Choice Hotels International earns most of its money by charging hotel owners to use its brands, reservation systems, and related services. Its U.S. hotels generated more room revenue in the third quarter of 2026, while the company reduced spending on hotel development and lending. Yet those net outlays plus payments to attract and retain franchisees still consumed $140.3 million in the first nine months, compared with $144.4 million a year earlier. The shift toward owning fewer buildings is progressing, but freeing cash also depends on the cost of winning hotel owners and collecting their fees.
Analysis period: quarter and nine months ended September 30, 2026. Research cutoff: November 3, 2026, New York date; the latest company disclosures verified for this analysis are dated November 2.
Sources: Choice Hotels third-quarter 2026 Form 10-Q, pp. 6 and 31–32; November 2, 2026 earnings release, “Asset Recycling.” The combined spending measure is calculated below.
1. Better occupancy is lifting fees, while the U.S. hotel network is barely growing
Choice’s U.S. recovery is coming mainly from better hotel performance and higher royalty rates. The number of rooms in its U.S. franchise network was essentially unchanged from September 2025. Existing hotels therefore mattered more than network expansion to the quarter’s domestic royalty growth.
Hotel owners generally pay Choice a percentage of room revenue. More occupied rooms and higher nightly prices increase the money on which that fee is calculated. In the third quarter, occupancy improved much more than room prices, indicating that fuller hotels supplied an important part of the recovery.
| U.S. franchised-hotel measure | Third quarter 2025 | Third quarter 2026 |
|---|---|---|
| Average nightly room price, USD | $99.99 | $100.99 |
| Occupied share of available rooms | 60.3% | 61.9% |
| Revenue per available room, USD | $60.28 | $62.56 |
| Average royalty rate charged by Choice | 5.15% | 5.23% |
Revenue per available room, or RevPAR, spreads room sales across all available rooms, including empty ones. It rose 3.8%; occupancy increased 1.6 percentage points. Choice attributed 0.4 percentage point of the RevPAR increase to the FIFA World Cup. U.S. royalties rose from $126.7 million to $132.1 million, reflecting both hotel performance and the higher royalty rate.
Source: Third-quarter 2026 Form 10-Q, pp. 26–27, U.S. royalties and operating statistics. Rates and occupancy are rounded separately, so multiplying the displayed figures does not reproduce RevPAR exactly.
The improvement follows a weak comparison period. Choice reported a 3.2% decline in U.S. RevPAR in the third quarter of 2025, citing softer government and international inbound demand. The 2026 recovery was also broader than Choice alone: rival Wyndham reported 6% U.S. RevPAR growth for the same quarter, with both occupancy and prices improving. The companies have different hotel portfolios, so this comparison supports a wider demand recovery rather than proving a change in Choice’s market share.
Sources: Choice’s November 5, 2025 earnings release, “Financial Performance”; Wyndham’s October 21, 2026 earnings release, “RevPAR.”
Within Choice, extended-stay hotels performed particularly well. These properties serve guests staying for longer periods. Their U.S. RevPAR increased 6.2%, compared with 3.6% for midscale and upper-midscale hotels and 1.1% for upscale and higher-priced hotels.
Expansion was uneven across brands. WoodSpring Suites and Everhome Suites added a combined 4,138 U.S. rooms over the year. Comfort and Quality Inn together lost 4,788, and the economy brands also contracted. Growth in the newer brands therefore had to replace losses elsewhere before increasing the total network. U.S. rooms ended September at 498,215, down just 92 from a year earlier.
International expansion supplied the net increase in Choice’s global network. International rooms grew 7.3% to 162,399, while international royalties increased from $14.6 million to $17.3 million in the quarter. Across the first nine months, international royalties also benefited from consolidating Choice Hotels Canada after the July 2025 acquisition of the remaining half of that business. Canada’s rooms were already included in network statistics before the acquisition; buying the business did not itself add those rooms to the system.
Source: Third-quarter 2026 Form 10-Q, Note 12, pp. 20–22; U.S. brand table and international royalties, pp. 27 and 30.
There are encouraging signs for future U.S. expansion. Rooms leaving the system during the quarter fell 23%, and the pipeline of existing U.S. hotels expected to convert to Choice brands reached 25,500 rooms, up 29% from a year earlier. Converting an existing hotel avoids the need to construct a new building. Even so, actual U.S. openings fell to 4,400 rooms from 4,800 in the quarter, despite increasing 17% over the first nine months. Signed agreements become economically useful when hotels open, stay in the system, and pay their fees; the quarter’s flat room count shows that this process is still catching up.
