Choice Hotels Beats RevPAR Forecasts, Upscale Brands Still Lag

Choice Hotels International grew U.S. revenue per available room 3.8% in the third quarter, roughly 1.5 percentage points above Wall Street's forecast — but the gain sat almost entirely at the bottom of its portfolio, where economy brands beat the industry while upscale brands grew at barely a quarter of the market pace.

CEO Dominic Dragisich told analysts on a Monday earnings call that October RevPAR came in at about 7%, a sharp acceleration from the quarter's average. The summer performance offered an early sign of progress for the chief executive, who in August faced a portfolio that trailed industry benchmarks in every price tier Choice competes in, from economy to upscale, according to CoStar data.

The third quarter narrowed that deficit without erasing it.

Where the growth actually landed

The tier-by-tier breakdown, from Truist Securities citing CoStar data:

• Economy brands: RevPAR up 3.5% against roughly 2.5% for the industry — the portfolio's clear win.
• Midscale and upper-midscale: up 3.6% against an industry average of about 4.5%.
• Upscale and above: up just 1.1% against roughly 4% industrywide.

Dragisich acknowledged the uneven result. "We did narrow the gap," he said, referring to Choice's performance relative to industry averages.

Truist analysts C. Patrick Scholes and Gregory Miller were more blunt. They wrote that the mix implies Choice is still losing market share against the U.S. hotel sector's 7% RevPAR gain for the quarter, reported by CBRE. Their estimate: fair-share growth for Choice would have been closer to 5% to 6%.

What does this change for the growth plan?

Room count, for now, not much. Choice's system is roughly flat year over year, and Dragisich said he wants net room growth of 2% to 4%. Getting there depends on organic growth the company says it is now prioritizing.

The quarter's capital moves show the strategy shifting further asset-light:

• A $24 million charge to terminate an option to acquire an unnamed European hospitality business. Choice walked after the option "eventually migrated to an obligation" and the target's growth model became more lease-based — a structure incompatible with an asset-light approach.
• Two owned hotels sold for about $34 million in net proceeds, with franchise agreements retained. Choice now holds 17 owned hotels.
• The $130 million purchase of RV membership club Harvest Hosts, completed October 1, extending the brand into outdoor and drive-to travel segments.

The pattern is consistent: shed real estate and lease-based commitments, keep or buy fee streams. The Harvest Hosts deal is the clearest signal that Choice sees franchised membership and licensing revenue — not property ownership — as its next engine.

For Dragisich, the third quarter proves the budget end of the portfolio can outperform. The open question entering the fourth quarter is whether October's roughly 7% RevPAR holds, and whether upscale brands can close a gap that economy brands already have.