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Analogy 1: Yum! Brands for hotels

Analogy 2: The Marriott or Hilton of mid-range and economy hotels

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• Hotel Franchising: Providing licenses for hotel brands and operational support to independent hotel owners worldwide.
• Cloud-based Property Management Software: Developing and marketing software solutions for managing hotel operations to non-franchised hoteliers.

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• Hotel Franchisees: These are independent business owners, investment groups, or operators who contract with Choice Hotels International to license and operate hotels under one of Choice's numerous brand names (e.g., Comfort Inn, Quality, Cambria Hotels). These franchisees pay fees to Choice Hotels for the use of its brands, access to its global reservation system, marketing and advertising support, operational guidance, and other services. Given the nature of a franchise model, these customers are typically numerous independent entities, most of which are privately owned and operated businesses. Therefore, specific names and public symbols for major customer companies cannot be provided as there are no large, publicly traded companies that serve as primary franchisees for Choice Hotels.
• Non-Franchised Hoteliers: Choice Hotels also develops and markets cloud-based property management software to hoteliers who are not part of its franchise system. These customers are other hotel owners and operators who utilize Choice's software solutions for their property management needs. Similar to franchisees, these customers are typically independent hotels or smaller hotel groups, and not major publicly traded corporations.

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Patrick Pacious, President and Chief Executive Officer

Patrick Pacious joined Choice Hotels in 2005 and ascended to the role of President and Chief Executive Officer in 2017. Before his tenure as CEO, he served as the company's President and Chief Operating Officer. Mr. Pacious began his career as an officer in the U.S. Navy, specializing in surface warfare and strategic planning from 1987 to 1993. Following his military service, he worked in senior management consulting for firms such as Arthur Andersen Business Consulting LLP and BearingPoint Inc., where he advised various major hospitality companies, including Choice Hotels. Under his leadership, Choice Hotels significantly expanded its portfolio through strategic acquisitions, including Radisson Hotels Americas in 2022 and WoodSpring Suites in 2018, and launched the Everhome Suites brand in 2020. He also successfully navigated the company through the challenges of the COVID-19 pandemic, achieving industry-outperforming results. Mr. Pacious currently serves on the board of directors of Valvoline Inc.

Scott Oaksmith, Chief Financial Officer

Scott Oaksmith was promoted to Chief Financial Officer of Choice Hotels International in August 2023. A veteran of Choice Hotels for over 20 years, he joined the company in 2002. Throughout his career at Choice, he has held numerous financial leadership positions, including controller, senior vice president of finance, and chief accounting officer. In his current capacity, Mr. Oaksmith is responsible for leading the company's overall financial strategy and corporate growth initiatives. Prior to becoming CFO, he served as Senior Vice President and Deputy Chief Financial Officer.

Dominic Dragisich, Executive Vice President, Operations and Chief Global Brand Officer

Dominic Dragisich became the Executive Vice President, Operations and Chief Global Brand Officer for Choice Hotels International. He initially joined Choice Hotels in 2017 as the Chief Financial Officer. During his time as CFO, he played a crucial role in the 2022 acquisition of Radisson Hotels Americas. Before joining Choice, Mr. Dragisich served as Chief Financial Officer at XO Communications, a telecommunications services provider. In that role, he was responsible for financial operations, improved profitability, and was instrumental in the company's subsequent sale to Verizon Communications, Inc. His earlier career includes senior finance and operational positions at Marriott International, NII Holdings, and Deloitte Consulting.

Raul Ramirez, Chief Segment and International Operations Officer

Raul Ramirez serves as the Chief Segment and International Operations Officer for Choice Hotels International, a position he was promoted to in August 2023. He joined Choice Hotels in 2017. Previously, he held the role of Chief Strategy and International Operations Officer. Mr. Ramirez has been key in leading the successful integrations of the WoodSpring Suites and Radisson Hotels Americas brands following their acquisitions. Before joining Choice, he held various senior leadership roles in finance and operations at Verizon, XO Communications, and Nextel International.

David Pepper, Chief Development Officer

David Pepper has served as the Chief Development Officer of Choice Hotels International Inc. since November 2015. In this role, he is responsible for the growth of the company's franchised hotels.