Source: November 2, 2026 earnings release, “Highlights” and “System Size and Development.”
2. The profit decline exaggerates the operating setback, but the cost pressure is real
Last year’s acquisition gain and this year’s exit costs dominate the reported profit decline. Last year included a large accounting gain from acquiring full ownership of Choice Hotels Canada. This year included the cost of abandoning a European transaction and writing down two hotels. Those differences explain much of the headline decline, but higher shared-service costs also reduced earnings.
| Consolidated results, USD millions except EPS and margins | Third quarter 2025 | Third quarter 2026 | First nine months 2025 | First nine months 2026 |
|---|---|---|---|---|
| Revenue | 447.340 | 458.328 | 1,206.643 | 1,239.665 |
| Franchise and management fees | 193.777 | 203.667 | 515.931 | 540.834 |
| Operating profit | 142.416 | 106.479 | 346.945 | 270.651 |
| Operating margin, calculated | 31.8% | 23.2% | 28.8% | 21.8% |
| Net income | 179.996 | 57.912 | 306.264 | 142.554 |
| Net margin, calculated | 40.2% | 12.6% | 25.4% | 11.5% |
| Diluted earnings per share, USD | $3.86 | $1.28 | $6.52 | $3.12 |
Source: Third-quarter 2026 Form 10-Q, consolidated income statements, p. 3. Margins divide reported profit by total reported revenue, including reimbursable revenue.
Third-quarter revenue increased 2.5%, while franchise and management fees grew 5.1%. Higher U.S. and international royalties and fees for franchise programs and services supported that growth. Initial franchise fees fell. Partnership revenue slipped slightly to $28.3 million, while revenue from company-owned hotels increased to $38.1 million. Fees collected when hotels terminate their agreements early also declined: this liquidated-damages revenue fell to $3.3 million from $9.5 million, reducing the contribution from a source that depends on contract exits.
Sources: Third-quarter 2026 Form 10-Q, pp. 3 and 26–28; November 2 earnings release, “Financial Performance.”
The largest unusual comparison was the $100.025 million gain recorded in 2025 when Choice revalued its previously owned half of Choice Hotels Canada. That gain produced no operating cash and was not taxable. Its absence helps explain both the lower 2026 profit and the increase in the quarterly effective tax rate from 14.7% to 22.8%; the higher rate does not mean tax expense itself increased.
In September 2026, Choice incurred $24.268 million to terminate an arrangement that included an option to buy a European hospitality business operating mainly through leased hotels. Management said the withdrawal redirected capital toward franchising, where owners carry more of the property investment. Choice also recorded a $6.035 million noncash impairment on a Cambria hotel and a Radisson RED hotel. The withdrawal was a real cost of changing direction, and the impairment recognized that the hotels were worth less than their recorded amounts.
Source: Third-quarter 2026 Form 10-Q, Notes 7 and 11–13, pp. 15 and 19–22; MD&A, p. 28.
Choice’s adjusted net income removes these items, the profit or loss from shared services funded by hotel owners, and several other identified costs and gains. On that basis, quarterly profit rose 7.2% to $105.308 million. The longer comparison is weaker: adjusted net income for the first nine months declined 1.9% to $246.960 million. The full reported-to-adjusted reconciliation appears in the calculation notes. Adjusted profit still includes interest and ordinary depreciation and amortization; it does not measure the cash available to spend.
Repurchases also helped per-share results. The quarterly diluted share count fell from 46.461 million to 45.076 million. Consequently, adjusted EPS rose 11.0%, faster than adjusted net income. Over nine months, adjusted EPS increased from $5.36 to $5.41 even as adjusted net income fell. This is the effect of dividing profit among fewer shares, rather than evidence that total profit grew.
Sources: November 2 earnings release, Exhibit 6; third-quarter 2026 Form 10-Q, Note 9, p. 16. EPS also accounts for earnings allocated to participating restricted shares.
3. Lower building outlays have been largely replaced by payments to franchisees
Choice has reduced one form of growth spending while increasing another. It historically helped establish Cambria and Everhome Suites by developing hotels, investing alongside developers, and lending to franchisees. Management intends to sell owned hotels while retaining long-term franchise agreements. That releases property capital while preserving a future stream of fees.
