Choice Hotels International, Inc. · NYSE:CHH
Choice Hotels International — Oppenheimer Gaming, Lodging & Leisure Conference 2008
30 slides from Choice Hotels International's conference presentation, Jul 10, 2008
Slide 1: Oppenheimer Gaming, Lodging & Leisure Conference
Oppenheimer Gaming, Lodging & Leisure Conference Stephen P. Joyce – President and Chief Executive Officer July 10, 2008 Exhibit 99.1
Slide 2: Disclaimer
DISCLAIMER Certain matters discussed in this presentation constitute forward-looking statements within the meaning of the federal securities law. Generally, our use of words such as “expect,” “estimate,” “believe,” “anticipate,” “will,” “forecast,” “plan,” project,” “assume” or similar words of futu
Slide 3: Investment Thesis
INVESTMENT THESIS Strong, Growing, Fee-based Operating Business – Track record of predictable, profitable growth in variety of lodging and economic environments – Track record of expanding market share – Long-term franchise contracts Significant Growth Opportunities Remain – Organic, acquisitions, n
Slide 4: One of the Largest Hoteliers
Wyndham Choice IHG Hilton Marriott Best Western Accor Hyatt Carlson Starwood ONE OF THE LARGEST HOTELIERS Source: Smith Travel Research, May 2008 Market Share 11.3% 9.2% 5.7% 5.4% 5.2% 4.2% 1.9% 1.3% 1.2% 0.8% 4+ yr. bps (03-08) -120 -30 -60 10 10 Leading Gainer of Market Share (% of Hotels Open in
Slide 5: Many Well Recognized & Segmented Brands
MANY WELL RECOGNIZED & SEGMENTED BRANDS Limited Service Full Service Economy Mid-Scale Upscale
Slide 6: Significant Core Competencies Drive Results
98% 89% 81% 95% 88% SIGNIFICANT CORE COMPETENCIES DRIVE RESULTS Brand Awareness & Reservations Delivery = Key Value Proposition For Hoteliers – $300 million+ in annual marketing & reservation fees – Choice Privileges has 7 million members (2 million new members in 2 years) SELLING HOTEL ROOMS Brand
Slide 7: Exceptional Development Teams Focused on Selling Hotel Franchises
639 720 792 770 552 258 276 269 413 728 717 190 284 176 602 EXCEPTIONAL DEVELOPMENT TEAMS FOCUSED ON SELLING HOTEL FRANCHISES 3,834 4,048 4,211 4,445 3/31/08 3/31/08 TTM $5 $10 $15 $20 $25 3/31/08 TTM Conversion New Construction Track record of unit growth across a range of industry and economic cyc
Slide 8: Revenue Growth in +/- RevPAR Environments
-6% -4% -2% 0% 2% 4% 6% 8% 10% $0 $50 $100 $150 $200 $250 $300 $350 CHH RevPAR STR Chain Scale (Supply Weighted) Industry RevPAR Franchising Revenue REVENUE GROWTH IN +/- REVPAR ENVIRONMENTS Source: Smith Travel Research, Choice Internal Data, December 2007 ($ in millions)
Slide 9: EBITDA Growth in +/- Lodging Environments
EBITDA GROWTH IN +/- LODGING ENVIRONMENTS $- $5 $10 $15 $20 $25 $30 $- $50 $100 $150 $200 $250 Industry Profits Adjusted EBITDA Source: Smith Travel Research, Choice Internal Data, December 2007 ($ in millions) ($ in billions)
Slide 10: Capital "Light" Model Generates Strong Returns on Invested Capital
CAPITAL “LIGHT” MODEL GENERATES STRONG RETURNS ON INVESTED CAPITAL 68.8% 62.9% 49.7% 36.7% 27.6% 14.7% 16.1% 15.2% 78.5% 19.5% Source: Choice Internal Data, December 2007
Slide 11: Track Record of Strong Earnings Per Share Growth
TRACK RECORD OF STRONG EARNINGS PER SHARE GROWTH $0.40 $0.51 $0.51 $0.58 $0.76 $0.93 $1.07 $1.26 $1.49 $1.73 Source: Choice Internal Data, December 2007, Per Share Amounts Retroactively Adjusted For 2005 Stock Split Adjusted Diluted Earnings Per Share
Slide 12: Development Opportunities for Hoteliers at Various Price Points
* Excludes cost of land Conversion $40,000+ $84,000+ $76,000+ $95,000+ $50 $70 $100+ Targeted Average Daily Rate $61,000+ $54,000+ $80 DEVELOPMENT OPPORTUNITIES FOR HOTELIERS AT VARIOUS PRICE POINTS Estimated Per Room Investment* New Construction Source: Choice Internal Data, April 2008 $65,000+
Slide 13: Cambria Suites Brand – Upscale, Select Service Market Opportunity
CAMBRIA SUITES BRAND – UPSCALE, SELECT SERVICE MARKET OPPORTUNITY • All-suites brand – 100% new construction – Guest suites 25% larger than standard hotel rooms – Very attractive per-key development cost – Targeted ADR of $100-$150 • 67 contracts – in 25+ states and Canada – executed since January 2
Slide 14: Significant Growth Opportunities Remain in Large Conversion Market
