takeover, one of the things that really percolated up that maybe wasn't as well known was some dissatisfaction from your franchisees or I should say, less than ideal franchisor franchisee relationships versus perhaps that of some of your peers. And in that regard, I recall around that time, you folks had dropped out of the AAHOA organization. Would you ever consider rejoining that organization that certainly being the largest franchisee organization out there? Dominic Dragisich: Yes. Thanks for the question. I mean I think, first and foremost, we've said this previously, but we paused the membership. We never paused the relationship with AAHOA. And so I think that's first and foremost. We continue to work with them very collaboratively in the context of those items that ultimately support a broader franchise business model that ultimately support the hotel industry. There are many, many things and candidly, the vast majority, 99.99% of the things that we are more aligned on. And so I think there was one element in particular where all the hotel companies paused that membership. Not saying that if there was an opportunity to rejoin that we wouldn't. It's a conversation that we would certainly entertain. But the reality here is we work very collaboratively with our self-elected owners councils to really address those items that our franchisees are dealing with day in and day out. Many of those members are also members of AAHOA. So again, there's a collaborative effort on that side as well. And broadly speaking, we feel like the relationship that we've had with our franchisees has never been better. We continue to see that, and we had that experience at our franchisee convention just 2 months ago, and we're encouraged by the continued feedback that we're getting from our franchisees with regards to everything that we're doing to allow them to operate their businesses more effectively to drive their profitability. And it's showing up. I think it's showing up on the retention side of the house. And there's a reason why we believe that the numbers are down 50% in terms of the exits from the portfolio year-over-year, and that's because of not just the performance that we're driving, but the broader relationship that we have with them and the trust that they have in us. Charles Scholes: Okay. And then a follow-up, not so much as a question, but just passing on quite a few thoughts or requests from a number of shareholders this morning. Certainly, what I'm hearing is we, myself and shareholders certainly would encourage more granularity, and you've certainly talked about from a high level on this, but certainly more granularity to address RevPAR improvement. When we look at the index of your performance, it looked to be about 300 basis points below. I get it, some of it may be location or customer, but I don't think that explains the whole thing. So certainly, going forward, providing as much granularity as far as your plan to improve that would certainly go a long way. So just passing that on, and I appreciate your consideration. Dominic Dragisich: Absolutely. Thanks for that, Patrick. And the reality is communication and transparency are critical. I think we are doing a much better job as it pertains to showing the puts and takes on the net rooms growth in the prepared remarks on the RevPAR side. We obviously try to provide that, and we'll continue to do so in the future. Operator: Your next question comes from the line of Robin Farley with UBS. Robin Farley: Two questions. One is just going back to the commentary about the expected increase in U.S. rooms really sounds like in Q4. Maybe I'm doing the math wrong on this, but it looks like your U.S. pipeline is down year-over-year. So is the growth in U.S. rooms, is it more just this fewer exits? Is that the right way to think about it? And is there -- are you sort of -- was there a purposeful program to get rid of certain properties that now is winding down? Or just to understand the components of that U.S. growth. Dominic Dragisich: Thanks for the question, Robin. And I'll hit it at a high level. And if Scott wanted to add anything, certainly can. But I think it is coming from both, right? It's coming from an increase in openings. I think in this quarter, you actually did see a 27% or so increase in the openings. And so we're very encouraged by what we're seeing. And the reality is that the vast majority, about 90% of those openings and that we expect in the full year as well are coming from conversions. And so we have that proven conversion engine. We're actually seeing a reduction in the time between a franchise agreement being signed and when a hotel opens by almost 1 month. And so again, we're seeing speed to open increasing as well. So we're very encouraged by the fact that about 75% of the conversions that we're signing this year are going to open in year, so we do expect to see a pretty significant -- well, the increase that's in line with the guidance, at least on the opening side. We also continue to see the trend that we're seeing on exits continuing in the back half of the year. So it's going to be a both/and as it pertains to the opening side and the exit side. New construction obviously has been light across the industry. Supply growth is less than 1%, which is one of the reasons why you're seeing the pipeline where it is. But we're not just looking at the pipeline in terms of the catalyst for future growth because of that conversion engine that we do have. So again, very much excited about where we're heading there. Scott Oaksmith: As Dom mentioned, it really is a conversion story today. And if you look at our conversion pipeline in the U.S., it's up about 24% since last year at the same time and up about 6% sequentially since the end of March. So really reflecting the success our franchise development team has done in signing agreements and as Dom mentioned, new construction has declined year-over-year as we've seen less starts with the current economic conditions, but it's basically flat since the end of the year. So really, it's increasing conversion openings as well as a decline in our termination rate, which is expected to be down about 250 basis points year-over-year. Robin Farley: Okay. Great. And then my other question was just if you could help us understand, you talked about the net capital outlay for hotel development declining pretty significantly. But also in the quarter, you talked about the increase in franchise agreement acquisition costs. So can you just help us understand what is different about those 2 buckets? Scott Oaksmith: Yes. The net development outlays are really focused specifically on building hotels through wholly owned ownership, joint ventures as well as loans. So those were specific programs that we had done to launch our both Cambria and Everhome brands. And now that we've gotten both of those to the scale that we believe is necessary for them to grow more in an asset-light nature and franchising only, we're able to pull back the spending on those programs and now move to recycle that capital. So that will be capital that comes back in. Key money is more focused on cost of acquiring a franchise agreement. And as Dom mentioned earlier, really, it's around helping the owner as they transition to our brands to upgrade the hotel, make sure the quality is in the right spot for each one of the brands to make sure we're enhancing guest experience. So those come with a very long franchise agreement and assuming the franchisee operates within our system over the term of the agreement, the key money is forgiven over time. So really, it's a cost of acquiring the contract, but very high IRRs on that as we go forward. So a little bit different. When you look at the overall capital intensity of the business, it's certainly declining, and we expect free cash flow conversion over the next several years to get back to more of the historical levels that we've had. Operator: Your next question comes from the line of Stephen Grambling with Morgan Stanley. Stephen Grambling: So maybe just a follow-up there and I guess, in the vein of disclosure, I guess, what percentage of the key money that you expect this year is for supporting existing owners versus what's in the pipeline? And then some of your peers have also talked about supporting owners through programs to incentivize them spending on properties and aligning the brand with owners. It sounds like you're alluding to a bit of a similar dynamic with your own cost reductions, but should investors anticipate this will be funded through your P&L or the system fund? Or are you finding outright reductions and the system fund should still be kind of breakeven longer term? Dominic Dragisich: Yes. So I'll hit the cost and the key money associated with the existing owners. And the reality is when an owner is coming up on an expiration or whatnot, obviously, in order to retain that owner, we expect for them to have a capital outlay associated with improving that particular hotel, that's our opportunity to work with them on what that property improvement plan looks like, making sure that we're ultimately tailoring it in such a way that meets their needs, but more importantly, the needs of the guest in terms of those longer-term guest reviews and whatnot. And so you are seeing us being able to meet the owner where they are as it pertains to retaining them and as it pertains to supporting that property improvement plan. There's other creative things that we've always done in the past, candidly, that I know some of our competitors are talking about today with regards to reducing certain fees as well based on guest review scores. We have an internal acronym for