Choice Hotels Q3 2026: Adjusted EPS Up 11%, RevPAR Outlook Raised

# Choice Hotels Q3 2026: Adjusted EPS Up 11%, RevPAR Outlook Raised

Choice Hotels International (NYSE: CHH) reported third-quarter 2026 results on Nov. 2, with net income of $58 million, or $1.28 per diluted share, adjusted EBITDA of $193 million, and adjusted diluted EPS of $2.33. The company said U.S. RevPAR rose 3.8% year over year and that it raised its full-year U.S. and global RevPAR outlooks. Net income fell 68% against a prior-year quarter that included a $100 million joint-venture acquisition gain.

Context — Why Choice Hotels' Q3 2026 Results Matter Now

The quarter's headline earnings decline traces almost entirely to an accounting comparison, not to operations. The company said the prior-year period included a $100 million gain from the acquisition of a joint venture, while the current quarter carried a $24 million charge tied to terminating an arrangement that involved an option to acquire a European hospitality business operating mainly under a lease-based model. A $6 million non-cash impairment on two owned hotels also weighed on reported net income.

The company framed the period as one of operational repair. U.S. net rooms growth improved for a third consecutive quarter, with the U.S. room count roughly flat versus Sept. 30, 2025, after third-quarter room exits fell 23% from the prior-year period. Global net rooms grew 1.7%, led by a 2.5% gain across the higher-revenue extended stay, midscale, and upscale brands.

The franchise model remains the core of the story. U.S. franchise agreements awarded rose 24% year over year, representing 6,900 new rooms for development, and the U.S. conversion pipeline reached 25,500 rooms, up 6% from June 30, 2026 and 29% from a year earlier. Conversion signings matter because they convert to royalty-paying rooms faster than new construction.

Choice operates an asset-light lodging franchisor model, meaning it collects fees from hotel owners rather than owning most of the real estate. That structure makes royalty rate and system size the two levers that drive revenue, and both moved in the company's favor this quarter. The U.S. average royalty rate expanded 8 basis points to 5.23%.

Macro conditions for travel demand were not described in detail by the company beyond its RevPAR commentary. The report attributes U.S. RevPAR strength to gains in both occupancy and rate, with the West South Central and Midwest regions leading.

Data — What Choice Hotels' Q3 2026 Numbers Show

Revenue excluding reimbursable costs from franchised and managed properties rose to $285 million from $278 million a year earlier, a 4.5% increase. Total revenues were $458 million versus $447 million. Franchise and management fees climbed 5% to $204 million, which the company attributed to higher U.S. royalties, royalty rate expansion, increased franchisee programs and services revenue, and higher international royalties.

Metric	Q3 2026	Q3 2025	Change
Net income	$58M	$180M	-68%
Diluted EPS	$1.28	$3.86	-67%
Adjusted diluted EPS	$2.33	$2.10	+11%
Adjusted EBITDA	$193M	$190M	+1%
U.S. RevPAR	+3.8%	—	—
Global RevPAR	+3.9%	—	—

Stripping out liquidated damages revenue changes the EBITDA picture. The company reported $3.3 million of liquidated damages in the third quarter of 2026 versus $9.5 million a year earlier. Excluding that line, adjusted EBITDA rose 5% year over year.

System size stood at 660,614 global rooms as of Sept. 30, 2026, up 1.7% from 649,677. U.S. rooms were 498,215 versus 498,307, essentially unchanged. International rooms grew 7.3% to 162,399. Global extended stay net rooms rose 10.7%, the 13th straight quarter of double-digit growth in that segment.

The global pipeline totaled 78,200 rooms, with 96% concentrated in extended stay, midscale, and upscale brands. That breaks into 71,700 U.S. rooms and 6,500 international rooms, plus 30,300 extended stay rooms, 28,100 conversion rooms, and 50,100 new-construction rooms.

Analysis — What It Means for Lodging Stocks and CHH

Second-order effects land on two fronts: the franchisee-facing cost base and the balance sheet. The company's net income guidance cut reflects higher expected marketing and reservation system reimbursable expenses, which it ties to increased investment in franchisee tools and guest delivery capabilities. Those are costs the company absorbs on behalf of a system it does not own, so they pressure reported earnings without changing the royalty economics.

use is the constraint to watch. Net debt-to-adjusted EBITDA was 3.2x for the trailing twelve months ended Sept. 30, 2026, inside the company's stated 3.0x to 4.0x target range. The quarter-end cash balance included borrowings made ahead of the Oct. 1, 2026 acquisition of Harvest Hosts. The company said net use stayed within target after that deal closed.

The counter-argument is that adjusted results flatter the quarter. Adjusted diluted EPS rose 11% while GAAP diluted EPS fell 67%, and the gap is bridged by items the company excludes, including the $24 million termination charge and the $6 million impairment. Investors who weight GAAP earnings will read the quarter differently from those tracking adjusted EBITDA.

Asset recycling is the other thread. Net capital outlays for hotel development and lending fell 56% to $36.3 million in the first nine months of 2026 from $82.0 million a year earlier. After quarter-end, the company sold two owned hotels for estimated net cash proceeds of roughly $34 million while keeping the franchise agreements, leaving 17 operating hotels owned and one under construction as of Nov. 2, 2026.

Positioning follows the guidance revision. The company raised its adjusted EBITDA midpoint while lowering net income guidance, a combination that signals confidence in fee-based cash flow and caution on reimbursable-cost drag.

Outlook — What to Watch for Choice Hotels

The company's revised full-year 2026 outlook now calls for global RevPAR growth of 1.5% to 2.5%, up from a prior range of 0% to 1%, and U.S. RevPAR growth of 1.5% to 2.5%, up from 0% to 1.25%. U.S. royalty rate growth is guided to roughly 9 basis points. Global net system rooms growth is expected at approximately 1.5%, unchanged from the prior outlook.

Adjusted EBITDA guidance was raised to $641 million to $651 million from $635 million to $650 million, while net income guidance was cut to $178 million to $185 million from $230 million to $241 million. Adjusted diluted EPS is now $6.92 to $7.07. Adjusted SG&A growth excluding Harvest Hosts is expected at approximately 9%, versus a prior mid-single-digit expectation.

Management said it expects U.S. net rooms growth to accelerate to approximately 1% by year-end. Net capital outlays for hotel development are expected to fall to approximately $20 million in 2026 from $103.4 million in 2025, assuming no further hotel sales. The effective tax rate is guided at 26%.

Frequently Asked Questions

Why did Choice Hotels' net income fall 68% in Q3 2026?

The decline is a comparison effect, not an operational collapse. The prior-year quarter included a $100 million gain from a joint-venture acquisition that did not repeat. The current quarter also carried a $24 million charge for terminating an arrangement involving an option to acquire a European hospitality business, plus a $6 million non-cash impairment on two owned hotels. Higher franchise and management fees partly offset those items.

What does the raised RevPAR outlook mean for Choice Hotels shareholders?

RevPAR is the revenue a hotel generates per available room, and royalty fees are calculated on it. Raising the full-year U.S. and global RevPAR outlook to 1.5% to 2.5% from 0% to 1% raises the base on which Choice collects its royalty rate, now 5.23% in the U.S. That is why the company also raised the midpoint of its adjusted EBITDA guidance range.