Source: Smith Travel Research, March 2008 SIGNIFICANT GROWTH OPPORTUNITIES REMAIN IN LARGE CONVERSION MARKET Domestic Hotels 2,060 1,897 1,703 1,540 1,479 1,448 Chart does not include 16,000+ independent hotels in budget, economy and mid-scale segments Best Western Other (includes 50+ brands) Holida
Slide 15: International Opportunity
549 hotels 22% of Comfort portfolio 378 hotels 31% of Quality portfolio 118 hotels 41% of Clarion portfolio 16 hotels 4% of Sleep Inn portfolio INTERNATIONAL OPPORTUNITY • 1,100+ properties • 38 countries and territories on 5 continents • Large global “pure hotel franchising” business • Track record
Slide 16: Royalty Fee "Levers"
ROYALTY FEE “LEVERS” Domestic Royalty Impact Estimated Impact on ‘08 Royalties Estimated Impact on ‘08 Diluted EPS 1,2 RevPAR Improvement 1% = $2,388,000 $0.02 5% = $11,940,000 $0.12 New Franchise Growth 1% (46 units) = $2,399,000 $0.02 5% (230 units) = $11,995,000 $0.12 Improvement in Royalty Rate
Slide 17: Why Choice?
WHY CHOICE? • Highest returning model in the industry • Track record of profitable growth in a wide variety of economic conditions and industry cycles • Substantial size, scale and distribution – difficult to duplicate • Highly-skilled and experienced management team • Focused on returning value to
Slide 18: Appendix: Reconciliation of Non-GAAP Financial Measurements to GAAP
Appendix Appendix Reconciliation of Non-GAAP Financial Measurements to GAAP
Slide 19: Disclaimer
DISCLAIMER Adjusted franchising margins, adjusted earnings before interest depreciation and amortization (EBITDA), adjusted net income, adjusted diluted earnings per share, franchising revenues, net operating profits after taxes (NOPAT), return on invested capital (ROIC) and free cash flows are non-
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Slide 22: Quarter Franchising Revenues and Adjusted Franchising Margins
ST QUARTER FRANCHISING REVENUES AND ADJUSTED FRANCHISING MARGINS (Dollar amounts in thousands) March 31 March 31 2007 (1) Franchising Revenues and Margins Total Revenues 128,855 $ 114,929 $ Adjustments: Marketing and Reservation (68,426) (60,787) Hotel Operations (1,042) (1,096) Franchising Revenues
Slide 23: Return on Invested Capital
RETURN ON INVESTED CAPITAL Source: Choice Internal Data, December 2007 Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended ($ in millions) December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31,
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Slide 26: Adjusted EBITDA
ADJUSTED EBITDA Source: Choice Internal Data, December 2007 Year Ended Year Ended Year Ended Year Ended Year Ended ($ in thousands) December 31, December 31, December 31, December 31, December 31, Operating Income 185,199 $ 166,625 $ 143,750 $ 124,983 $ 113,946 $ Adjustments Executive Termination Be
Slide 27: Adjusted EBITDA (Continued)
ADJUSTED EBITDA (CONTINUED) Source: Choice Internal Data, December 2007 Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended ($ in thousands) December 31, December 31, December 31, December 31, December 31, December 31, Operating Income 104,700 $ 73,577 $ 92,427 $ 94,170 $ 85,151 $ 77,0
Slide 28: Quarter EBITDA
ST QUARTER EBITDA March 31 March 31 Operating Income 34,052 $ 27,386 $ Adjustments Depreciation and Amortization 2,057 2,115 EBITDA 36,109 $ 29,501 $ Three Months Ended Source: Choice Internal Data, March 2008 (Dollar amounts in thousands)
Slide 29: Adjusted Diluted Earnings Per Share
Year Ended Year Ended Year Ended Year Ended December 31, December 31, December 31, December 31, 112,787 $ 87,565 $ 74,345 $ 71,863 $ - - - - - - (1,182) - - 1,192 - - - - - (3,383) - - - - 100,213 $ 83,902 $ 73,596 $ 68,480 $ 67,050 66,336 69,000 73,349 1.68 $ 1.32 $ 1.08 $ 0.98 $ - - 0.01 - - - - -
Slide 30: Adjusted Diluted Earnings Per Share (Continued)
ADJUSTED DILUTED EARNINGS PER SHARE (CONTINUED) Year Ended Year Ended Year Ended Year Ended Year Ended December 31, December 31, December 31, December 31, December 31, (In thousands, except per share amounts) Net Income 60,844 $ 14,327 $ 42,445 $ 57,155 $ 55,305 $ Adjustments: Loss(Gain) on Extingui
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