The reduction in development and lending outlays is substantial. However, Choice also pays owners to sign franchise agreements or make specified improvements to existing hotels. These incentives use cash now and are generally recognized as reductions in revenue over later years. They therefore matter even though they do not appear in the usual property-investment line.
| Network-support cash spending, USD millions | First nine months 2025 | First nine months 2026 |
|---|---|---|
| Owned-hotel investment, affiliate contributions, and new loans | 181.663 | 60.909 |
| Less loan collections, asset-sale proceeds, and distributions from affiliate sales | 99.653 | 24.610 |
| Net hotel-development and lending outlays | 82.010 | 36.299 |
| Franchise agreement incentive payments, net of reimbursements | 62.359 | 103.993 |
| Combined net cash outlays, calculated | 144.369 | 140.292 |
Calculation notes: The first row combines the three specified investing cash-flow lines. The second combines collections of loans, proceeds from asset sales, and distributions from sales of affiliates. Subtracting the second row from the first gives management’s development-and-lending measure. Adding franchise incentive payments creates this article’s broader measure of network-support outlays. It excludes business acquisitions and other property and equipment spending, and is not a company-reported non-GAAP measure.
Source: Third-quarter 2026 Form 10-Q, cash-flow statement, p. 6; MD&A, pp. 31–32. See also the definition of net capital outlays in footnote 2 of the November 2 earnings release.
Development and lending outlays fell by $45.711 million. The $41.634 million increase in franchise incentive payments offset most of that reduction. The broader total declined only 2.8%. Management linked the higher incentive payments to the increase in U.S. openings over nine months, but the disclosures do not provide a cost for each hotel opened. The benefit of the higher payments will emerge as the resulting hotels generate fees over time.
Choice can demand repayment of the incentive amount that has not yet been forgiven, plus interest, if an owner exits or is terminated under specified conditions. If the owner remains in good standing, the incentive is forgiven over the agreed period. The business benefit therefore depends on retaining hotels long enough to collect fees that compensate for the initial payment.
Sources: Third-quarter 2026 Form 10-Q, pp. 19 and 32; 2025 Form 10-K, Note 6, “Intangible Assets,” franchise agreement acquisition costs; November 2 earnings release, “Balance Sheet and Liquidity.”
Franchise payments also change the kind of assets Choice holds. The company records incentives as assets and gradually reduces their value as it recognizes the cost over the agreement’s life. Its intangible assets—including franchise rights, brands, and these incentives—rose from $1,082.5 million to $1,119.1 million between December and September, after amortization and other movements.
Buildings and equipment still tie up substantial capital. Their recorded value edged down from $649.3 million to $645.1 million despite further investment, reflecting depreciation and other changes, including the hotel impairment. Goodwill, the value attributed to acquisitions beyond their identifiable net assets, was another $302.7 million. The new impairment concerned hotel assets; the goodwill reconciliation instead includes currency translation.
Choice’s capital commitment remains meaningful: it reported approximately $652 million invested in Cambria and Everhome development activities and generally targets recycling these investments within five years. That is a management objective, and depends on the hotel lending and property-sale markets. Unlike a manufacturer, Choice has no material inventory line. Its financial exposure instead lies mainly in property, contract rights, incentives, loans, and hotel ventures.
Source: Third-quarter 2026 Form 10-Q, balance sheet, p. 5; Notes 12–13, p. 22; liquidity discussion, p. 31.
4. Shared-service spending and unpaid fees are delaying the cash benefit
Stronger hotel revenue has not yet translated into stronger operating cash flow. Operating cash generated in the first nine months fell 34.0% to $121.914 million. Higher franchise incentive payments, the European contract termination payment, and the larger deficit on reimbursable services were the main disclosed pressures.
Choice collects money from franchisees for marketing, reservations, and other shared services. It must use those fees for the system and has contractual rights to recover deficits from owners. Spending and collections can occur in different periods. In the first nine months of 2026, reimbursable expenses exceeded related revenue by $92.100 million, compared with $44.230 million a year earlier.
Management expects these programs to break even over time. Nevertheless, Choice must finance the gap while it exists. The deficit is an accounting measure containing noncash items as well as cash costs, so it is not a dollar-for-dollar measure of cash advanced. Excluding it from adjusted earnings does not eliminate the funding need or guarantee a particular collection date.
