Here’s Why Choice Hotels International (CHH) Declined in Q3

Baron Funds, an investment management company, released its “Baron Focused Growth Fund” third-quarter 2025 investor letter. A copy of the letter can be downloaded here. The Fund delivered strong results in the third quarter, appreciating 4.83% (Institutional Shares); however, the performance underperformed the Russell 2500 Growth Index’s (the Benchmark) 10.73% gain. The fund’s underperformance stemmed from concerns over a slowdown in economic growth affecting the fund’s more economically sensitive Consumer Discretionary stocks. Furthermore, the rise in competitive pressures has adversely affected the valuations of a few of its holdings. In addition, please check the fund’s top five holdings to know its best picks in 2025.

In its third-quarter 2025 investor letter, Baron Focused Growth Fund highlighted stocks such as Choice Hotels International, Inc. (NYSE:CHH). Headquartered in North Bethesda, Maryland, Choice Hotels International, Inc. (NYSE:CHH) operates as a hotel franchisor. The one-month return of Choice Hotels International, Inc. (NYSE:CHH) was -10.03%, and its shares lost 36.67% of their value over the last 52 weeks. On November 4, 2025, Choice Hotels International, Inc. (NYSE:CHH) stock closed at $91.50 per share, with a market capitalization of $4.23 billion.

Baron Focused Growth Fund stated the following regarding Choice Hotels International, Inc. (NYSE:CHH) in its third quarter 2025 investor letter:

“Shares of Choice Hotels International, Inc. (NYSE:CHH), a global franchisor of economy and midscale hotels across a portfolio of well-known brands, declined 15.6% and hurt performance by 44 bps. Shares fell during the quarter as investors were concerned with slowing revenue-per-available-room (RevPAR) growth. However, management has steadily reduced Choice’s exposure to RevPAR fluctuations by expanding higher-margin, non RevPAR fee income as it leverages the company’s 70-million-member loyalty database to secure additional partnerships with credit card companies, timeshare operators, and casinos. Choice is also adding higher-revenue units at a low single-digit rate, with a focus on larger room sizes, premium royalty rates, and RevPAR levels that exceed the current portfolio. We expect revenue growth to accelerate as a robust pipeline of new projects come online and Choice captures synergies from its Radisson Americas acquisition by increasing traffic to those properties and narrowing the royalty-rate gap between Radisson and legacy Choice brands. With a strong balance sheet, Choice is well positioned to return capital to shareholders through dividends and share repurchases.”

Is Choice Hotels International, Inc. (CHH) the Underperforming Stock Targeted By Short Sellers?

Choice Hotels International, Inc. (NYSE:CHH) is not on our list of 30 Most Popular Stocks Among Hedge Funds. According to our database, 23 hedge fund portfolios held Choice Hotels International, Inc. (NYSE:CHH) at the end of the second quarter, compared to 24 in the previous quarter. While we acknowledge the risk and potential of Choice Hotels International, Inc. (NYSE:CHH) as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than Choice Hotels International, Inc. (NYSE:CHH) and that has 10,000% upside potential, check out our report about this cheapest AI stock.

In another article, we covered Choice Hotels International, Inc. (NYSE:CHH) and shared Baron Focused Growth Fund’s views on the company in the previous quarter. In addition, please check out our hedge fund investor letters Q3 2025 page for more investor letters from hedge funds and other leading investors.

READ NEXT: The Best and Worst Dow Stocks for the Next 12 Months and 10 Unstoppable Stocks That Could Double Your Money.

Disclosure: None. This article is originally published at Insider Monkey.