Choice Hotels International, Inc. · NYSE:CHH
Choice Hotels International — Investor Presentation (March 2011)
39 slides from Choice Hotels International's investor presentation, Mar 28, 2011
Slide 1: Investor Presentation
Investor Presentation March 2011 Exhibit 99.1
Slide 2: Disclaimer
DISCLAIMER Certain matters discussed throughout all of this presentation constitute forward-looking statements within the meaning of the federal securities laws. Generally, our use of words such as “expect,” “estimate,” “believe,” “anticipate,” “will,” “forecast,” “plan,” “project,” “assume” or simi
Slide 3: Choice Hotels Overview
CHOICE HOTELS OVERVIEW Leading gainer of US hotel market share* – 9.5% share of branded US hotels (+120 basis points over trailing 5 years)* – nd largest U.S. hotelier 70+ year-old hotel distribution company with well-known, diversified brands suitable for various stages of hotel life cycle Core com
Slide 4: One of the Largest Hoteliers
Source: Smith Travel Research, December 31, 2010 Wyndham Choice Hilton IHG Marriott Best Western Accor Carlson Starwood Hyatt ONE OF THE LARGEST HOTELIERS Market Share % 11.2% 9.5% 6.1% 6.0% 5.7% 3.8% 1.8% 1.1% 0.9% 0.6% 5 yr. bps (05-10) -20 +120 +140 +70 +100 -70 -60 +10 +20 -60 Market Share (% of
Slide 5: Family of Well-Known and Diversified Brands
Conversion $45,000+ $105,000+ $50 $70 $100+ Targeted Average Daily Rate $85 FAMILY OF WELL-KNOWN AND DIVERSIFIED BRANDS New Construction * Excludes cost of land; based on average domestic per-room investment. Source: Choice Internal Data, April 2010 ® ® ® ® ® ® ® ® ® ® ® ® ® ® ® ® ® ® ® ® ® ® ® ®
Slide 6: Challenging Near-Term Environment for New Construction Hotel Development
0% CHALLENGING NEAR-TERM ENVIRONMENT FOR NEW CONSTRUCTION HOTEL DEVELOPMENT Source: Lodging Econometrics (Q4 2010) – New Construction Pipeline Source: 2011-2012 supply growth projections are based on January 2011 STR forecast U.S. Lodging Industry Change in Room Supply (YOY %) New Construction Pipel
Slide 7: Strong Limited Service New Construction Brands Positioned Well for Long-Term Growth
STRONG LIMITED SERVICE NEW CONSTRUCTION BRANDS POSITIONED WELL FOR LONG-TERM GROWTH Source: Smith Travel Research, Choice Internal Data, December 31, 2010
Slide 8: Significant Growth Opportunities Remain in Large Conversion Market
SIGNIFICANT GROWTH OPPORTUNITIES REMAIN IN LARGE CONVERSION MARKET Chart does not include 17,000+ independent hotels in budget, economy and mid-scale segments Domestic Hotels Hampton Inn / Hampton Inn & Suites Holiday Inn Express Days Inn Motel 6 America’s Best Value Inn Holiday Inn / Holiday Inn Se
Slide 9: Domestic Pipeline of Hotels
DOMESTIC PIPELINE OF 516 HOTELS Mid-scale Extended Stay Economy Upscale Source: Choice Internal Data, December 31, 2010 ® ® ® ® ® ® ® ® ® ® ® ® ® ® ® ® ® ® ® ® ® ®
Slide 10: Strong Presence in Major Travel Markets Outside of the U.S.
19 hotels Mexico 294 hotels Canada 247 hotels Continental Europe, UK & Ireland 161 hotels Scandinavia 57 hotels Brazil 52 hotels Japan 3 hotels China 1 hotel Malaysia 26 hotels India 12 hotels Central America 1 hotel Singapore 276 hotels Australia, New Zealand & Papua New Guinea 1,149 properties in
Slide 11: Presentation
PRESENTATION
Slide 12: Services Lifecycle Improves Brands and Property Performance
FRANCHISED PROPERTIES RETURN ON INVESTMENT SERVICES LIFECYCLE IMPROVES BRANDS AND PROPERTY PERFORMANCE FRANCHISED PROPERTIES RETURN ON INVESTMENT Brand Planning and Management • Targeted, differentiated programs, amenities and services for each brand Brand Performance • Revenue and guest service con
Slide 13: Marketing and Central Reservation System Leverages Size, Scale and Distribution
MARKETING AND CENTRAL RESERVATION SYSTEM LEVERAGES SIZE, SCALE AND DISTRIBUTION $300-plus million in annual marketing and reservation system fees Leverage expertise and innovation in on-line, targeted interactive marketing to influence guest hotel stay decisions Powerful advertising campaigns Focus
Slide 14: Strong and Growing Aided Brand Awareness
STRONG AND GROWING AIDED BRAND AWARENESS Source: Percentage of survey respondents. Millward Brown, December 2010. *Econo Lodge, Rodeway Inn and Suburban Extended Stay measured among economy hotel users.