Sources: Third-quarter 2026 Form 10-Q, pp. 6, 19, 25 and 32; November 2 earnings release, “Non-GAAP Financial Measurements.”
Amounts owed by customers also deserve attention. Net accounts receivable, mainly fees owed by hotel owners after deducting expected losses, increased from $207.5 million to $286.0 million between December and September. These are different seasonal dates, so the balance change alone cannot establish that customers are taking longer to pay.
The company’s estimates of unpaid bills provide more direct evidence of collection pressure. Choice added $46.4 million to expected credit losses during the first nine months and wrote off $14.9 million of bills, net of recoveries. The allowance—the amount deducted from unpaid bills to reflect expected losses—rose from $51.2 million to $82.6 million.
Of the new credit-loss charges, $26.0 million affected general administrative expenses and $20.4 million affected reimbursable expenses. The administrative-expense portion increased $13.6 million versus the same nine-month period of 2025, according to management. Higher fees are therefore being accompanied by a greater expected loss on unpaid bills.
Source: Third-quarter 2026 Form 10-Q, Note 3, pp. 11–12, and MD&A, p. 30. The provision and write-off disclosures are rounded; their reconciliation is explained in the calculation notes.
Management has historically used repurchases and dividends to distribute cash from a franchising business that required limited reinvestment. In the first nine months of 2026, however, cash left after buying property and equipment was smaller than the amount paid to shareholders:
| Cash allocation, USD millions | First nine months 2025 | First nine months 2026 |
|---|---|---|
| Operating cash flow | 184.757 | 121.914 |
| Cash spending on owned hotels and other property/equipment | 112.234 | 63.145 |
| Cash remaining after that spending, calculated | 72.523 | 58.769 |
| Cash paid for treasury shares | 112.958 | 166.178 |
| Cash dividends paid | 40.194 | 39.325 |
| Share purchases and dividends above the cash remaining, calculated | 80.629 | 146.734 |
Calculation notes: The remainder is a simple free-cash-flow measure: operating cash flow minus cash investment in owned hotels and other property and equipment. It already includes franchise incentive payments because those are operating cash outflows. It excludes affiliate investments, loans, acquisitions, and sale proceeds. Capital spending is shown as a positive use of cash.
Source: Third-quarter 2026 Form 10-Q, cash-flow statement, p. 6. These are paid cash amounts, rather than dividends declared or the earnings release’s broader repurchase measure. Management’s capital-allocation rationale appears on pp. 24 and 31 of the same filing.
Choice’s profit-to-cash reconciliation also removes the prior-year Canada gain and adds back depreciation, amortization, and other noncash costs. Cash income-tax payments, net of refunds and transferable tax credits, fell from $76.0 million to $31.4 million, providing relief. Despite that relief and less adverse working-capital timing in aggregate, operating cash declined. The company therefore relied on financing while continuing investment, repurchases, and dividends; the decline was not simply the disappearance of last year’s noncash acquisition gain.
Source: Third-quarter 2026 Form 10-Q, p. 6 and liquidity discussion, p. 32. The full profit-to-cash calculation follows the conclusion.
5. Borrowing provides room to act, with a large refinancing concentration in 2029
Choice has substantial available credit, but part of September’s cash was already intended for an acquisition. Cash increased from $45.0 million at December 2025 to $170.6 million in September. Over the same period, the recorded value of debt increased from $1.91 billion to $2.18 billion. The earnings release says the cash balance included borrowing ahead of the October 1 Harvest Hosts purchase.
In August, Choice obtained a $500 million term loan. Management said it reduced the borrowing spread on the debt being refinanced by 0.15 percentage point and restored capacity under the revolving credit line. During the first nine months, proceeds from the new borrowing were $499.5 million, while net repayments on revolving facilities were $228.725 million. Borrowing therefore supported both liquidity and cash uses beyond internally generated funds.
Sources: Third-quarter 2026 Form 10-Q, pp. 5–6 and Note 5; November 2 earnings release, “Balance Sheet and Liquidity.”
| Financing obligation at September 30, 2026 | Principal, USD millions | Scheduled maturity | Interest terms |
|---|---|---|---|
| Revolving credit borrowing | approximately 242.1 | June 2029 | Variable; 5.01% effective rate at quarter-end |
| New term loan | 500.0 | August 2029 | Variable; SOFR plus 1.25 percentage points under the SOFR option |
| 2019 senior notes | 400.0 | December 2029 | 3.70% annual coupon |
| 2020 senior notes | 450.0 | January 2031 | 3.70% annual coupon |
| 2024 senior notes | 600.0 | August 2034 | 5.85% annual coupon |
The table uses principal, not debt after unamortized discounts and issuance costs. It excludes $1.85 million of economic-development loans with conditional repayment requirements. SOFR is a short-term market interest-rate benchmark. The term loan’s effective rate was 4.95% at September 30.