it, but it's effectively your guest review scores around hitting a certain threshold and having a reduction in a loyalty fee hitting a certain score and having a reduction to other business as usual fees and customer relations and whatnot. And so again, there's the capital piece that ultimately flows through the P&L. And then there's the P&L piece that does not have a material impact on the effective royalty rate and the overall royalty fees as well. Scott Oaksmith: In terms of your question on key money, so we have -- at this point in the year, we have fairly good visibility in terms of how much key money is tied up into the pipeline today. Certainly, the timing of disbursement can fluctuate over periods as our hotels, particularly, as we mentioned earlier, 90% of our openings this year will be conversion open within 3 to 6 months. But there can be unforeseen circumstances as people do their property improvement plans that could either accelerate or push that into the next year. And there will be still deals that we'll do for the remainder of the year that will open in the year that we have not executed yet. So there's always a little bit of volatility in terms of predicting the key money in any one period. But generally, we have a very good sense of kind of the total outlays over an 18-month period. Operator: Your next question comes from the line of Trey Bowers with Wells Fargo. Raymond Bowers: I guess in the vein of what have you done for me lately, you guys have done a great job kind of breaking out the net capital outlays and the improvement from last year. But as we look out to 2027 and think about free cash flow dynamics, should we expect that to be a net positive number next year, less negative? Just any framework as you guys look to start to distribute some of these assets, what that could mean? Scott Oaksmith: Yes. At this point in time, Trey, we're done at the end of this year for the most part. There may be a few dollars that trickle into 2027, but as the final projects are finished. But the capital outlays, there's no more commitments to that. So at this point in time, in terms of our support of Cambria and Everhome, we should -- we will be net recyclers of that. So as we wind up some of the joint ventures we have, as we sell the wholly-owned assets, as we collect the outstanding loans we have, we will be in a net surplus position, which will obviously be a tailwind to our cash flow. So we expect no more substantial money to go out and really over the next 12 to 24 months as we work through the market conditions and take those assets to market to be net recyclers of capital. Raymond Bowers: And then I guess as a follow-up, as I think about the owned portfolio, is that a number that over time should go to 0? Would you like to be 100% franchised? Or will there always be some small portion of the portfolio that you guys want to hold on to just to kind of control brand standards? And then finally, against that, any sense of kind of magnitude if you were to execute all these sales, what that would mean? Scott Oaksmith: Yes. In terms of ownership, that's really not in our long-term plans. The hotels we own really are concentrated in 3 different ways, as I mentioned earlier, building some Cambrias and early Everhomes to get the brands launched. And then we did acquire 3 assets when we acquired Radisson. At this point in time, we don't see any long-term strategic value into owning them. We are an asset-light franchising company. So we do not plan on holding any of the assets really around -- now it is around making sure that we're maximizing the value on sales as well as retaining franchise agreements is really where we're focused on. In terms of magnitude, we've got about $650 million on our balance sheet related to those programs. It is mixed between owned hotels, some joint ventures we have as well as lending. About $450 million of it is on owned hotels. So that would be the more immediate area that we have the ability to go sell and monetize those prior investments. Operator: Your next question comes from the line of Meredith Jensen with HSBC. Meredith Prichard Jensen: Two very quick things. One, Scott, I think you mentioned some penetration in terms of loyalty. I was hoping you might discuss a little bit further what you're seeing since the refresh, what some opportunities you're seeing maybe in the future given that increase of engagement? And secondly, if you might speak a little bit more about the partnership revenues in terms of the moving parts in there and sort of the sustainability of how we might model that over the longer term? Dominic Dragisich: And I'll start with the loyalty piece. And the reality is we're very -- we're encouraged by the progress that we're seeing. I think the most important kind of result that we wanted to highlight there is just the increase in loyalty contribution, which is in that 250 basis point range. And at the end of the day, that's all about driving our franchisees' profitability. So the more direct business that we're driving to them through the loyalty program, the better their economics are going to be. And so again, the relaunch of the loyalty program in isolation was a great win for us, but it's a bigger part of that commercial ecosystem that we've invested in to really close that RevPAR gap and to really drive the same-store sale number higher in the future. So that's part of a loyalty tool, a guest data platform, the relaunch of our -- or the launch, I should say, of our EasyBid RFP response tool. So it's a consolidated ecosystem, candidly, that's made up of a number of different programs that we think is going to be a net tailwind for us from a RevPAR perspective into the future. We're also seeing an increase in active members within the loyalty program itself at the highest level. And then the last piece is really those new loyalty program members are actually driving more RevPAR than the loyalty program members that we added during the same period last year. So again, all encouraging signs. I'm not going to take a victory lap just yet. It's early days, but we feel like this is going to be a big part of that commercial engine into the future. Scott Oaksmith: And it dovetails well into the partnership question you had as we continue to bring more guests into our ecosystem and a higher-value guests, they're very valuable to the various partners that we have. So gives us the ability to cross-sell different services, whether they're travel adjacent or something else to our most loyal members, which we then earn fees off of. So the growth of the loyalty program really sets us up well to continue to monetize that guest in other ways to drive that revenue line item. The other area for the partnership services and fees that we focus on very much, and it's been the theme of this call is franchisee economics. So leveraging the size and scale of our overall franchise system to drive down the cost of operating a hotel, whether that's through the various procurement of the types of items that are used in the hotel, whether that's driving down cost of converting the hotels that we talked about the 25% reduction in prototype costs. As we do that, we're able to both lower costs for our franchisees, but also then earn fees from those third-party vendors. So we feel good about where we are on those programs. Our guide for this year is kind of that mid-single-digit increase, but I think we have a lot of opportunity in the future to accelerate that growth. Meredith Prichard Jensen: That's super helpful. Dom, did you mention the actual -- the penetration or the contribution for the loyalty just so we can keep track on the progress? Dominic Dragisich: We didn't disclose that, but I mean it's different across the chain scales. In the past, we've talked about it being a little north of 40% across. But again, kind of in the mid-scale and above, you see a much higher loyalty penetration. Scott Oaksmith: Yes. Really, the portfolio is very different. So below the 30% in our economy brands, but when you get to the upper mid-scale and upscale hotel is more in that 50% to 60% -- close to 50% to 60% range where it blends to 40%. And I think that's pretty common across the industry, particularly in the economy segment where it tends to be a little more cost conscious and less value guests. But as you move up the chain scale, a lot more loyalty from your guests. Operator: Your last question comes from the line of Alex Brignall with Rothschild & Co. Alex Brignall: The first one is just on the churn rate, massively appreciative of the new color that you've given for the U.S. Is there anything that you could just tell us whether it's directional in terms of the international piece or just what it would look like on a whole system basis and whether that 250 basis point reduction in churn would apply across the whole group? And if not, why there are differences? And then just in terms of the reimbursable revenue and expenses, obviously, the gap has widened a little bit. Could you just talk about how this will progress in sort of outer years? Dominic Dragisich: Yes. So I'll hit the international and just the broader portfolio net rooms growth question and specifically on the churn rate and then Scott can hit on the reimbursable. But when you take a look at just where we are from a net rooms growth perspective, we would expect to see international consistent into the future as it pertains to the churn rates. International growth this year was pretty significant. And so we're lapping a pretty tough comp in the back half of the year. So right now, with the net rooms growth at 2%, and we're guiding to globally about 1.5%, that's because of the fact that