One of the biggest players in the affordable hotel segment is defending its turf after a CEO shakeup.
Choice Hotels International saw its lowest franchise termination rate in 10 years during the first quarter, chief development officer David Pepper said at this summer’s NYU International Hospitality Investment Forum, arguing that an aggressive push by larger competitors to poach midscale owners has lost steam.
Pepper acknowledged that Choice endured a difficult 2025 as Hilton and Marriott moved into the “premium economy” and midscale segment, respectively, in what was seen as a pursuit of rooms growth. But he said the tide turned at the start of this year as franchisees who defected found the new offerings did not deliver the guest base they expected.
“They spent a lot of money doing these conversions, and it's not their space, they don't have those guests,” Pepper said, adding that owners are recognizing the rival brands were “a shiny new thing” without a built-in customer.
The remarks landed after Choice parted ways with longtime president and CEO Patrick Pacious, who stepped down after a nearly 21-year tenure with the company. Dominic Dragisich, the chief growth and strategy officer, is serving as interim CEO while the board conducts a search for a permanent replacement.
Pepper's comments come after Choice leaders faced analyst criticism on a Q1 earnings call over a lack of transparency around the company's market share and amid speculation that owners were converting to competing brands targeting Choice franchisees. Asked about the current conversion climate, Pepper said the first-quarter termination figure reflected a reversal of that trend. He declined to address the earnings-call transparency question directly, noting it fell to the CFO.
The competition might tell a different story.
“I've also heard noise out from others in the market that Spark is not all it's cracked up to be performance-wise,” Hilton CEO Christopher Nassetta said on an earnings call last fall regarding the company’s new conversion-friendly brand Spark, which operates at the top of the economy chain scale. “That's a bunch of hooey.”
Owners with the brand are said to have seen significant performance growth after taking on Spark affiliation, and the brand is pushing into international markets. Nassetta noted on the earnings call Spark is “literally the highest market share brand, and we have some very high market share brands.”
"Conversions represented 36% of openings for the quarter across 12 brands in nearly 30 countries, including Spark openings in Saudi Arabia, Germany and the U.K., Nassetta said on an earnings call this week."
A Marriott spokesperson told Hospitality Investor the company “remains confident in the growth opportunities for its midscale portfolio” and continues to see strong momentum for brands like City Express by Marriott. The spokesperson said City Express is achieving Marriott Bonvoy member occupancy typical of the company's long-established brands — a direct counter to Pepper's claim that the rivals lack the guests to fill their rooms. The brand logged the third-highest global signings in Marriott's portfolio in 2025, closing the first quarter with 166 open properties worldwide and 156 in the pipeline, the spokesperson said. Since launching in the U.S. and Canada in 2024, City Express reached more than 100 regional signings in 2025 — the fastest a new Marriott brand has hit that mark in recent history.
IHG, which was not named by Pepper but competes in the same midscale and premium-economy space, said conversions have become an increasingly important growth driver across the company and the industry. An IHG spokesperson said conversion properties accounted for more than 300 global signings and over half of all its global room openings in 2025, a share that carried into the first quarter of 2026. The company pointed in particular to Garner, its midscale conversion brand and a newer entrant to the segment, which launched in 2023 and which IHG called the fastest-scaling brand in its history — surpassing 100 open hotels worldwide, with nearly another 100 in the pipeline across 17 countries.
IHG said some Garner properties have opened within two months of signing, and that the brand's flexible design standards and competitive cost-per-key have driven rapid entry into new markets.
Hilton's Spark, Marriott's City Express, and IHG's Garner are among the premium-economy and lower-midscale brands that have intensified competition for franchisees in the segment — the same wave of new flags Pepper argued is now receding.
Pepper projected another year of positive unit growth for Choice, particularly internationally, and pointed to the company's revenue-per-available-room turning positive as further grounds for optimism.
“It should be a really good year for Choice,” he said.