Source: Third-quarter 2026 Form 10-Q, Note 5, pp. 13–14; debt discussion, pp. 33–35; market-risk disclosure, p. 37.
Approximately $1.14 billion of principal falls due in 2029 if the existing facilities are not extended or refinanced. The term loan is payable in full at maturity; its optional one-year extension requires lender consent. Revolver extensions also require consent. Thus, the new borrowing improves current access to funds while keeping a sizeable refinancing task in the same year.
The three fixed-rate note issues require $66.55 million of annual coupon interest at their stated rates. Variable-rate borrowings add to that cost. Interest expense rose from $67.468 million to $73.796 million over the first nine months, primarily because of increased borrowing. Choice estimated that a 10% relative change in its quarter-end variable interest rate—roughly half a percentage point—would change annual interest expense by $3.7 million. That sensitivity is not a forecast.
Source: Third-quarter 2026 Form 10-Q, pp. 31 and 33–37. Coupon costs are calculated from principal and stated coupon rates; they exclude floating-rate interest, facility fees, and debt-cost amortization.
Available liquidity was $927.5 million at quarter-end, combining cash and unused revolving borrowing capacity. Choice reported compliance with its credit agreements. Its leverage test, which compares borrowing with earnings under the loan contract’s rules, stood at 3.26 times, below the standard 4.5-times ceiling. Certain acquisitions can temporarily raise that ceiling to 5.5 times under specified conditions. This borrowing capacity gives Choice time to collect fees and sell properties, although using it adds interest costs.
Shareholders’ equity—the recorded assets left after subtracting liabilities—fell from $181.2 million to $131.8 million. Choice earned a profit, but buying back shares and declaring dividends more than offset the increase that profit would otherwise have produced. Purchased shares were held by the company as treasury stock, and employee awards returned some to circulation. The reconciliation below separates these transactions from business earnings and checks that assets equal liabilities plus equity.
Source: Third-quarter 2026 Form 10-Q, pp. 5, 8, 31 and 33; November 2 earnings release, “Balance Sheet and Liquidity.”
6. October’s transactions advance the strategy, while developer exposure remains
Choice is exchanging some property ownership for fee and subscription businesses. On October 2 and October 22, it sold a Cambria hotel and a Radisson RED hotel for gross prices of $27.7 million and $8.0 million. Management estimated combined net cash proceeds of approximately $34 million and retained franchise agreements on both properties. These transactions can release capital while preserving fees. They occurred after September 30 and are absent from the nine-month investing cash flows.
On October 1, Choice also bought Harvest Hosts for approximately $130 million, subject to customary adjustments. The business charges recreational-vehicle travelers for access to a network of overnight host locations. Management sees an opportunity to introduce Choice’s travelers to that service without buying hotels. Harvest Hosts is intended to remain a standalone business. Its subscription model adds another revenue source, but the purchase consumes substantially more cash than the two hotel sales release. Initial acquisition accounting was incomplete at the filing date.
Sources: Third-quarter 2026 Form 10-Q, Note 14, pp. 22–23; November 2 earnings release, “Asset Recycling” and “Acquisition”; September 30 acquisition announcement.
Existing development support still exposes Choice to owners’ financial health. Net loans to franchisees declined from $107.2 million to $84.6 million, helped by repayments. However, approximately 51.9% of loans before deducting expected losses were more than 90 days overdue. Choice had also stopped recording interest income on $42.9 million of loans.
The property behind those loans matters. For three loans whose repayment depends on collateral, management judged the underlying assets sufficient to secure substantially all of the recorded loan value. That judgment uses estimated property values and cash flows. Slower hotel sales or weaker property performance could therefore affect how much Choice recovers.
The expected-loss allowance on these loans rose slightly, to $8.7 million, despite the smaller loan portfolio. Separately, Choice’s investments in hotel ventures increased from $135.0 million to $139.7 million. Choice recorded $14.3 million as its share of losses from affiliates over nine months, including a $3.8 million loss on selling its interest in one hotel venture. Equity investments and loans therefore remain sources of business risk even as direct construction spending declines.