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The key risks to Choice Hotels International (CHH) include a decline in domestic revenue per available room (RevPAR), intense competition within the hospitality industry, and challenges related to maintaining consistency across its franchised properties alongside slower unit growth.

1. Softening U.S. Travel Demand and Domestic RevPAR Decline: Choice Hotels International faces a significant risk from the softening of U.S. travel demand, which has led to a decline in domestic Revenue Per Available Room (RevPAR). This is highlighted as a "real headwind" and the "most immediate problem" for the company. For example, in the third quarter of 2025, U.S. RevPAR reportedly declined by 3.2% year-over-year. As a franchisor, a substantial portion of Choice Hotels' revenue is derived from royalty fees tied directly to its franchisees' gross room revenue, making it particularly vulnerable to fluctuations in this key performance indicator.
2. Intense Competition: The hospitality industry is highly competitive, with Choice Hotels International vying for market share against other large hotel chains such as Marriott International and Hilton Worldwide Holdings, as well as boutique hotels and alternative lodging options like vacation rentals. This competitive landscape, characterized by low switching costs for consumers and fierce price competition, poses a threat to CHH's growth and profitability. The scale of larger competitors often provides advantages in areas like loyalty programs and technology investments.
3. Challenges in Franchise Consistency and Slower Unit Growth: Given its extensive asset-light franchising model, Choice Hotels faces the challenge of maintaining consistent quality and service standards across its vast network of franchised properties. Inconsistencies can potentially impact customer loyalty and the overall strength of its brands. Furthermore, the company has experienced lower organic and total net unit growth compared to its sector, which is a significant concern that could hinder its ability to secure prime locations for new properties and maintain its long-term market share and competitive standing.

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The emergence of comprehensive, tech-driven platforms and networks that provide independent hotel owners with an alternative to traditional franchising, offering integrated solutions for distribution, marketing, technology, and flexible branding. These platforms, potentially developed by large online travel agencies or new hospitality technology companies, could offer greater flexibility, lower costs, or more tailored solutions compared to conventional franchise agreements, thereby attracting potential and existing franchisees away from companies like Choice Hotels.

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For Choice Hotels International (CHH), the addressable markets for its main products and services are substantial both globally and within the U.S.

Hotel Franchising

The global market for hotel franchises was valued at approximately USD 38.3 billion in 2024 and is projected to reach USD 54.8 billion by 2030, demonstrating a compound annual growth rate (CAGR) of 6.2% from 2024 to 2030. Other estimates place the global market at USD 37.02 billion in 2023, with a projection to reach USD 77.16 billion by 2033 at a CAGR of 7.62%. Similarly, another source indicates a market size of USD 39.4 billion in 2024, expected to grow to USD 73.39 billion by 2033 with a CAGR of 7.3%.

Regionally, North America is identified as the largest market for hotel franchises, with the U.S. market alone estimated at USD 10.4 billion in 2024. North America is also projected to lead the global hotel franchise market by 2033.

Cloud-Based Property Management Software

The global hotel property management system (PMS) market was estimated to be USD 3.6 billion in 2024 and is expected to grow to USD 8.5 billion by 2034, with a CAGR of 9.2% from 2025. Another assessment values the global hospitality property management software market at USD 5.78 billion in 2024, with a forecast to reach USD 9.99 billion by 2035 at a CAGR of 5.12%. The broader global hotel and hospitality management software market was valued at USD 6.8 billion in 2024 and is expected to reach USD 11.2 billion by 2030, growing at a CAGR of 8.6%. An estimate for the global hotel management software market size is USD 5.74 billion in 2026, projected to reach USD 10.37 billion by 2033.

In terms of regional market size, North America holds a significant share. The U.S. market for hotel property management systems accounted for over 70% of the North American market in 2024, generating USD 903.7 million. North America generally leads the hospitality PMS market, comprising over 35% to 40% of the global market share. The U.S. hospitality PMS market is mature, with over 70% of its more than 54,000 hotels and motels estimated to use a property management system.

