Here's Why You Should Retain Choice Hotels Stock in Your Portfolio

Choice Hotels International, Inc. CHH is benefiting from steady unit growth and a strong global pipeline. The company is seeing improved performance due to rising demand across its portfolio. Strategic partnerships and a focus on rewards programs are also supporting growth. However, an uncertain macroeconomic environment is a concern.

Let us discuss the factors that highlight why investors should retain the stock for now.

Growth Catalysts for CHH Stock

Solid Business Travel Demand: Choice Hotels is witnessing steady momentum in business and group travel. The company is benefiting from higher bookings across corporate and leisure segments. Enhanced digital platforms and loyalty program updates are also contributing to improved engagement and occupancy. In 2024, business travel represented about 40% of the company’s total revenues, with the business transient segment growing 14% in the fourth quarter.

For 2025, the company expects continued strength in business travel, driven by higher group bookings and sustained demand in the business transient segment.

Strong Expansion Drives Growth: CHH continues to focus on both domestic and international expansion, effectively executing its unit growth strategy. The company is seeing significant success in strengthening its core brand portfolio and adding new properties to global footprint.

In 2024, Choice Hotels achieved robust development growth, with a 36% year-over-year increase in domestic upscale franchise agreements awarded. As of Dec. 31, 2024, the company's Global pipeline reached 964 hotels (approximately 97,325 rooms). The majority, around 88%, of the pipeline is situated within the United States, with nearly 71% of the domestic pipeline dedicated to new construction projects.

Strengthening Rewards and Partnerships: Choice Hotels is enhancing its rewards program and forming key partnerships to support growth. The company’s cobrand credit card initiative and strategic collaborations are increasing customer loyalty and attracting new travelers.

In 2024, Choice Hotels’ rewards program grew to 69 million members, reflecting an 8% year-over-year increase, the highest organic enrollment in a year. The partnership with Westgate Resorts added more than 14,000 rooms to the company’s domestic portfolio, further strengthening its offerings.

Concerns for Choice Hotels Stock

Although shares of Choice Hotels have fared better than the Zacks Hotels and Motels industry in the year-to-date period, the stock has traded downward. In the said period, the stock has declined 12%, while the industry has seen a drop of 16.8%. The recent decline can be primarily attributed to market volatility and concerns regarding discretionary spending, which remains under pressure.

Uncertain financial conditions and rising interest rates are also impacting business operations. Additionally, the construction cost environment and intense competition are added headwinds. The company believes that if inflation rates rise moderately, it will likely lead to comparable or even higher increases in hotel room rates.

CHH’s Zacks Rank & Key Picks

Choice Hotels currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks from the Zacks Consumer Discretionary sector are RCI Hospitality Holdings, Inc. RICK, Adtalem Global Education Inc. ATGE and Life Time Group Holdings, Inc. LTH.

RCI Hospitality currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The company delivered a trailing four-quarter negative earnings surprise of 62.9%, on average. The stock has declined 24.4% in the past year. The Zacks Consensus Estimate for RCI Hospitality’s 2025 sales and earnings per share (EPS) indicates growth of 2.5% and 1,278.8%, respectively, from year-ago levels.

Adtalem sports a Zacks Rank #1 at present. The company delivered a trailing four-quarter earnings surprise of 21.6%, on average. The stock has gained 127.2% in the past year.

The Zacks Consensus Estimate for Adtalem’s fiscal 2025 sales and EPS indicates growth of 10.1% and 23.8%, respectively, from the year-ago levels.

Life Time Group presently sports a Zacks Rank of 1. LTH delivered a trailing four-quarter earnings surprise of 21.6%, on average. The stock has gained 119.4% in the past year.

The consensus estimate for Life Time Group’s 2025 sales and EPS implies growth of 12.9% and 37.9%, respectively, from the year-ago levels.

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This article originally published on Zacks Investment Research (zacks.com).

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