we're lapping that pretty difficult comp. But we do expect to still grow our international portfolio and, call it, kind of the low to mid-single digits after 13% growth year-over-year. And so those churn rates, we expect to stay stable. Obviously, we're continuing to see the openings as well throughout that portfolio. We are seeing significant momentum in Canada following the transition to direct franchising or I should at least say momentum where we're driving mid-single-digit net rooms growth, low to mid-single-digit RevPAR growth. We also do see an opportunity in CALA following the Radisson acquisition. And Asia Pac remains a little bit of a distribution market for us outside of Australia. So again, encouraged by the continued progress there. I wouldn't sit here and say you should expect to see 13% rooms growth internationally over the course of the next 6 to 12 months. But I think you're going to see more of a moderation, which means as U.S. growth picks up, we feel confident in that 1.5% guide. Scott Oaksmith: Yes, Alex, in terms of your question about the marketing reservation reimbursable. So yes, we have had a temporary acceleration of the investments really around our franchisee and guest value proposition. So we've been investing in capabilities that improve distribution, strengthen our reservation delivery, modernize our loyalty technology and improve our rate setting abilities, which ultimately will help franchisees acquire customers and operate their hotels more efficiently. The current level of spending is not intended to represent a permanent run rate. We did have some accumulated surpluses from prior years where we're able to fund this defined period of elevated investment. So as we wind those up, I would expect this to kind of be the high watermark in terms of the amount of spending in this year, and we'll see that start to come down as these investments are completed this year and going into the following year. So those reimbursable expenses as measured against revenues will be more aligned. Alex Brignall: Could you quantify the surplus that you had there, please? Scott Oaksmith: Yes. Coming into the year, we had a little over -- I think it was about $25 million in surpluses. So we are going into more of a deficit with the spending levels this year. But the way our contracts work is we will then recover that over the next several years back to breakeven. Operator: A final question coming from Brandt Montour with Barclays. Brandt Montour: I apologize if I missed this. I wanted to ask about the pipeline, the domestic pipeline specifically and the fact that it's down quarter-over-quarter, down year-over-year. I know franchise agreements and signings are up and they're sort of moving in a better direction, opposite direction. I know the pipeline is not really representative of the signs because you're conversion heavy, but you kind of always have been conversion heavy. So I guess the question is why are those numbers moving in the opposite direction? And if there's a significant change of mix toward closer in conversions and why not sort of just put them in the pipeline? Dominic Dragisich: Yes. There's a couple of stories within the story there, Brandt. And I think when you take a look at the pipeline year-over-year, there was a pretty significant set of hotels that were in the pipeline globally, so in our international division, which led to the 13% growth. So those effectively were open hotels that brought the pipeline down. When you take a look at the domestic pipeline year-over-year, it's effectively flat. And I think it's down 40 basis points, 0.4%. So a lot of that has to do with the fact that, again, new construction has been pretty muted. And I think we are encouraged by new construction that we're seeing on extended stay, which now represents about 40% of the pipeline, 13% unit growth. And so we continue to see that momentum on the extended stay portfolio. But broadly speaking, you are seeing just a higher velocity within that conversion -- those conversion development agreements, where we actually reduced time to open by, I think it was between 10% and 15%. And so again, the more development agreements that are being signed, the more you're basically seeing open in the year or in some cases, even within the quarter. So that -- those aren't even showing up in the pipeline. So again, we're still pretty darn confident about where we're heading from a net rooms growth perspective, which is why we guided even with the pipeline effectively staying flat year-over-year domestically. Scott Oaksmith: Yes, Brandt, yes, I think to the point we made earlier, we really are more in a heavier conversion, especially in the U.S. environment, we have about 90% of our U.S. openings this year. Historically, it's been more mid-60s just with the lack of supply growth across the entire U.S. industry. So really, if you focus where we've been focused on is our U.S. conversion pipeline is up 24% year-over-year and 6% sequentially since March 31 of this year. So we are seeing, to your point earlier about the increase in franchise agreements, we are seeing that more on the conversion side, and they're moving through the pipeline really quickly. So the pipeline is not always representative at any point in time of the velocity and the unit growth potential. Operator: There are no further questions at this time. I will now turn the call back to Dom Dragisich for closing remarks. Dominic Dragisich: Thank you, operator, and thanks, everyone, for joining us this morning. We're looking forward to meeting with you again in November when we report our third quarter results. But in the meantime, we both hope you have a great rest of your summer. Operator: This concludes today's call. Thank you for attending. You may now disconnect. Before you buy stock in Choice Hotels International, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Choice Hotels International wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $403,337!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,334,946!* Now, it’s worth noting Stock Advisor’s total average return is 958% — a market-crushing outperformance compared to 214% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors. See the 10 stocks » *Stock Advisor returns as of August 12, 2026. This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Choice Hotels (CHH) Q2 2026 Earnings Call Transcript was originally published by The Motley Fool

Interested in Choice Hotels International, Inc.? Here are five stocks we like better. Strong quarterly performance: Adjusted EBITDA rose 6% year over year to $175 million, adjusted EPS increased 5% to $2.02, and revenue excluding reimbursable costs grew 7% to $277 million. Room growth momentum improved: Global openings increased 16%, U.S. openings rose 27%, and U.S. room exits fell 50% to a six-year low. Conversion-led development, extended-stay properties and international expansion supported the pipeline. Full-year outlook raised: Choice now expects adjusted EBITDA of $635 million to $650 million, global net rooms growth of approximately 1.5%, and U.S. RevPAR growth of 0% to 1.25%, while continuing its shift toward an asset-light franchising model and returning capital to shareholders. The Most Shorted Stocks in June: Hold, Short, or Squeeze? Choice Hotels International (NYSE:CHH) reported second-quarter results marked by higher adjusted EBITDA, improving U.S. room-growth trends and an increase in full-year guidance for several operating measures. Adjusted EBITDA rose 6% year over year to $175 million, while adjusted diluted earnings per share increased 5% to $2.02. Revenue excluding reimbursable revenue from franchised and managed properties rose 7% to $277 million, Chief Financial Officer Scott Oaksmith said. → 3 Drone Stocks That Should Soar After the Summer Slump Hilton Demonstrates Asset Light is Right for Investors Interim Chief Executive Officer Dom Dragisich said the company’s U.S. net rooms growth improved sequentially for a second consecutive quarter and was nearly flat from a year earlier. Global rooms grew 2.6% during the quarter, supported by improving U.S. development activity and continued international expansion. Choice said global room openings increased 16% year over year. In the U.S., gross room openings rose 27% from the prior-year period and 9% sequentially, while room exits declined 50% year over year to the lowest level in six years. U.S. franchise agreements awarded increased 30% during the quarter. → Meta’s Earnings Drop Shows Wall Street Wants More Than Ad Growth Why Wyndham Hotels Is The Industry Value Play, An Earnings Story Dragisich said the company’s conversion-led development model remains central to its growth strategy. About 75% of U.S. agreements signed year to date are expected to open during 2026, while conversions are projected to account for about 90% of U.S. openings for the full year. The U.S. conversion pipeline expanded 6% sequentially and was up 24% from a year earlier, according to management. Choice also shortened the average time from signing to opening for conversion properties by nearly one month. → Jersey Mike's Serves Fresh Gains After IPO Stumble Extended Stay remained a significant development contributor, representing more than 40% of the U.S. pipeline and posting its 12th consecutive quarter of double-digit rooms growth. International net rooms increased 13% year over year, including a 5.4% increase in Canada, where Choice has transitioned to a direct franchising model. Management said it expects U.S. net rooms growth to return to positive territory for the full year, aided by stronger openings and an anticipated 250-basis-point improvement in the