Choice Hotels' New Interim CEO's First Task: Fix the Revenue Gap
Interim CEO Dominic Dragisich acknowledges U.S. revenue performance trailing industry averages and outlines strategies to close the gap.
Stock photo for illustration only, not from the actual event
- Choice Hotels is underperforming industry RevPAR benchmarks across all chain scales and losing market share.
- The interim CEO points to weak exposure in rebounding urban and business-transient markets as the primary driver.
- The company plans to sell all 19 wholly-owned hotels, valued at roughly $450 million, to achieve a fully asset-light model.
- Choice is ramping up AI tools and cost-relief programs to better support its extensive franchise network.
Eleven weeks into the top job, Dominic Dragisich has inherited a robust franchise expansion engine at Choice Hotels, yet he faces an immediate hurdle in closing a widening revenue shortfall across much of the company's U.S. business during the second quarter. While room openings continue to accelerate, revenue growth metrics indicate the hospitality franchisor is lagging behind its industry peers.
According to data from CoStar, revenue per available room (RevPAR) across Choice's upscale-and-above hotels in the United States increased by 1.3% year over year, falling short of the broader industry average of roughly 5% for those chain scales. Similarly, midscale and upper-midscale properties grew by 1.1% compared to an industry average of about 4%, while budget hotels experienced a 0.7% decline against a modest 1% gain for the overall segment.
Stock photo for illustration only, not from the actual event
Patrick Scholes, an analyst at Truist Securities, noted in a report that these results imply the company continues to cede market share. Acknowledging the performance gap during Wednesday's earnings call with analysts, Dragisich emphasized that his primary mission is to align current execution with the company's true potential, attributing part of the deficit to being under-indexed in urban markets and business transient travel segments that saw strong rebounds.
"My job is to close the gap between where we are today and where I believe this business can perform."
Dominic Dragisich
Choice Hotels' upcoming transition to a fully asset-light model—highlighted by plans to divest its 19 wholly-owned hotels valued at approximately $450 million starting in the first half of 2027—reflects a strategic pivot to optimize the balance sheet. By shedding real estate holdings, the company can concentrate capital on software, loyalty programs, and franchisee support systems, positioning itself more competitively against lodging giants investing heavily in proprietary tech platforms.
Despite the revenue lag, underlying fundamentals within the core franchise business remain resilient. U.S. room openings in the second quarter hit roughly 6,400, marking the highest volume since 2019, while franchisee departures fell by half. This momentum prompted Choice to raise its global net rooms growth guidance to approximately 1.5%. Furthermore, the company is deploying artificial intelligence tools, such as the "Charlie" assistant and group-sales platforms, to reduce support requests and drive booking efficiency for property owners.
Source: Skift
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