The hospitality industry is transitioning into a new phase defined by recalibration rather than disruption. Three significant themes are emerging from this week’s data: Choice Hotels’ evolving path toward 2026, the cooling but increasingly strategic construction pipeline, and two notable portfolio transactions that signal how capital is repositioning across the hotel landscape. Taken together, these developments offer a clear window into how owners, developers, and investors are thinking about RevPAR, supply fundamentals, and asset selection heading into the next cycle.
Choice Hotels’ Path to 2026: Corporate Strategy Under Pressure
RevPAR Normalization as the Critical Trigger
Choice Hotels (CHH) continues to face pressure from investors skeptical of near-term performance in the midscale and economy segments. Even after the company raised its annual Adjusted EBITDA guidance, the market remains uneasy. Much of that tension reflects broader concerns about the lower-end consumer, whose spending patterns have been uneven throughout the year.
A close look at Baird’s analysis shows that RevPAR stabilization is the key factor shaping how investor’s view Choice’s near-term outlook. Without improvement in the first half of 2026, sentiment will likely remain muted. But if performance stabilizes—even modestly—the company’s valuation may finally begin to reflect its underlying fundamentals.
Baird’s Model: +4% Adjusted EBITDA and What It Really Means
Baird projects $650 million in Adjusted EBITDA for 2026, about 4% growth year-over-year. The model is built on several assumptions:
- Domestic RevPAR flattens for 2026, with a stronger second half
- Net domestic room growth reaches roughly 1%
- Partnership services revenue grows around 5%
- International royalty fees increase by about $10 million
What’s striking is the gap between the forecasted fundamentals and the market’s cautious stance. With CHH trading at more than a 6% free cash flow yield, the stock underperformance suggests sentiment has swung too far negative—unless RevPAR deteriorates further.
International Growth Becoming a Real Earnings Engine
Choice’s international business is quickly becoming a material contributor to earnings. The company expects $39 million in international Adjusted EBITDA in 2025 and more than $50 million by 2027. This growth reflects higher effective franchise royalty rates and stronger deal structures across its global footprint.
The shift also provides a counterweight to domestic volatility. As the brand deepens its international presence, a more diversified earnings base strengthens long-term stability—something investors will look for as domestic segments work through softer demand.
Investor Skepticism vs. Long-Term Fundamentals
Much of the hesitation around Choice stems from uncertainty about how quickly domestic demand will improve and whether the company will moderate investment spending as promised. With development costs still elevated, reducing outlays for brands like Cambria and Everhome in 2026 and 2027 will be important for strengthening free cash flow.
Yet when looking at the data, it’s clear the fundamentals are sturdier than investor sentiment implies. If RevPAR flattens and international earnings continue to climb, the company could enter 2026 with far more operational and financial momentum than many are currently pricing in.
Construction Pipeline Insights: A Cooling Market with Uneven Signals
October’s Data: A Smaller Decline in Rooms Under Construction
The latest construction numbers show 131,839 rooms under construction, a slight decrease of 271 rooms from the previous period. That’s a significant improvement from July’s decline of more than 11,000 rooms, signaling that the pipeline may be finding its natural bottom.
Rather than pulling back dramatically, developers appear to be making more precise decisions about which projects to pause and which to advance—a sign of discipline rather than distress.
Declines Occurring Across Regions, Not Clustered
Unlike the sharp, concentrated declines seen earlier in the year, the October data shows softer pullbacks across every region. No area stands out as excessively weak, suggesting a broad industry recalibration rather than localized challenges.
This pattern reflects a market adjusting to high financing costs and tighter underwriting standards. Developers are being selective, prioritizing projects with strong operating potential and delaying those that no longer make economic sense.
Extended Stay Dominating New Development—Especially in Lower Chain Scales
One of the most defining trends in today’s pipeline is the continued rise of extended stay. Around 46,692 rooms under construction fall into this segment which accounts for about one-third of all new supply. In the economy and midscale categories, extended stay is even more dominant, representing 55% of rooms under construction.
The appeal is clear: extended stay properties typically cost less to build, operate with leaner staffing, and produce more consistent margins. They benefit from workforce travel, relocation demand, long-term business stays, and infrastructure-related projects. In today’s environment, those attributes make extended stay the most “financeable” product for banks and private lenders.
Implications for Developers, Lenders, and Investors
Developers are signaling where they see stable demand and where construction risk feels justified. Lower chain scales with extended stay components are rising, while upscale and full-service development remains subdued due to higher operating costs and uncertain demand patterns.
For investors, this supply mix sets the stage for potential room night compression in higher-end segments a few years from now. With construction heavily skewed toward extended stay, segments like upper-upscale could face tighter supply conditions if demand rebounds faster than new projects enter the market.
Big Portfolio Movements: Rialto & Noble Shift the Landscape
Rialto’s Mysterious 40-Hotel Wyndham Portfolio
Rialto Capital Management’s quiet acquisition—or potential takeover—of 40 Wyndham-branded hotels stands out due to its scale and unusual profile. These Travelodge and Baymont properties rarely appear in CMBS loan pools, yet the characteristics resemble a distressed resolution.
The portfolio appears to have originated from a single owner, indicating a possible surrender or forced transaction. At the same time, the asset class doesn’t typically align with CMBS financing, suggesting a more complex
backstory. Regardless of the structure, the move signals renewed interest in distressed or semi-distressed economy and midscale properties, particularly those with repositioning potential.
A more challenging element of the deal is the operational model. Without an ownership team specializing in these property types, the next steps for the portfolio may rely heavily on partnerships or third-party management—an approach that comes with risks if execution is not tightly managed.
Noble’s Purchase of 31 Sonesta Simply Suites
On the opposite end of the strategy spectrum, Noble Investment Group’s purchase of 31 Sonesta Simply Suites reflects a targeted strategy built around real estate fundamentals rather than long-term brand loyalty. The properties transition from brand-managed to franchise mode, and Noble is betting on the underlying locations’ long-term value—even with the Sonesta flag in place.
Because the deal includes long-term franchise agreements, the likely play is a combination of stabilization and eventual repositioning once the contractual runway shortens. This aligns with broader market trends: investors are prioritizing real estate quality first and brand alignment second, especially in a supply environment where replacement cost advantages are increasingly meaningful.
What These Shifts Signal for 2026—and How to Position Yourself Now
The hospitality industry is moving through a period of recalibration rather than retrenchment. Choice Hotels’ long-term fundamentals appear stronger than investor sentiment reflects. The construction pipeline is cooling, but more selectively and strategically than earlier this year. And major portfolio movements reveal a clear preference for select-service and extended stay assets with strong real estate underpinnings.
As the market heads toward 2026, owners, investors, and developers should reassess their positioning considering these trends. This is a moment to evaluate whether your assets, pipeline plans, or acquisition targets align with where demand—and capital—is moving.
If you’re exploring acquisitions, evaluating development opportunities, or considering a strategic exit, our team can help you assess value, risk, and timing. Contact us to position your portfolio effectively for the next cycle.