U.S. net exit rate compared with 2025. Third-quarter U.S. net rooms growth is expected to remain broadly consistent with second-quarter levels before accelerating in the fourth quarter. U.S. revenue per available room, or RevPAR, increased 1.3% year over year in the second quarter, while global RevPAR rose 1.7% on a currency-neutral basis. International RevPAR increased 2.1%, led by the Caribbean and Latin America and supported by Canada and Asia-Pacific. Oaksmith said the FIFA World Cup contributed about 60 basis points to second-quarter U.S. RevPAR. Choice estimates the event will provide roughly a 30-basis-point benefit for the full year because its activity was concentrated in the second quarter. Dragisich said the company is seeking to improve competitive RevPAR through its commercial and technology capabilities rather than relying solely on industry demand. He noted that Choice has lower representation in urban markets and business-transient travel, areas that contributed to a gap in its RevPAR index performance during the quarter. The company cited early results from several commercial initiatives: Choice Privileges membership rose 7% year over year to 77 million, while loyalty contribution increased by more than 250 basis points. Members acquired since the loyalty-program relaunch are generating higher average revenue than comparable members acquired a year earlier. Revenue from small and medium-sized business travelers increased 8% year over year, supported by the Business Direct platform. AI-enabled EasyBid improved group request-for-proposal conversion by 360 basis points and helped drive 16% growth in group revenue. An early pilot of the AI-enabled CHARLIE tool reduced operational support requests by about 40%, according to the company. U.S. average royalty rate increased 11 basis points in the quarter, reflecting a mix shift toward higher-revenue brands and newer franchise agreements. In response to an analyst question, Oaksmith said the increase did not represent higher rates for existing franchisees; rather, older contracts are being replaced over time by agreements using the company’s current published contractual rates. Choice continued to reduce investment in hotel development as it shifts back toward an asset-light franchising model. Capital outlays for hotel development declined 80% year over year in the first half of 2026. The company owns 19 operating hotels and one hotel under construction, including properties associated with developing the Cambria and Everhome brands and properties acquired in the Radisson Americas transaction. Oaksmith said Choice does not plan to retain hotel ownership as a long-term strategy and expects its first asset disposition in the first half of 2027, subject to market conditions. Choice reported $475 million of total liquidity and net leverage of 3.1 times adjusted EBITDA at quarter-end. Operating cash flow totaled $67 million for the first six months, compared with $116 million in the prior-year period, reflecting higher franchise agreement acquisition costs and increased spending on franchisee-facing tools and guest-delivery capabilities. Through July 31, Choice returned $172 million to shareholders, including $133 million in share repurchases and $39 million in dividends. The company continues to expect $175 million to $225 million in share repurchases during 2026. Choice raised its full-year outlook for adjusted EBITDA, U.S. and global RevPAR, U.S. average royalty rate and global net rooms growth. The company now expects: Adjusted EBITDA of $635 million to $650 million. Adjusted diluted EPS of $6.86 to $7.10, reflecting higher expected interest expense and a higher effective tax rate, partly offset by repurchases. U.S. RevPAR growth of 0% to 1.25% and global RevPAR growth of 0% to 1%. U.S. average royalty rate expansion of 7 to 9 basis points. Global net rooms growth of approximately 1.5%, up from its prior outlook of about 1%. Oaksmith said third-quarter adjusted EBITDA comparisons will be affected by approximately $9.5 million in liquidated damages recognized in other revenue during the prior-year quarter that are not expected to recur. He added that the company expects adjusted SG&A growth to moderate in the second half from the first-half run rate. Choice Hotels International, Inc is a hospitality franchisor specializing in the development and support of lodging brands across the economy, midscale and upscale segments. Through a network of franchisees, Choice Hotels supplies proprietary reservation and distribution systems, comprehensive marketing programs, and operational support services. The company's core activities include brand management, franchise development, and technology-driven revenue optimization tools designed to enhance guest acquisition and retention for its partners. Founded in 1939 as Quality Courts United, the company rebranded to Choice Hotels International in 1982 to reflect its expanding brand portfolio and global ambitions. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "Choice Hotels International Q2 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for August 2026.

This article first appeared on GuruFocus. Release Date: August 05, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Adjusted EBITDA increased 6% year-over-year to $175 million, driven by higher US royalties, franchisee program revenues, and partnership revenues. US net rooms growth improved sequentially for the second consecutive quarter, with gross openings up 27% and exits down 50% year-over-year, positioning the company for positive full-year growth. Global franchise agreements increased 20% year-over-year, with US conversion agreements up 82%, reflecting strong demand for the company's conversion-led development model. US RevPAR increased 1.3% year-over-year, supported by strengthening demand trends, including a 60 basis point contribution from the FIFA World Cup, and the company raised its full-year RevPAR guidance. The company is leveraging AI and technology to enhance franchisee value, including a 360 basis point improvement in group RFP conversion and a 40% reduction in operational support requests through its AI-enabled 'Charlie' tool. Capital allocation discipline is evident, with hotel development outlays down 80% year-over-year, and the company expects to begin monetizing its owned hotel portfolio in the first half of 2027. US RevPAR growth of 1.3% lagged the industry, with the company under-indexed in urban markets and business transient travel, which saw a strong rebound in the quarter. Adjusted SG&A expenses increased 7% year-over-year, driven by the transition to direct franchising in Canada and higher accounts receivable reserves, though growth is expected to moderate in the second half. Operating cash flow declined to $67 million in the first half of 2026 from $116 million in the prior year period, due to higher franchise agreement acquisition costs and increased reimbursable expenses. The company faces a tough comparison in Q3 2026, with approximately $9.5 million of liquidated damages recognized in the prior year quarter not expected to recur, impacting year-over-year EBITDA growth. The US development pipeline is down year-over-year, reflecting muted new construction starts, though the company emphasizes its conversion pipeline is up 24% year-over-year. The company expects Q4 RevPAR growth to moderate despite easier comparisons, citing short booking windows and calendar shifts, which adds uncertainty to the full-year outlook. Warning! GuruFocus has detected 4 Warning Sign with CHH. Is CHH fairly valued? Test your thesis with our free DCF calculator. Q: Can you unpack how royalty rates are increasing while you are simultaneously trying to increase the value proposition to franchisees?A: Dom Dragoic (Interim CEO) explained that the royalty rate increase is primarily driven by mix shift, as higher-revenue brands like Comfort enter the portfolio. He emphasized that the company is delivering value through reduced prototype costs (down 25%), increased loyalty contribution (up 250 basis points), and lower FF&E costs (down 20%). Scott Oak Smith (CFO) added that these are contractual rates from new agreements signed since 2016-2017, not increases on existing franchisees. Q: Can you unpack the US net rooms growth trends, specifically how much is from the revenue intensity strategy ending versus underlying improvement?A: Dom Dragoic (Interim CEO) highlighted that Q2 openings were up 27%, exits down 50%, and franchise agreements up 30% year-over-year. He noted that 75% of agreements signed this year will open this year due to the speed of the conversion engine. He emphasized the company is winning in both higher-revenue segments (3.6% growth) and expects to continue improving in economy and lower mid-scale segments, with retention being equally important. Q: Why did US revPAR of 1.3% lag the industry, and why should Q4 revPAR decelerate from Q3 given easier comparisons?A: Dom Dragoic (Interim CEO) acknowledged the gap is due to under-indexing in urban markets and business transient travel, which bounced back strongly in Q2. He noted occupancy index gains are improving, with rate being the biggest opportunity. Scott Oak Smith (CFO) explained Q3 should be stronger with July up 100 basis points, but calendar shifts (Labor Day in September, fewer weekend days in August) will moderate performance. Q4 assumes some improvement but with limited visibility due to short booking windows. Q: What people and processes have changed so far under your leadership, and what's still to come?A: Dom Dragoic (Interim CEO) said his focus is on staying close to franchisees, with changes including realigning functions for single