Source: Third-quarter 2026 Form 10-Q, Notes 3–4, pp. 11–13, and consolidated income statement, p. 3. Affiliate results are Choice’s recorded share, not the sum of the ventures’ full profits or losses.
Choice has also promised to cover some obligations of hotel ventures if specified conditions are met. These limited guarantees could require principal payments of up to $40.8 million, plus certain unpaid expenses and interest, beyond debt recorded on Choice’s balance sheet. Management considered payment under those guarantees remote. A separate guarantee of specified payments to an owner of managed hotels had maximum unrecorded exposure of $18.2 million. Neither figure should be treated as an expected loss, but both can create cash demands if the relevant conditions are met.
The company also had approximately $179 million of conditional commitments through 2036 to purchase transferable solar-production tax credits. Management expects to use the credits when purchased to offset federal tax payments. These purchases therefore relate to how Choice settles taxes, rather than being equivalent to additional hotel construction spending. The benefit depends on contractual conditions and continued eligibility under federal tax law.
Source: Third-quarter 2026 Form 10-Q, Note 11, pp. 18–19. The same note reports ordinary-course litigation; management and counsel did not expect a material adverse outcome and supplied no quantified reasonably possible loss range.
Choice also rents offices, equipment, and land. Its September balance sheet showed $102.3 million of lease obligations due beyond the next year. The latest detailed payment schedule, dated December 31, 2025, listed $13.1 million due during 2026 and $365.5 million over all remaining years. Much of that long-term total reflects a land lease with more than 86 years remaining.
Accounting assigns a smaller present value to payments far in the future. That reduced the December schedule’s recorded obligation to $116.3 million, including the current portion. The large undiscounted total is therefore spread over decades. The older schedule explains the commitment’s shape but does not establish the updated September payment total.
Sources: Third-quarter 2026 Form 10-Q, p. 5; 2025 Form 10-K, Note 14, “Leases,” pp. 87–88.
7. The outlook combines better hotel demand with continued spending pressure
Management expects stronger room revenue while shared-service spending continues to exceed related fees.
Management says increased service spending supports tools for hotel owners and systems intended to attract more guests. Those improvements are meant to strengthen the franchise network, with the spending arriving before the hoped-for benefit.
Management raised its forecast for full-year U.S. RevPAR growth to 1.5%–2.5%, from 0%–1.25%, and expects roughly 1% U.S. net room growth by year-end. Yet it cut the forecast for reported net income to $178 million–$185 million from $230 million–$241 million. It attributed the reduction primarily to higher marketing and reservation expenses, with the European termination charge, hotel impairment, weaker affiliate earnings, and higher interest also contributing. Demand improvement and spending pressure are therefore both present in the updated outlook.
The revised forecast assumes $135 million of reimbursable expenses above related revenue for the full year. That compares with the $92.1 million deficit already recorded through September. Management’s forecast thus does not assume that the shared-service gap closes in the fourth quarter. At the same time, it expects net development-related outlays of approximately $20 million for the full year, down from $103.4 million in 2025, assuming no additional hotel sales. That measure excludes franchise incentive payments and the Harvest Hosts acquisition.
Source: November 2 earnings release, CEO statement, “Outlook,” footnote 2, and Exhibit 7. These are management forecasts, including Harvest Hosts from October 1 and the two hotel dispositions.
8. Choice’s recovery needs to reach the cash account
The hotel business is improving, while a broad reduction in cash needs remains unfinished. Fuller U.S. hotels, higher royalty rates, fewer room exits, and international expansion support future fees. The October property sales demonstrate that Choice can release property capital while retaining franchise relationships.
The decisive next step is to retain and open hotels without allowing incentive spending and unpaid fees to absorb most of the additional royalties. Successful collections and further property recycling would turn the present demand recovery into greater financial flexibility. If hotel owners continue to need more cash support, stronger room revenue alone will leave Choice dependent on borrowing and choices among acquisitions, investment, and shareholder distributions.
Reporting basis and calculation notes
Reporting basis: This analysis uses the unaudited consolidated U.S. GAAP statements of Choice Hotels International, Inc. and subsidiaries, CIK 0001046311, Form 10-Q for September 30, 2026, accession 0001046311-26-000033, filed November 2, 2026. Quarterly comparisons cover July–September; cumulative comparisons cover January–September. Balance-sheet comparisons are September 30, 2026 versus December 31, 2025. Dollars are U.S. dollars. The financial comparisons use consolidated figures from this filing. SEC structured financial data were checked for matching reporting dates, units, and filing accession.
