Here’s why Choice’s CEO is optimistic about economy

In recent discussions surrounding the economy and its potential recovery, Patrick Pacious, CEO of Choice Hotels International, expressed a cautiously optimistic view regarding the company’s performance and the broader economic landscape. Analyzing his insights, we can identify key elements that contribute to this positivity, including the recovery signals in the economy hotel segment, the role of business travel, and the evolving demographics of travelers.

Current Landscape of Choice Hotels

During the company’s third-quarter earnings report, Choice Hotels highlighted a slight decline of 3.2% in U.S. Revenue Per Available Room (RevPAR) compared to the previous year. Despite this downturn, Pacious pointed to several hopeful indicators that suggest a positive shift is on the horizon. Notably, the economy transient segment—hotels primarily catering to budget-conscious travelers—showed increasing occupancy, especially in recent months. Excluding the adverse impact of a hurricane in the third quarter, this segment demonstrated year-over-year occupancy growth in the past two quarters.

Pacious articulated that these occupancy trends usually serve as precursors to broader economic recovery—a point reinforced by historical patterns in the hotel industry. A stabilization or rise in occupancy rates tends to restore confidence among hotel owners, allowing them to adjust pricing strategies in favor of profitability.

Small and Medium-Sized Business (SMB) Travel

A significant driver behind Pacious’s optimism is the upward trend in small and medium-sized business travel, which constitutes a pivotal portion of the clientele at Choice Hotels. Pacious noted that around 75% of the U.S. workforce is tied to SMBs. These travelers—working in sectors such as construction, utilities, and medical staffing—are increasingly frequenting hotels, particularly those that accommodate their specific needs.

The shift from leisure to a more balanced business travel mix—once 70% leisure and now shifting towards 60% leisure and 40% business—indicates a more resilient customer base. With SMBs seemingly on the rebound and more equipped to travel for work, the outlook for sustained occupancy is promising. Additionally, the advent of artificial intelligence is reshaping workforce dynamics, creating new travel opportunities for workers within these businesses.

Demographics: The Golden Traveler

Another demographic that Pacious emphasized is the "Golden Traveler" segment, consisting mainly of travelers aged 60 and older. This age group, which currently accounts for 30% of Choice Hotels’ clientele, is attracted to travel due to their accumulated wealth and discretionary income. With access to robust stock portfolios and assets, Golden Travelers have both the financial means and the time to explore various destinations.

As this demographic becomes more active in the travel space, hotels can anticipate increased spending and direct bookings, further bolstering the company’s revenue. This evolving traveler profile provides a solid foundation for robust future growth.

Pipeline Strength and Higher Revenue Brands

One of the critical components of Pacious’s vision for growth is the strength of Choice Hotels’ pipeline, which is increasingly concentrated in higher-revenue brands. Currently, an impressive 98% of the company’s pipeline is dedicated to revenue-generating brands expected to significantly elevate earnings per unit. Pacious noted that these hotels are around 1.7 times more accretive than the current portfolio due to higher RevPARs and effective royalty rates.

Moreover, the ability of Choice to quickly convert hotels into operational properties—often before they even enter the formal pipeline—has become particularly advantageous in a climate marked by low new supply growth. This agility allows the company to capitalize rapidly on emerging opportunities.

Looking Forward

As we look toward the future of the lodging cycle, Pacious’s perspectives are grounded in both cautious optimism and proactive strategy. He acknowledged that while challenges still exist, particularly reflected in declining RevPAR, the trend dynamics paint a favorable picture going into 2026. Key factors driving this positivity include:

1. Occupancy Trends – Early signs of recovering occupancy rates indicate confidence among owners that can catalyze pricing adjustments and volume increases.

2. SMB and Business Travel – The resurgence in SMB travel, combined with a more balanced business-leisure mix, supports sustainable growth in hotel occupancy.

3. Golden Traveler Segment – Older travelers with financial means add a robust dimension of income potential to the travel industry.

4. Pipeline Quality – The strength and focus on high-revenue brands within the pipeline indicate an upward trajectory in earnings.

In conclusion, while the current economic landscape expresses a blend of challenges and opportunities, Patrick Pacious’s reflections offer a compelling case for optimism within the hotel industry. Choice Hotels’ focus on adapting to market demands, leveraging demographic trends, and strengthening its portfolio pipeline positions it uniquely to navigate the recovery phase successfully. The coming years will be crucial as the industry seeks to rebound fully, and the indicators Pacious discussed serve as a litmus test for the resilience of the lodging sector. It’s a promising outlook that deserves attention in the evolving narrative surrounding economic recovery in hospitality.

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