points of accountability, simplifying the organization, and emphasizing communication and accountability. He noted investments made in the back half of last year are paying dividends, particularly in retention (50% reduction in exits) and commercial/technology capabilities, with AI being the next evolution. Q: Can you discuss your philosophy on conservatism in guidance, given EBITDA guidance was only raised 0.5% despite stronger revPAR, net unit growth, and royalty rate expansion?A: Dom Dragoic (Interim CEO) said they beat internal forecasts and flowed that through, but there are timing-related puts and takes in the back half, including elevated liquidated damages in Q3 of last year that won't recur (a good news story for retention). He noted a cautious approach to M&A in Europe and that the midpoint feels most comfortable, though execution could push results to the higher end. Q: How are you addressing owner health and all-in costs of franchising, and how does key money investment compare to capital intensity?A: Dom Dragoic (Interim CEO) said they are lowering costs through reduced prototype costs, exploring insurance options, and reducing commissions, with the value proposition showing up in 30% higher development results. Scott Oak Smith (CFO) noted key money is up due to 27% more room openings and mix shift to higher-revenue brands, but they haven't seen increases in key money per deal. Development capital is down 80% in the first half, expected down 70% for the full year, with first asset dispositions expected in the first half of 2027. Q: Would you consider rejoining the Asian American Hotel Owners Association (AAHOA) after pausing membership?A: Dom Dragoic (Interim CEO) said they paused membership but never paused the relationship, continuing to work collaboratively on industry-wide issues. He noted they would entertain rejoining if the opportunity arose, but currently work closely with self-elected owner councils. He emphasized franchisee relationships have never been better, citing the 50% reduction in exits as evidence of improved trust and performance. Q: Is the expected increase in US rooms growth driven more by fewer exits than openings, and is there a purposeful program to exit certain properties?A: Dom Dragoic (Interim CEO) said growth is coming from both openings (up 27% in Q2) and exits (down 50%), with 90% of openings from conversions. Scott Oak Smith (CFO) added that the US conversion pipeline is up 24% year-over-year and 6% sequentially, with new construction flat since year-end. The termination rate is expected to be down 250 basis points year-over-year. Q: What is the difference between net capital outlays for hotel development declining and franchise agreement acquisition costs increasing?A: Scott Oak Smith (CFO) explained that net development outlays were for building hotels through wholly-owned ownership, joint ventures, and loans to launch Cambria and Everhome brands. Key money is the cost of acquiring franchise agreements, helping owners transition to brands with property improvement plans. Key money comes with long-term agreements and is forgiven over time, offering high IRRs, while development capital is being recycled as they return to asset-light franchising. Q: What percentage of key money is for supporting existing owners versus new pipeline, and how should investors think about funding for owner support programs?A: Dom Dragoic (Interim CEO) said key money for existing owners is tied to property improvement plans for retention, with creative fee reductions based on guest review scores. Scott Oak Smith (CFO) noted they have good visibility on key money tied to the pipeline, though timing can fluctuate. He emphasized the company is disciplined in underwriting key money to attractive returns with reasonable payback periods. Q: Should we expect free cash flow to be a net positive in 2027 as you start to distribute assets?A: Scott Oak Smith (CFO) confirmed that capital outlays for Cambria and Everhome are essentially complete by end of 2026, with no more commitments. They will become net recyclers of capital through winding up joint ventures, selling wholly-owned assets, and collecting outstanding loans. He noted approximately $650 million on the balance sheet related to these programs, with about $450 million in For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Choice Hotels (CHH) reported $440.76 million in revenue for the quarter ended June 2026, representing a year-over-year increase of 3.4%. EPS of $2.02 for the same period compares to $1.92 a year ago. The reported revenue represents a surprise of +2.31% over the Zacks Consensus Estimate of $430.81 million. With the consensus EPS estimate being $1.97, the EPS surprise was +2.54%. While investors closely watch year-over-year changes in headline numbers -- revenue and earnings -- and how they compare to Wall Street expectations to determine their next course of action, some key metrics always provide a better insight into a company's underlying performance. As these metrics influence top- and bottom-line performance, comparing them to the year-ago numbers and what analysts estimated helps investors project a stock's price performance more accurately. Here is how Choice Hotels performed in the just reported quarter in terms of the metrics most widely monitored and projected by Wall Street analysts: RevPAR: $61.95 versus $59.54 estimated by three analysts on average. Global System by Region - U.S - Rooms: 499,226 versus the three-analyst average estimate of 498,782. Global System by Region - Total System - Rooms: 661,089 compared to the 658,146 average estimate based on three analysts. Global System by Region - Total International - Rooms: 161,863 versus the two-analyst average estimate of 161,769. Average Daily Rate (ADR): $101.45 compared to the $99.59 average estimate based on two analysts. RevPAR Growth: 1.7% versus 1% estimated by two analysts on average. Occupancy: 61.1% versus the two-analyst average estimate of 59.9%. Revenues- Revenue for reimbursable costs from franchised and managed properties: $163.32 million versus the three-analyst average estimate of $163.48 million. The reported number represents a year-over-year change of -2.4%. Revenues- Franchise and management fees: $187.54 million versus $185.29 million estimated by three analysts on average. Compared to the year-ago quarter, this number represents a +5.9% change. Revenues- Owned Hotels: $34.9 million compared to the $31.77 million average estimate based on three analysts. The reported number represents a change of +15.4% year over year. Revenues- Partnership services and fees: $28.67 million versus $27.36 million estimated by three analysts on average. Compared to the year-ago quarter, this number represents a +6% change. Revenues- Other: $26.33 million versus the three-analyst average estimate of $23.1 million. The reported number represents a year-over-year change of +6.5%. View all Key Company Metrics for Choice Hotels here>>> Shares of Choice Hotels have returned -2.1% over the past month versus the Zacks S&P 500 composite's +3.5% change. The stock currently has a Zacks Rank #3 (Hold), indicating that it could perform in line with the broader market in the near term. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Choice Hotels International, Inc. (CHH) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

U.S. Net Rooms Growth Improved for the Second Consecutive Quarter, Supporting 2.6% Global Net Rooms Growth NORTH BETHESDA, Md., Aug. 5, 2026 /PRNewswire/ -- Choice Hotels International, Inc. ("Choice" or "the Company") (NYSE: CHH), a leading global lodging franchisor with an asset-light model, today reported results for the second quarter ended June 30, 2026. Highlights include: Net income was $64 million, or $1.41 per diluted share, for the second quarter. Adjusted EBITDA totaled $175 million, and adjusted diluted EPS reached $2.02 for the second quarter. U.S. room openings increased 27% in the second quarter compared to the same period of 2025, as the Company opened approximately 6,400 U.S. rooms—the highest second-quarter level since 2019, while exits declined to their lowest second-quarter level since 2020, supporting continued improvement in U.S. net rooms growth. Global net rooms grew 2.6% compared to June 30, 2025, driven by 3.6% growth in the higher revenue extended stay, midscale, and upscale brands. U.S. RevPAR increased 1.3% in the second quarter, compared to the same period of 2025, reflecting improvements in both occupancy and rate. U.S. franchise agreements awarded increased 30% in the second quarter compared to the same period of 2025, representing approximately 9,400 new U.S. rooms for development. The Company's U.S. conversion rooms pipeline grew 24% to 24,100 rooms, compared to June 30, 2025, and 6% sequentially from March 31, 2026. The U.S. royalty rate expanded 11 basis points to 5.2% in the second quarter, compared to the same period of 2025. The Company returned $139 million to shareholders through dividends and share repurchases year-to-date through June 30, 2026. The Company raised several full-year 2026 guidance ranges. "Our second quarter results reflect encouraging progress across our key priorities, with U.S. net rooms growth improving for the second consecutive quarter to its strongest first-half performance since 2021 and U.S. RevPAR trends strengthening," said Dom Dragisich, Interim Chief Executive Officer. "Over the past several years, we've built a stronger commercial engine and technology platform, and we continue to invest in both. Our biggest opportunity now is sharpening execution—leveraging those capabilities to further enhance franchisee economics by increasing the