Slide 15: Strong, Growing Loyalty Program
STRONG, GROWING LOYALTY PROGRAM Choice Privileges Revenue as Percent of Domestic Gross Room Revenues* Source: Choice Internal Data, December 31, 2010 * 2001-2008 Data Excludes Econo Lodge and Rodeway Inn brands Comprehensive loyalty rewards program 12 million members worldwide – contribute over ¼ of
Slide 16: Central Reservations System Delivery Puts Heads in Beds
CENTRAL RESERVATIONS SYSTEM (CRS) DELIVERY PUTS “HEADS IN BEDS” All Hotel Direct Reservation Choice Central Reservation Contribution Domestic Franchise System Gross Room Revenue Source Domestic Choice CRS Net Room Revenue Source: Choice Internal Data, December, 2010
Slide 17: Central Reservations Bookings Create Significant Value for Franchisees
Central Channel ADR “Premium” Domestic Choice CRS Net Channel Share CENTRAL RESERVATIONS BOOKINGS CREATE SIGNIFICANT VALUE FOR FRANCHISEES Source: Choice Internal Data, December, 2010 $66.11 $70.43 $71.59 $73.54 $73.35 $80.04 Systemwide Call Center choicehotels.com
Slide 18: Conversion Brand Franchise Sales Opportunity in Soft New Construction Environment
CONVERSION BRAND FRANCHISE SALES OPPORTUNITY IN SOFT NEW CONSTRUCTION ENVIRONMENT Source: Choice Internal Data, December, 2010
Slide 19: Strong, Steady Franchise System Growth
STRONG, STEADY FRANCHISE SYSTEM GROWTH Domestic Hotels On-Line Domestic Rooms On-Line (in thousands) Source: Choice Internal Data, December, 2010
Slide 20: Franchising Revenue Stream Less Volatile Than RevPAR
FRANCHISING REVENUE STREAM LESS VOLATILE THAN REVPAR $0 $50 $100 $150 $200 $250 $300 $350 -17% -12% -7% -2% 3% 8% CHH RevPAR STR Chain Scale (Supply Weighted) Industry RevPAR Franchising Revenue ($ in millions) Source: Smith Travel Research, Choice Internal Data, December 2010
Slide 21: Adjusted EBITDA Less Volatile Than Industry Profitability
ADJUSTED EBITDA LESS VOLATILE THAN INDUSTRY PROFITABILITY Industry Profits Adjusted EBITDA Source: Smith Travel Research, Choice Internal Data, December 2010 ($ in millions) ($ in billions)
Slide 22: Capital Light Model Generates Strong Returns on Invested Capital
CAPITAL “LIGHT” MODEL GENERATES STRONG RETURNS ON INVESTED CAPITAL 15.2% 16.1% 14.7% 19.5% 27.6% 36.7% 49.7% 62.9% 78.5% 68.8% 59.5% 48.1% 48.0% After-Tax Return On Invested Capital Source: Choice Internal Data, December 2010
Slide 23: Track Record of Strong Earnings Per Share Performance
TRACK RECORD OF STRONG EARNINGS PER SHARE PERFORMANCE $0.40 $0.51 $0.51 $0.58 $0.76 $0.93 $1.07 $1.25 $1.48 $1.73 $1.73 $1.68 $1.81 Adjusted Diluted Earnings Per Share Note: See appendix for reconciliation of adjusted diluted earnings per share to diluted earnings per share. To improve comparability
Slide 24: Opportunistic Share Repurchases Key Part of Capital Allocation Strategy
Remaining authority on current authorization – 3.6 million shares as of December 31, 2010 OPPORTUNISTIC SHARE REPURCHASES KEY PART OF CAPITAL ALLOCATION STRATEGY Source: Capital IQ, December 2010, Choice Internal Data, December 30, 2010. Share amounts for 2005 and prior years retroactively adjusted
Slide 25: High Cash Dividend Yield Compared to Other Lodging C-Corps
1.9% 0.0% 0.0% 0.0% 3.3% 0.9% 0.0% 0.0% 0.5% 1.9% HIGH CASH DIVIDEND YIELD COMPARED TO OTHER LODGING C-CORPS Choice Great Wolf Wyndham Gaylord Hyatt Orient- Express Starwood Red Lion Marriott IHG Source: Bloomberg Financial, March 10, 2011
Slide 26: Strong Credit Position
STRONG CREDIT POSITION Investment grade credit rating – Moody’s Baa3 – Standard & Poor’s BBB Strong liquidity position Substantial financial flexibility Minimal contingent liability exposure Source: Choice Internal Data, December 2010
Slide 27: Strategy for Choice's Brands, Growth and Shareholders
STRATEGY FOR CHOICE’S BRANDS, GROWTH AND SHAREHOLDERS Improve and Grow Brands – Increase portfolio profitability of the Comfort brand family – Refresh Sleep Inn to improve long-term brand growth potential – Invest in and expand emerging brands/segments – Cambria, Ascend, International Capture Greate