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Choice Hotels International (CHH) is expected to drive future revenue growth over the next two to three years through several strategic initiatives and market trends:

1. International Expansion: Choice Hotels is significantly expanding its international footprint, which is a major driver of revenue growth. International adjusted EBITDA grew 35% year-over-year in Q3 2025, with management planning to double it by 2027. The company's international system size expanded 13% in 2025, reaching nearly 160,000 rooms outside the U.S., driven by an 82% increase in international hotel openings during the same period. This expansion includes a strategic shift to direct franchising in regions like Canada, following the acquisition of the remaining 50% stake in Choice Hotels Canada in Q3 2025, and entry into new markets such as Argentina and Poland, alongside substantial growth in France and Asia-Pacific.
2. Growth in Higher-Revenue Segments: The company is prioritizing growth in its upscale and extended-stay segments, which generate higher revenue. The extended-stay segment now constitutes over 40% of Choice Hotels' U.S. pipeline, and 2025 saw a record number of U.S. extended-stay hotel openings, increasing 8% year-over-year, particularly led by the Everhome Suites brand. The global system size for the upscale segment also expanded by 21%, with a growing domestic upscale pipeline indicating future openings.
3. Conversion-Led Hotel Openings and High-Quality Pipeline: Choice Hotels benefits from a strategy focused on conversion hotels, which open significantly faster than new construction (typically within three to six months, about 80% faster). These conversions are projected to account for approximately 80% of total U.S. openings in 2025. The company's global pipeline is characterized by high quality, with 97% to 98% of rooms in higher-revenue brands, which are anticipated to be approximately 1.7 times more accretive than the existing portfolio. Global franchise agreements awarded surged 22% in 2025, demonstrating strong developer interest.
4. Increased Royalty Rates and Diversified Partnership Revenue: Revenue growth is also expected from increasing average U.S. royalty rates and a strong performance in partnership services. The average U.S. royalty rate increased by 8 basis points for the full year 2025 and 10 basis points in Q4 2025, reflecting improved franchisee economics and the successful growth of higher-revenue brands. Furthermore, partnership services and fees grew 14% year-over-year in 2025, including a 16% increase in the fourth quarter, driven by co-brand fees and enhanced supplier and strategic partnership fees. These diversified revenue streams contribute to higher-margin growth.
5. Enhanced Loyalty Program and Targeted Business Travel Growth: The launch of the next evolution of the Choice Privileges loyalty platform and a forthcoming digital platform aimed at small and midsized businesses are designed to boost direct bookings and customer retention. Business travelers currently account for approximately 40% of stays. The company reported a 35% year-over-year increase in group revenue and an 18% rise in small and medium business revenue in Q3 2025, indicating successful efforts to capture higher-value business and group segments.

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Share Repurchases

• In 2025, Choice Hotels repurchased approximately $135.8 million in shares.
• The company repurchased about 1 million shares in 2025, representing more than 2% of its outstanding shares.
• As of December 31, 2025, approximately 2.8 million shares remained under the share repurchase authorization, equivalent to about 6% of shares outstanding.

Share Issuance

• Choice Hotels' shares outstanding declined by 3.12% in 2025, 5.17% in 2024, and 8.02% in 2023, reflecting a trend of share repurchases rather than issuances.

Outbound Investments

• Choice Hotels acquired the remaining 50% stake in Choice Hotels Canada in 2025, which included a $100 million gain from the fair value remeasurement of the previously held equity investment.
• The company continued to selectively deploy capital to scale its Cambria Hotels and Everhome Suites brands in 2025.
• Choice Hotels acquired the Radisson brand in August 2022, adding approximately 70,000 rooms to its portfolio.

Capital Expenditures

• Capital expenditures were $116.3 million in 2023, $89.95 million in 2022, and $74.29 million in 2021.
• Forecasted capital expenditures are $145.9 million for 2024 and $145.8 million for 2025.
• Net capital outlays for hotel development-related activities are projected to decrease from $103.4 million in 2025 to a range of $20 million to $45 million in 2026, primarily focused on expanding the franchise system and improving hotel performance, including new construction brands like Cambria Hotels and Everhome Suites.