number and quality of the guests we deliver while lowering operating costs. While we still have work to do, this business has significantly more potential, and I'm confident we can realize it. The progress we delivered this quarter reinforces that confidence." Net income was $64 million for the second quarter, a 21% decline compared to the same period of 2025. The year-over-year decrease primarily reflected a higher net reimbursable deficit from franchised and managed properties related to investments in franchisee-related tools and guest delivery capabilities, timing of SG&A expenses, and increased depreciation and amortization associated with owned hotels and the prior year acquisition of Choice Hotels Canada. These items were partially offset by higher franchise and management fees.2 Adjusted EBITDA increased 6%, and adjusted diluted EPS increased 5% compared to the same period of 2025. Franchise and management fees increased 6% to $188 million for the second quarter, compared to the same period of 2025, reflecting higher international royalty fees, higher franchisee programs and services revenue, along with U.S. RevPAR and U.S. royalty rate improvement. Partnership services and fees increased 6% to $29 million for the second quarter, compared to the same period of 2025, primarily reflecting growth in procurement services revenue. U.S. RevPAR increased 1.3% in the second quarter, compared to the same period of 2025, driven by a 0.7% increase in rate and a 40-basis-point increase in occupancy, primarily reflecting strength in the East North Central, Middle Atlantic, and West South Central regions. International RevPAR increased 2.1% on a currency-neutral basis in the second quarter, compared to the same period of 2025, led by the Caribbean and Latin America and further supported by continued strength in Canada and Asia Pacific. Global room openings increased 16% in the second quarter of 2026 compared to the same period of 2025, as the Company opened approximately 8,300 global rooms. Extended stay remained a core growth engine, supported by strong unit economics and continued developer demand, with U.S. extended stay net rooms growing 13.0% compared to June 30, 2025, marking the 12th consecutive quarter of double-digit growth. International net rooms grew 12.5% compared to June 30, 2025, led by double-digit growth in Asia Pacific and EMEA, with continued growth in Canada. Global franchise agreements awarded increased 20% in the second quarter compared to the same period of 2025, representing 11,200 new global rooms for development and reflecting continued demand for conversion-led brands. The Company's global pipeline totaled approximately 77,300 rooms as of June 30, 2026, with 96% concentrated in extended stay, midscale, and upscale brands. The pipeline included: Balance Sheet and LiquidityAs of June 30, 2026, Choice had total available liquidity of $475 million, comprised of cash and cash equivalents and available borrowing capacity. The Company's net debt-to-adjusted EBITDA ratio was 3.1x for the trailing twelve months ended June 30, 2026, within the Company's target range of 3.0x to 4.0x. During the six months ended June 30, 2026, the Company generated $67 million in cash flows from operating activities, compared to $116 million in the prior-year period, primarily reflecting higher franchise agreement acquisition costs associated with a 27% increase in U.S. room openings and higher marketing and reservation system reimbursable expenses. During the six months ended June 30, 2026, net capital outlays for hotel development and lending activities declined 80% to $15 million, from $76 million in the prior-year period.3 The Company expects to enter the next phase of its asset-light strategy by recycling capital from its owned hotel portfolio. As of August 5, 2026, the Company owned 19 operating hotels, with one additional hotel under construction. The Company expects the first asset sales to occur during the first half of 2027, subject to market conditions. Shareholder Returns During the six months ended June 30, 2026, the Company returned $26 million to shareholders through dividends and $113 million in share repurchases.4 As of June 30, 2026, 1.8 million shares of common stock remained available under the Company's current share repurchase authorization. Outlook The Company is updating certain aspects of its full-year 2026 outlook. The following outlook includes forward-looking non-GAAP measures used by management to assess expected performance. Adjusted metrics exclude the net surplus or deficit from reimbursable revenue from franchised and managed properties, due diligence and transition costs, and other items. The net income guidance range has been revised from the Company's prior outlook primarily to reflect higher expected marketing and reservation system reimbursable expenses, driven by increased investment in franchisee-facing tools and guest delivery capabilities, as well as higher interest expense and a higher effective tax rate. The adjusted net income guidance range has been revised from the Company's prior outlook primarily to reflect higher expected interest expense and a higher effective tax rate. Adjusted EBITDA guidance has been raised from the Company's prior outlook, primarily reflecting improvement in U.S. RevPAR, global net rooms growth, and U.S. royalty rate. Net capital outlays for hotel development-related activities are expected to decline from $103.4 million in 2025 to a range of $20 million to $45 million in 2026.3 Webcast and Conference Call Choice will host a conference call to discuss second quarter 2026 results on August 5, 2026, at 10:00 a.m. ET. A live webcast will be available on the Company's Investor Relations website at www.investor.choicehotels.com/events-and-presentations. Participants may also dial (833) 461-5787 (U.S.) or (585) 542-9983 (international) and reference conference ID 558894687. A replay and transcript will be available within 24 hours on the Company's Investor Relations website. About Choice Hotels® Choice Hotels International, Inc. (NYSE: CHH) is one of the largest lodging franchisors in the world, with over 7,500 hotels, representing more than 650,000 rooms, in 49 countries and territories. A wide-ranging portfolio of 22 brands that includes full-service upper upscale, midscale, extended stay, and economy properties enables Choice® to meet travelers' needs in more places and for more occasions while driving more value for franchise owners and shareholders. The award-winning Choice Privileges® rewards program and co-brand credit card options provide members with a fast and easy way to earn reward nights and personalized perks. For more information, visit www.choicehotels.com. Forward-Looking Statements Information set forth herein includes "forward-looking statements." Certain, but not necessarily all, of such forward-looking statements can be identified by the use of forward-looking terminology, such as "expect," "estimate," "believe," "anticipate," "should," "will," "forecast," "plan," "project," "assume," or similar words of futurity. All statements other than historical facts are forward-looking statements. These forward-looking statements are based on management's current beliefs, assumptions, and expectations regarding future events, which in turn are based on information currently available to management. Such statements may relate to projections of Choice's revenue, expenses, adjusted EBITDA, earnings, debt levels, ability to repay outstanding indebtedness, payment of dividends, net surplus or deficit, repurchases of common stock and other financial and operational measures, including occupancy, room openings and open hotels, RevPAR, royalty rate, strategic investment and acquisition performance, international expansion performance, macroeconomic backdrop and Choice's liquidity, among other matters. We caution you not to place undue reliance on any such forward-looking statements. Forward-looking statements do not guarantee future performance and involve known and unknown risks, uncertainties, and other factors. Several factors could cause our actual results, performance or achievements to differ materially from those expressed in or contemplated by the forward-looking statements. Such risks include, but are not limited to, changes to general, U.S. and foreign economic conditions, including access to liquidity and capital; changes in consumer demand and confidence, including consumer discretionary spending and the demand for travel, transient and group business; the timing and amount of future dividends and share repurchases; future U.S. or global outbreaks of epidemics, pandemics or contagious diseases or fear of such outbreaks, and the related impact on the global hospitality industry, particularly but not exclusively the U.S. travel market; changes in law and regulation applicable to the travel, lodging or franchising industries, including with respect to the status of our relationship with employees of our franchisees; the potential impact of changes in laws and regulations generally, or the interpretation thereof, including, without limitation, those relating to taxes, wages, labor and immigration; foreign currency fluctuations; changes in global interest rates and rate differentials; variability and unpredictability in trade relations, sanctions, tariffs or other trade controls; governmental action or inaction relating to the federal budget, including funding lapses and government shutdowns; impairments or declines in the value of our assets; our assumptions underlying our critical accounting estimates; operating risks common in the travel, lodging or franchising industries; changes to the desirability