Releasing its first-quarter 2025 results, Choice Hotels International acknowledged the volatile economy at the end of the first quarter by adjusting its outlook for the year ahead downward. Domestic growth in revenue per available room, which the company previously had projected to be between 1 and 2 percent, is now forecast to be between -1 percent to 1 percent. The company similarly lowered projections for net income from $288-$300 million to $275-$290 million for the year. Adjusted net income was lowered from $333-$345 million to $324-$339 million while adjusted earnings before interest, taxes, depreciation and amortization went from $625-$640 million to $615-$635 million.
“The high end of our range assumes our RevPAR performance for the remainder of the year is largely in line with the outlook we provided in February,” CFO Scott Oaksmith said during the company’s earnings call with investors. “The midpoint of this range assumes that the current trends we have seen from late March to April continue for the remainder of the year. And the low end implies that conditions soften modestly.”
The lowered guidance follows an overarching trend among the major public hotel companies. Hilton, Hyatt, Wyndham and Marriott have also adjusted their expectations for the year in the wake of economic uncertainty. Windsor, England-based IHG, however, maintained its guidance for the year, suggesting that the uncertainty could be localized or affected by reduced U.S. government spending.
Despite the economic headwinds facing the industry, President and CEO Patrick Pacious expressed confidence in Choice’s long-term outlook during the company’s earnings call with investors. “Employment remains high, gas prices are low and consumers appear to be saying they're going to drive as opposed to fly,” he said. “That generally does really well for our hotels.”
At last week’s convention with more than 5,000 attendees, Pacious continued, owners were expressing “optimism” on the trade show floor. “It was also very interesting to talk to our vendors,” he added. “Many of them have gotten ahead of the whole tariff impact by bringing inventory here sooner. And then secondly, many of them told us they have figured out ways not to pass that cost on to the owners.” Those who did expect to raise prices only expected to do so within the 10 percent range, he added— “which is very absorbable in the way our franchisees are thinking about development moving forward.”
Performance Growth
Despite the lowered guidance, the company reported some positive numbers for the quarter. Domestic RevPAR increased 2.3 percent year over year, with RevPAR for Choice’s extended-stay portfolio increasing 6.8 percent and the midscale and economy portfolios up 1.7 percent and 7.1 percent, respectively.
“These results reflect the improved mix of guests that we are now delivering today,” Pacious said during the call, noting that approximately 40 percent of the company’s guests are business travelers. This, he said, “is well balanced between business and leisure travel.” Choice’s business travel segment grew 10 percent year over year in the first quarter, he added, which was supported by the company’s expanding upscale and extended-stay portfolio of hotels.
“Despite a weaker-than-anticipated macroeconomic environment, we drove adjusted EBITDA to a first-quarter record of $129.6 million, representing a 4 percent year-over-year increase,” Oaksmith said.
Net income increased 44 percent to $44.5 million year over year, while total revenues for the quarter reached $333, $1 million more than in 2024.
Unit Growth
Choice increased its net global rooms system size 2.8 percent, including 3.9 percent growth for global upscale, extended-stay and midscale rooms portfolio year over year.
The company also increased the net rooms portfolio for its domestic extended-stay segment 10.8 percent, and the segment's pipeline reached more than 40,000 rooms as of March 31.
During the call, Pacious said Choice had opened more than 5,000 domestic extended-stay guestrooms during the first quarter. “For seven consecutive quarters, we have grown our domestic extended-stay room system size by double digits year over year, and we expect this higher-than-industry-average growth to continue,” he said. Industrywide, he added, nearly half of the economy and midscale extended-stay rooms currently under construction are Choice brands. The company has increased the size of its extended-stay portfolio 19 percent over the past five years to approximately 53,000 rooms. “The segment pipeline now [represents] half of the total domestic room pipeline,” Pacious said, and noted that he sees opportunity for the segment to grow internationally, particularly in Canada.
In total, Choice’s domestic room count grew 2.3 percent from 494,096 guestrooms to 505,601, and its domestic upscale, extended stay, and midscale portfolio increased 3.6 percent to 444,230 rooms.
As of the end of the quarter, Choice’s global pipeline had more than 95,000 rooms, of which nearly 79,000 were domestic, and the company maintained its guidance of 1 percent growth for global net system rooms growth.