The November 2 release is Exhibit 99.1 to accession 0001046311-26-000030. It supplies management forecasts, operating statistics, and adjusted reconciliations. October transactions are subsequent events, not September results. The latest verified company disclosure is dated November 2, one day before the research cutoff.
Sources: SEC company submission record; SEC company financial facts; selected 10-Q; earnings release.
Calculation notes: Adjusted profit. The table adds management’s specified adjustments to reported net income. Expense and gain adjustments are pretax; the final tax row supplies management’s aggregate tax effect. No separate after-tax value is assumed for the termination or impairment. The Canada remeasurement gain was nontaxable. A positive adjustment raises adjusted profit; a negative adjustment lowers it.
| Reconciliation, USD millions | Third quarter 2025 | Third quarter 2026 | First nine months 2025 | First nine months 2026 |
|---|---|---|---|---|
| Reported net income | 179.996 | 57.912 | 306.264 | 142.554 |
| Remove Canada remeasurement gain | -100.025 | 0.000 | -100.025 | 0.000 |
| Remove gain on asset sale | -0.713 | 0.000 | -0.713 | 0.000 |
| Add hotel impairment | 0.000 | 6.035 | 0.000 | 6.035 |
| Add reimbursable expenses less related revenue | 14.834 | 19.876 | 44.230 | 92.100 |
| Add business-combination, diligence and transition costs | 1.494 | 3.214 | 1.940 | 3.986 |
| Add restructuring and executive severance | 0.497 | 5.047 | 4.799 | 7.585 |
| Add enterprise-system implementation costs | 1.587 | 0.086 | 3.653 | 0.445 |
| Add loss on sale of an affiliate | 0.000 | 3.805 | 0.000 | 3.805 |
| Add joint-venture formation costs | 6.498 | 0.000 | 6.498 | 0.000 |
| Add European contract termination cost | 0.000 | 24.268 | 0.000 | 24.268 |
| Tax effect of adjustments | -5.924 | -14.935 | -14.977 | -33.818 |
| Adjusted net income | 98.244 | 105.308 | 251.669 | 246.960 |
The reimbursement adjustment nets expenses against related revenue: $192.812 million − $172.936 million for third-quarter 2026, versus $184.268 million − $169.434 million a year earlier; $552.264 million − $460.164 million for nine-month 2026, versus $504.437 million − $460.207 million. These adjustments improve comparability but include cash expenditures and do not establish that the resulting profit will recur.
Source: November 2 earnings release, Exhibit 6; 10-Q, Note 7 for tax treatment.
Calculation notes: Profit to operating cash. Depreciation and amortization spread earlier spending over time, so they reduce profit without requiring the same cash payment again in the current period. The cash-flow statement adds them back and then deducts current franchise incentive payments and changes in operating balances.
| Consolidated profit-to-cash reconciliation, USD millions | First nine months 2025 | First nine months 2026 |
|---|---|---|
| Net income | 306.264 | 142.554 |
| Remove noncash Canada acquisition gain | -100.025 | 0.000 |
| Add depreciation and amortization across all three disclosed cash-flow lines | 82.247 | 97.694 |
| Other disclosed profit-to-cash adjustments, net | 19.306 | 33.824 |
| Franchise incentive payments, net | -62.359 | -103.993 |
| Changes in working capital and other items | -60.676 | -48.165 |
| Operating cash flow | 184.757 | 121.914 |
For 2026, the amortization/depreciation total is $50.567 million of ordinary expense + $17.076 million in reimbursable expenses + $30.051 million of franchise incentive amortization. The 2025 inputs are $42.932 million + $14.295 million + $25.020 million. Other adjustments comprise impairment, asset-sale gains, noncash compensation and other charges, noncash interest/investment items, deferred taxes, and affiliate losses less distributions, using the signed amounts in the cash-flow statement. They total $33.824 million in 2026 and $19.306 million in 2025. Cash-tax savings are not added again to this reconciliation.