of our brands as viewed by hotel operators and customers; changes to the terms or termination of our contracts with franchisees and our relationships with our franchisees; our ability to keep pace with improvements in technology utilized for our marketing and reservation systems and other operating systems; our ability to grow our franchise system; exposure to risks related to our hotel development, financing, franchise agreement acquisition costs and ownership activities; exposures to risks associated with our investments in new businesses; fluctuations in the supply and demand for hotel rooms; our ability to realize anticipated benefits from acquired businesses; impairments or losses relating to acquired businesses; the level of acceptance of alternative growth strategies we may implement; the impact of inflation; information technology, cyber security and data breach risks; introduction and integration of artificial intelligence technologies; climate change; our sustainability strategy; ownership and financing activities; hotel closures or financial difficulties of our franchisees; operating risks associated with our international operations; political instability, geopolitical conflicts and terrorism; labor shortages; the outcome of litigation; and our ability to effectively manage our indebtedness and secure our indebtedness. These and other risk factors are discussed in detail in the Company's filings with the U.S. Securities and Exchange Commission, including our Annual Report on Form 10-K. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law. Non-GAAP Financial Measurements and Other Definitions The company evaluates its operations utilizing the performance metrics of adjusted EBITDA, adjusted selling, general and administrative (SG&A) expenses, adjusted net income, and adjusted diluted EPS, which are all non-GAAP financial measurements. These measures, which are reconciled to the comparable GAAP measures in Exhibits 6 and 7, should not be considered as an alternative to any measure of performance or liquidity as promulgated under or authorized by GAAP, such as SG&A, net income and EPS. The company's calculation of these measurements may be different from the calculations used by other companies and comparability may therefore be limited. Management believes these non-GAAP financial measures provide investors with additional meaningful financial information that should be considered when assessing our underlying business performance and trends. We further discuss management's reasons for reporting these non-GAAP measures and how each non-GAAP measure is calculated below. In addition to the specific adjustments noted below with respect to each measure, the non-GAAP measures presented herein also exclude restructuring of the company's operations including employee severance benefit, income taxes and legal costs, acquisition related to business combination, due diligence and transition (recoveries) costs, and global ERP system implementation and related costs to allow for period-over-period comparison of ongoing core operations before the impact of these discrete and infrequent charges. Adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization: Adjusted EBITDA, presented herein, is calculated as net income excluding the impact of interest expense, interest income, provision for income taxes, depreciation and amortization, amortization of cloud computing arrangements, impairments and gains on sale of business, joint ventures and assets, other (gains) and losses, equity in net income (loss) of unconsolidated affiliates and (gain) loss on extinguishment of debt, further adjusted to exclude certain items, including, franchisee agreement acquisition cost amortization and charges, mark-to-market adjustments on non-qualified retirement plan investments, share based compensation expense (benefit) and surplus or deficits generated by reimbursable revenue from franchised and managed properties. We consider adjusted EBITDA to be an indicator of operating performance because it measures our ability to service debt, fund capital expenditures, and expand our business. We also use these measures, as do analysts, lenders, investors, and others, to evaluate companies because they exclude certain items that can vary widely across industries or among companies within the same industry. For example, interest expense can be dependent on a company's capital structure, debt levels, and credit ratings, and share based compensation expense (benefit) is dependent on the design of compensation plans in place and the usage of them. Accordingly, the impact of interest expense and share based compensation expense (benefit) on earnings can vary significantly among companies. The tax positions of companies can also vary because of their differing abilities to take advantage of tax benefits and because of the tax policies of the jurisdictions in which they operate. As a result, effective tax rates and provision for income taxes can vary considerably among companies. These measures also exclude depreciation and amortization because companies utilize productive assets of different ages and use different methods of both acquiring and depreciating productive assets or amortizing franchise-agreement acquisition costs. These differences can result in considerable variability in the relative asset costs and estimated lives and, therefore, the depreciation and amortization expense among companies. Mark-to-market adjustments on non-qualified retirement-plan investments recorded in SG&A expenses are excluded from adjusted EBITDA, as the company accounts for these investments in accordance with accounting for deferred-compensation arrangements when investments are held in a rabbi trust and invested. Changes in the fair value of the investments are recognized as both compensation expense in SG&A and other gains and losses. As a result, the changes in the fair value of the investments do not have a material impact on the company's net income. Surpluses and deficits generated from reimbursable revenues from franchised and managed properties are excluded, as the company does not operate these programs to generate a profit and has the contractual rights to adjust future collections or assess additional fees to recover prior period expenditures. The company's franchise and management agreements require these revenues to be used exclusively for expenses associated with providing franchise and management services, such as central reservation systems, hotel employee and operating costs, reservation delivery and national marketing and media advertising. Franchised and managed property owners are required to reimburse the company for any deficits generated from these activities and the company is required to spend any surpluses generated in future periods. The reimbursement for franchise and management services is typically billed and collected monthly, based on the underlying hotel's sales or usage, while the associated costs are recognized as incurred by the company, creating timing differences with the net effect impacting net income in the reporting period. These timing differences are due to our discretion to spend in excess of the revenues earned or less than the revenues earned in a single period to ensure that the programs are operated in the best long-term interests of our franchised and managed properties. Since these activities will be managed to break-even over time, quarterly or annual surpluses and deficits have been excluded from the measurements utilized to assess the company's operating performance. Adjusted Net Income and Adjusted Diluted Earnings Per Share: Adjusted net income and adjusted diluted EPS exclude the impact of surpluses or deficits generated from reimbursable revenue from franchised and managed properties, impairments, formation costs and gains on sale of business, joint ventures and assets and gains on extinguishment of debt. Surpluses and deficits generated from reimbursable revenue from franchised and managed properties are excluded, as the company does not operate these programs to generate a profit and has the contractual rights to adjust future collections or assess additional fees to recover prior period expenditures. The company's franchise agreements require these revenues to be used exclusively for expenses associated with providing franchised and managed services, such as central reservation systems, hotel employee and operating costs, reservation delivery and national marketing and media advertising. Franchised and managed property owners are required to reimburse the company for any deficits generated from activities and the company is required to spend any surpluses generated in future periods. The reimbursement for franchise and management services is typically billed and collected monthly, based on the underlying hotel's sales or usage, while the associated costs are recognized as incurred by the company, creating timing differences with the net effect impacting net income in the reporting period. These timing differences are due to our discretion to spend in excess of the revenues earned or less than the revenues earned in a single period to ensure that the programs are operated in the best long-term interests of our franchised and managed properties. Since these activities will be managed to break-even over time, quarterly or annual surpluses and deficits have been excluded from the measurements utilized to assess the company's operating performance. We consider adjusted net income and adjusted diluted EPS to be indicators of operating performance because excluding these items allows for period-over-period comparisons of our ongoing operations. Adjusted