Receivables and Allowance for Credit Losses

12 Months Ended

Dec. 31, 2025

Accounts and Financing Receivable, after Allowance for Credit Loss [Abstract]

Receivables and Allowance for Credit Losses

Notes Receivable

The Company has provided financing in the form of notes receivable loans to franchisees in order to support the development of hotel properties in strategic markets. The Company's credit quality indicator is the level of security in the note receivable.

The following table summarizes the composition of the notes receivable balances by credit quality indicator and the allowance for credit losses:


	December 31,
(in thousands)	2025		2024
Senior	$	98,257	$	94,963
Subordinated	13,356		15,433
Unsecured	4,044		5,118
Total notes receivable	115,657		115,514
Less: allowance for credit losses	8,481		7,331
Total notes receivable, net of allowance for credit losses	$	107,176	$	108,183
Current portion, net of allowance for credit losses	$	94,686	$	75,501
Long-term portion, net of allowance for credit losses	$	12,490	$	32,682

The following table summarizes the amortized cost basis of the notes receivable by the year of origination and credit quality indicator:


(in thousands)	2025		2024		2023		2022		2021		Prior		Total
Senior	$	1,713	$	40,832	$	—	$	—	$	—	$	55,712	$	98,257
Subordinated	1,501		—		3,503		—		—		8,352		13,356
Unsecured	386		125		—		—		771		2,762		4,044
Total notes receivable	$	3,600	$	40,957	$	3,503	$	—	$	771	$	66,826	$	115,657

The following table summarizes the activity related to the Company’s notes receivable allowance for credit losses:


	December 31,
(in thousands)	2025		2024
Beginning balance	$	7,331	$	8,616
Provision (reversal) for credit losses	1,150		(609)
Recoveries	—		(676)
Ending balance	$	8,481	$	7,331

During the year ended December 31, 2024, the recoveries were primarily associated with cash collections pursuant to a settlement agreement with a borrower.

As of December 31, 2025 and December 31, 2024, three and one note receivable loans, respectively, with senior credit quality indicators met the definition of collateral-dependent and are collateralized by the membership interests in the borrowing entities, the associated land parcel, or the operating hotel. The Company used both a market approach that uses quoted market prices and an income approach that uses discounted cash flows to value the underlying collateral. The Company reviewed the borrower's financial statements, economic trends, industry projections for the market, and comparable sales capitalization rates, which represent significant inputs to the cash flow projections. These nonrecurring fair value measurements are classified as Level 3 in the fair value measurement hierarchy because they are unobservable inputs which are significant to the overall fair value. Based on the Company's analysis, the fair value of the collateral secures substantially all of the carrying value of the respective note receivable loans. The allowance for credit losses attributable to the collateral-dependent note receivable loans were $4.6 million and $2.2 million as of December 31, 2025 and 2024, respectively.

The following table summarizes the past due balances by credit quality indicator of the notes receivable:


(in thousands)	1-30 days Past Due		31-89 days Past Due		> 90 days Past Due		Total Past Due		Current		Total Notes Receivable
As of December 31, 2025
Senior	$	—	$	—	$	42,900	$	42,900	$	55,357	$	98,257
Subordinated	—		—		—		—		13,356		13,356
Unsecured	—		—		404		404		3,640		4,044
	$	—	$	—	$	43,304	$	43,304	$	72,353	$	115,657
As of December 31, 2024
Senior	$	—	$	—	$	15,200	$	15,200	$	79,763	$	94,963
Subordinated	—		—		2,264		2,264		13,169		15,433
Unsecured	—		—		784		784		4,334		5,118
	$	—	$	—	$	18,248	$	18,248	$	97,266	$	115,514

The amortized cost basis of the notes receivable in a non-accrual status was $42.9 million and $17.5 million as of December 31, 2025 and 2024, respectively.

Variable Interest through Notes Receivable

The Company has issued notes receivable loans to certain entities that have created variable interests in the associated borrowers totaling $103.2 million and $103.1 million as of December 31, 2025 and 2024, respectively. The Company has determined that it is not the primary beneficiary of these variable interest entities ("VIEs"). For the collateral-dependent loans, the Company has no exposure to the borrowing VIE beyond the respective note receivable and the limited commitments which are addressed in Note 16.

Transactions with Unconsolidated Affiliates

The Company has extended loans to various unconsolidated affiliates or members of our unconsolidated affiliates. The Company had a total principal balance on these loans of $65.3 million and $66.2 million as of December 31, 2025 and December 31, 2024, respectively.

Accounts Receivable

Accounts receivable consists primarily of franchise and related fees due from the hotel franchisees and are recorded at the invoiced amount.

During the year ended December 31, 2025, the Company recognized provisions for credit losses on accounts receivable of $20.2 million in selling, general and administrative expenses, and $15.0 million in reimbursable expenses from franchised and managed properties, in the consolidated statements of income. During the year ended December 31, 2024, the Company recognized provisions for credit losses on accounts receivable of $11.0 million in selling, general and administrative expenses, and $9.7 million in reimbursable expenses from franchised and managed properties, in the consolidated statements of income. For the years ended December 31, 2025 and 2024, the Company recorded write-offs, net of recoveries, through the accounts receivable allowance for credit losses of $29.6 million and $14.4 million, respectively.

CHOICE HOTELS INTERNATIONAL INC /DE 10-K