Opening cash of $44.997 million + operating inflow of $121.914 million − investing outflow of $63.143 million + financing inflow of $67.248 million − currency effects of $0.422 million = closing cash of $170.594 million. The statement reconciles cash and cash equivalents and does not present a separate restricted-cash component. Investing uses include property and equipment, affiliate contributions, and lending, net of collections and other items. Financing includes borrowing, repayments, issuance costs, treasury-share purchases, dividends, and option-exercise proceeds.
Source: Third-quarter 2026 Form 10-Q, consolidated cash-flow statement, p. 6.
Calculation notes: Receivables and equity. Loans more than 90 days overdue totaled $48.433 million out of $93.331 million before deducting expected losses: $48.433 million ÷ $93.331 million × 100 = 51.9%.
Gross fee receivables equal net receivables plus the credit-loss allowance: $285.966 million + $82.649 million = $368.615 million at September 2026; $207.491 million + $51.189 million = $258.680 million at December 2025. The fee allowance increased $31.460 million. The rounded disclosures of $46.4 million in provisions less $14.9 million in net write-offs imply a $31.5 million increase. Their $0.040 million difference from the exact balance movement is within the precision of those disclosures; no separate economic adjustment is inferred. The loan allowance reconciles exactly: $8.481 million opening balance + $0.256 million provision = $8.737 million closing balance.
| Equity movement during the first nine months of 2026, USD millions | Change |
|---|---|
| Opening shareholders’ equity | 181.229 |
| Net income added to retained earnings | +142.554 |
| Dividends declared deducted from retained earnings | -38.916 |
| Share-based payment activity added to paid-in capital | +2.553 |
| Treasury shares released through share-based payment activity | +14.427 |
| Treasury purchases recorded in equity | -166.325 |
| Foreign-currency comprehensive loss | -3.764 |
| Closing shareholders’ equity | 131.758 |
Retained earnings reconcile as $2,318.031 million + $142.554 million − $38.916 million = $2,421.669 million. Paid-in capital rose to $406.480 million. Treasury stock at cost became more negative, from −$2,536.373 million to −$2,688.271 million. Common-stock par value remained $0.951 million. Accumulated other comprehensive loss increased from $5.307 million to $9.071 million, entirely from currency items.
Issued shares stayed at 95,065,638. Outstanding shares reconcile as 45,996,087 opening shares + 279,603 from share-based payment activity − 1,630,186 treasury purchases = 44,645,504 closing shares. These were treasury transactions, not share retirement. Total share-based compensation expense was $15.371 million versus $32.576 million in the first nine months of 2025; that expense differs from the equity movement and from the cash-flow line combining noncash compensation with other charges.
The cash-flow statement’s $166.178 million of treasury purchases and $39.325 million of paid dividends are the amounts used in the cash-allocation analysis. Equity-recorded purchases and declared dividends have different recognition bases and timing. The release’s rounded $172 million repurchase measure also includes employee repurchases associated with withholding and option exercises; it is not substituted for cash paid.
Sources: Third-quarter 2026 Form 10-Q, pp. 5–8, Notes 3 and 8, and share repurchases discussion, p. 35; November 2 earnings release, footnote 3.
Calculation notes: The September balance sheet balances: $3,007.176 million liabilities + $131.758 million equity = $3,138.934 million assets. The December balance sheet also balances: $2,736.974 million liabilities + $181.229 million equity = $2,918.203 million assets.
Calculation notes: Brand changes. WoodSpring Suites added 2,985 U.S. rooms and Everhome Suites added 1,153, a combined 4,138. Comfort lost 1,853 rooms and Quality Inn lost 2,935, a combined 4,788. These compare September 30, 2026 with September 30, 2025.
Source: Third-quarter 2026 Form 10-Q, U.S. hotel and room table, p. 27.
Calculation notes: Forecast and percentage comparisons. The forecast reimbursement deficit is $734.2 million of expenses − $599.2 million of revenue = $135.0 million. Subtracting the actual nine-month deficit of $92.1 million leaves an implied fourth-quarter deficit of $42.9 million, assuming management’s full-year forecast is achieved. Growth rates use the later amount divided by the earlier comparable amount, minus one. Changes in occupancy, royalty rates, and profit margins are percentage-point changes, not percentage growth. The network-support spending decline is ($140.292 million ÷ $144.369 million − 1) × 100 = −2.8% after rounding.
Source: November 2 earnings release, Exhibit 7; 10-Q cash-flow statement, p. 6.
This report provides business and financial information for general understanding. It is not investment advice.