SG&A: Adjusted SG&A reflects SG&A excluding the impact of mark-to-market adjustments on non-qualified retirement plan investments, amortization of cloud computing arrangements and share based compensation expense. We use this measure, as do analysts, lenders, investors, and others, to evaluate companies because it excludes certain items that can vary widely across industries or among companies within the same industry. For example, share based compensation expense (benefit) is dependent on the design of compensation plans in place and the usage of them. Accordingly, the impact of share-based compensation expense (benefit) on earnings can vary significantly among companies. Mark-to-market adjustments on non-qualified retirement-plan investments recorded in SG&A expenses are also excluded as the company accounts for these investments in accordance with accounting for deferred-compensation arrangements when investments are held in a rabbi trust and invested. Changes in the fair value of the investments are recognized as both compensation expense in SG&A and other gains and losses. As a result, the changes in the fair value of the investments do not have a material impact on the company's net income. Occupancy: Occupancy represents the total number of room nights sold divided by the total number of room nights available at a hotel for a given period. Occupancy measures the utilization of the hotels' available capacity. Management uses occupancy to gauge demand at a specific hotel or group of hotels in a given period. The company calculates occupancy based on information as reported by its franchisees. To accurately reflect occupancy, the company may revise its prior years' operating statistics for the most current information provided. Average Daily Rate (ADR): ADR represents hotel room revenue divided by the total number of room nights sold for a given period. ADR measures the average room price attained by a hotel and ADR trends provide useful information concerning the pricing environment and the nature of the customer base of a hotel or group of hotels. ADR is a commonly used performance measure in the industry, and management uses ADR to assess pricing levels that the company is able to generate. The company calculates ADR based on information as reported by its franchisees. To accurately reflect ADR, the company may revise its prior years' operating statistics for the most current information provided. Revenue Per Available Room (RevPAR): RevPAR is calculated by dividing hotel room revenue by the total number of room nights available to guests for a given period. Management considers RevPAR to be a meaningful indicator of hotel performance and therefore company royalty and system revenues as it provides a metric correlated to the two key drivers of operations at a hotel: occupancy and ADR. The company calculates RevPAR based on information as reported by its franchisees. To accurately reflect RevPAR, the company may revise its prior years' operating statistics for the most current information provided. RevPAR is also a useful indicator in measuring performance over comparable periods. Pipeline: Pipeline is defined as hotels awaiting conversion, under construction or approved for development, and master development agreements committing owners to future franchise development. Contacts Allie Summers, Senior Director, Investor [email protected]© 2026 Choice Hotels International, Inc. All rights reserved. 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Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. Management is shifting focus toward 'closing the gap' between current performance and potential through a renewed emphasis on speed, discipline, and accountability. Performance attribution for the quarter was driven by a 27% increase in U.S. gross room openings and a 50% reduction in room exits, leading to global rooms growth of 2.6%. The company is leveraging its 'conversion-led development model' to differentiate itself, as conversions require lower owner investment and allow for faster royalty generation. Strategic positioning is moving back toward a pure-play asset-light franchising model, evidenced by an 80% year-over-year decline in capital outlays for hotel development. Technology and AI are being embedded as core operational drivers, with tools like the 'EasyBid' platform improving group RFP conversion by 360 basis points. RevPAR growth of 1.3% in the U.S. was supported by strengthening demand and major event-driven travel, including the FIFA World Cup. Management is focused on improving franchisee economics by reducing prototype costs by up to 25% and lowering procurement costs by an average of 20%. Full-year 2026 guidance was raised for adjusted EBITDA, U.S. RevPAR, and global net rooms growth based on encouraging preliminary third-quarter trends. Management expects U.S. net rooms growth to return to positive territory in 2026, supported by a projected 250 basis point improvement in the U.S. net exit rate. The company anticipates the first disposition of wholly-owned hotel assets to occur in the first half of 2027, subject to market conditions. Third-quarter U.S. RevPAR growth is expected to exceed second-quarter levels before moderating in the fourth quarter due to booking window visibility and calendar shifts. The guidance assumes a more cautious approach to the European market (EMEA) due to broader macroeconomic uncertainty in that region. The third-quarter year-over-year EBITDA comparison will be impacted by approximately $9.5 million of non-recurring liquidated damages from the prior year. Adjusted SG&A increased 7% in the quarter, partly due to the transition to direct franchising in Canada and higher accounts receivable reserves. Increased investment in franchisee-facing tools has led to a higher net reimbursable deficit, though these programs are intended to break even over time. The company maintains a net leverage ratio of 3.1x adjusted EBITDA, which is within its target range of 3x to 4x. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. Management explained that royalty rate increases are driven by a mix shift toward higher-revenue brands rather than raising rates on existing owners. The effective royalty rate grows as older contracts burn off and are replaced by current contractual 'rack rates' for new entrants. The 50% reduction in exits is attributed to improved franchisee engagement and investments in retention systems made in late 2025. Approximately 75% of conversion agreements signed year-to-date are expected to open within the same calendar year, providing high visibility for near-term growth. Choice Hotels has approximately $650 million on its balance sheet related to development programs, with $450 million tied to owned hotels. The company intends to exit ownership entirely to become 100% asset-light, focusing on maximizing value during sales while retaining long-term franchise agreements. Management clarified that while they paused their formal membership with AAHOA, they maintain a collaborative relationship on industry-wide issues. Internal sentiment is reported as strong, with the reduction in churn cited as evidence of increased franchisee trust and improved economics.

Choice Hotels (CHH) came out with quarterly earnings of $2.02 per share, beating the Zacks Consensus Estimate of $1.97 per share. This compares to earnings of $1.92 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of +2.54%. A quarter ago, it was expected that this hotel franchiser would post earnings of $1.35 per share when it actually produced earnings of $1.07, delivering a surprise of -20.74%. Over the last four quarters, the company has surpassed consensus EPS estimates two times. Choice Hotels, which belongs to the Zacks Hotels and Motels industry, posted revenues of $440.76 million for the quarter ended June 2026, surpassing the Zacks Consensus Estimate by 2.31%. This compares to year-ago revenues of $426.44 million. The company has topped consensus revenue estimates four times over the last four quarters. The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. Choice Hotels shares have added about 14% since the beginning of the year versus the S&P 500's gain of 13%. While Choice Hotels has outperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock? There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately. Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions. Ahead of this earnings release, the estimate revisions trend for Choice Hotels was mixed. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. It will be interesting to see how estimates for the coming quarters and the current fiscal year change in the days ahead. The current consensus EPS estimate is $2.40 on $455.57 million in revenues for the coming quarter and $7.14 on $1.63 billion in revenues for the current fiscal year. Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Hotels and Motels is currently in the bottom 13% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. One other stock from the same industry, H World Group (HTHT), is yet to report results for the quarter ended June 2026. This hotel operator is expected to post quarterly earnings of $0.74 per share in its upcoming report, which represents a year-over-year change of +25.4%. The consensus EPS estimate for the quarter has been revised 1.4% higher over the last 30 days to the current level. H World Group's revenues are expected to be $982.8 million, up 9.6% from the year-ago quarter. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Choice Hotels International, Inc. (CHH) : Free Stock Analysis Report H World Group Limited Sponsored ADR (HTHT) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research