Choice Hotels Stock Is Down 15%—But One Hedge Fund Just Piled In With $101 Million
Hedge fund Voss Capital disclosed a new position in Choice Hotels International (NYSE: CHH) during the first quarter, scooping up 967,500 shares in a transaction valued at roughly $100.61 million based on the average quarterly price, according to a May 15 SEC filing. The quarter-end market value of the stake stood at $100.14 million, reflecting both the purchase and subsequent share price movement.
The filing comes as Choice Hotels' stock has fallen about 15% year to date, pressured by a broader pullback in travel-related stocks and lingering RevPAR weakness. But Voss Capital's sizable bet suggests at least one institutional investor sees value beneath the surface.
Choice Hotels operates one of the largest hotel franchising networks in the world, with brands including Comfort Inn, Sleep Inn, and Cambria Hotels. Its asset-light, fee-based model generates recurring revenue streams and has historically supported steady profitability. The company also provides technology solutions—such as property management systems and cloud-based booking tools—to franchisees, further deepening its competitive moat.
Despite the stock's rough year, Choice's latest quarterly results revealed several upbeat signs. Global franchise agreements awarded surged 72% year over year, U.S. hotel openings reached a five-year high, and global net rooms increased 1.7%. The development pipeline expanded to more than 77,700 rooms, with 97% concentrated in higher-value extended stay, midscale, and upscale brands—segments that typically generate stronger returns for franchisees and higher royalties for Choice.
Management believes these trends mark an inflection point. CEO Patrick Pacious told investors that franchisee economics are improving, capital intensity is falling, and the company's conversion-focused strategy is driving more efficient growth. Choice reaffirmed its full-year outlook, including adjusted EBITDA of $632 million to $647 million and adjusted EPS of $6.92 to $7.14.
Still, challenges persist. First-quarter adjusted EBITDA slipped to $125.7 million from $129.6 million a year ago, and revenue per available room (RevPAR) remained soft. But the company's cash generation remains solid: it returned $75.2 million to shareholders during the quarter through dividends and buybacks. If those recent development gains continue to translate into revenue and profit growth, the stock could be poised for a recovery—and Voss Capital appears to be betting on exactly that.
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Jonathan Ponciano has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Cellebrite and Euronet Worldwide. The Motley Fool has a disclosure policy.
Choice Hotels Stock Is Down 15%, but One Investor Bought $101 Million Last Quarter was originally published by The Motley Fool.