Slide 28: Appendix: Reconciliation of Non-GAAP Financial Measurements to GAAP
Appendix Reconciliation of Non-GAAP Financial Measurements to GAAP
Slide 29: Disclaimer
DISCLAIMER Adjusted franchising margins, adjusted earnings before interest, taxes depreciation and amortization (EBITDA), adjusted net income, adjusted diluted earnings per share (EPS), franchising revenues, net operating profit after tax (NOPAT), return on average invested capital (ROIC) and free c
Slide 30: Franchising Revenues and Adjusted Franchising Margins
FRANCHISING REVENUES AND ADJUSTED FRANCHISING MARGINS Note: To improve comparability certain employee severance amounts included in the determination of adjusted franchising margins in this presentation for 2007 through 2010 differ from amounts reported in exhibit 8 of our year-end earnings announce
Slide 31: Franchising Revenues and Adjusted Franchising Margins (Continued)
FRANCHISING REVENUES AND ADJUSTED FRANCHISING MARGINS (Continued) ($ amounts in thousands) Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended December 31, December 31, December 31, December 31, December 31, December 31, Total Revenues $ 385,866 $ 365,562 $ 341,428 $ 352,841 $ 324,203
Slide 32: Return on Invested Capital
RETURN ON INVESTED CAPITAL ($ in millions) Year Ended December 31, Year Ended December 31, Year Ended December 31, Year Ended December 31, Year Ended December 31, Year Ended December 31, Year Ended December 31, Operating Income (a) $160.8 $148.1 $174.6 $185.2 $166.6 $143.8 $125.0 Tax Rate(a) 32.1% 3
Slide 33: Return on Invested Capital (Continued)
RETURN ON INVESTED CAPITAL (Continued) ($ in millions) Year Ended December 31, Year Ended December 31, Year Ended December 31, Year Ended December 31, Year Ended December 31, Year Ended December 31, Operating Income (a) $113.9 $104.7 $96.3 $92.4 $94.2 $85.2 Tax Rate(a) 36.1% 36.5% 35.0% 39.0% 39.5%
Slide 34: Free Cash Flows
FREE CASH FLOWS ($ in thousands) Year Ended December 31, Year Ended December 31, 2009 Year Ended December 31, Year Ended December 31, Year Ended December 31, Year Ended December 31, Year Ended December 31, Net Cash Provided by Operating Activities $ 144,935 $ 112,216 $ 104,399 $ 145,666 $ 153,680 $
Slide 35: Free Cash Flows (Continued)
FREE CASH FLOWS (Continued) ($ in thousands) Year Ended December 31, Year Ended December 31, Year Ended December 31, Year Ended December 31, Year Ended December 31, Year Ended December 31, Net Cash Provided by Operating Activities $ 115,304 $ 99,018 $ 101,712 $ 53,879 $ 65,040 $ 38,952 Net Cash Prov
Slide 36: Adjusted EBITDA
Note: To improve comparability certain employee severance amounts included in the determination of adjusted EBITDA in this presentation for 2007 through differ from amounts reported in exhibits 8 of our various earnings announcements. Source: Choice Internal Data, December 2010 ADJUSTED EBITDA ($ in
Slide 37: Adjusted EBITDA (Continued)
ADJUSTED EBITDA (Continued) ($ in thousands) Year Ended December 31, Year Ended December 31, Year Ended December 31, Year Ended December 31, Year Ended December 31, Year Ended December 31, Operating Income $ 113,946 $ 104,700 $ 73,577 $ 92,427 $ 94,170 $ 85,151 Adjustments Acceleration of Management
Slide 38: Adjusted Diluted Earnings Per Share
ADJUSTED DILUTED EARNINGS PER SHARE Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended December 31, December 31, December 31, December 31, December 31, December 31, (In thousands, except per share amounts) Net Income 107,441 $ 98,250 $ 100,211 $ 111,301 $ 112,787 $ 87,565 $ Adjustment
Slide 39: Adjusted Diluted Earnings Per Share (Continued)
ADJUSTED DILUTED EARNINGS PER SHARE (Continued) Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended December 31, December 31, December 31, December 31, December 31, December 31, December 31, (In thousands, except per share amounts) Net Income 74,345 $ 71,863 $ 60,844 $ 14,32
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