Choice Hotels International, Inc. · NYSE:CHH
Choice Hotels International — Investor Presentation (June 2012)
36 slides from Choice Hotels International's investor presentation, Jun 5, 2012
Slide 1: Investor Presentation June 2012
Investor Presentation June 2012 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 Growing US hotel market share* – 9.6% share of branded US hotels (+80 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 competencies a
Slide 4: One of the Largest Hoteliers
Source: Smith Travel Research, March 31, 2012 ONE OF THE LARGEST HOTELIERS Market Share % 11.2% 9.6% 6.3% 6.0% 5.9% 3.8% 2.0% 1.1% 0.9% 0.7% 5 yr. bps (07-12) -10 +80 +110 +30 +80 -70 +30 -50 +20 -70 Market Share (% of Hotels Open in U.S.) Wyndham Choice Hilton IHG Marriott Best Western Accor Carlso
Slide 5: Family of Well-Known and Diversified Brands
Conversion $42,000+ $120,000+ $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 2012
Slide 6: Strong Limited Service New Construction Brands
STRONG LIMITED SERVICE NEW CONSTRUCTION BRANDS POSITIONED WELL FOR LONG-TERM GROWTH Source: Smith Travel Research, Choice Internal Data, March 31, 2012 Hampton Inn / Inn & Suites Holiday Inn Express La Quinta Inn / Inn & Suites Fairfield Inn Country Inn & Suites Domestic Hotels
Slide 7: Significant Growth Opportunities Remain in Large Conversion Market
SIGNIFICANT GROWTH OPPORTUNITIES REMAIN IN LARGE CONVERSION MARKET Chart does not include 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 Select La
Slide 8: Domestic Pipeline of Hotels
DOMESTIC PIPELINE OF 388 HOTELS Mid-scale Extended Stay Economy Upscale Source: Choice Internal Data, March 31, 2012
Slide 9: Franchised Properties Return on Investment
FRANCHISED PROPERTIES RETURN ON INVESTMENT SERVICES LIFECYCLE IMPROVES BRANDS AND PROPERTY PERFORMANCE Brand Planning and Management Brand Performance • Revenue and guest service consulting • Inventory and rate management • Local sales and marketing • Independent third-party quality assurance Traini
Slide 10: Strong Presence in Major Travel Markets Outside of the U.S.
307 hotels Canada 160 hotels Scandinavia 3 hotels China 52 hotels Japan 251 hotels Continental Europe, UK & Ireland 23 hotels Mexico 15 hotels Central America 59 hotels Brazil 1 hotel Jordan 27 hotels India 1 hotel Singapore 1 hotel Malaysia 268 hotels Australia & New Zealand 1,168 properties in app
Slide 11: 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 12: Strong and Growing Aided Brand Awareness
STRONG AND GROWING AIDED BRAND AWARENESS Source: Percentage of survey respondents. Millward Brown, December 2011. *Econo Lodge, Rodeway Inn and Suburban Extended Stay measured among economy hotel users. N/A N/A N/A N/A
Slide 13: Strong, Growing Loyalty Program
STRONG, GROWING LOYALTY PROGRAM Choice Privileges Revenue as Percent of Domestic Gross Room Revenues* Source: Choice Internal Data, December 31, 2011 * 2001-2008 Data Excludes Econo Lodge and Rodeway Inn brands Comprehensive loyalty rewards program 14 million members worldwide – contribute over ¼ of
Slide 14: 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 31, 2011
Slide 15: 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 2011 $68.42 $71.93 $74.53 $76.90 $77.56 $82.31 Systemwide Call Center choicehotels.com
Slide 16: 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 31, 2011
Slide 17: Strong, Steady Franchise System Growth
STRONG, STEADY FRANCHISE SYSTEM GROWTH Domestic Hotels On-Line Domestic Rooms On-Line (in thousands) CAGR = 4.2% CAGR = 3.5% CAGR = 3.8% CAGR = 3.0% Source: Choice Internal Data, December 31, 2011
Slide 18: Franchising Revenue Stream Less Volatile Than RevPAR
FRANCHISING REVENUE STREAM LESS VOLATILE THAN REVPAR $0 $50 $100 $150 $200 $250 $300 $350 -17% -12% -7% -2% 3% 8% CHH RevPAR STR Chain Scale (Supply Weighted) Industry RevPAR CHH Franchising Revenue ($ in millions) Source: Smith Travel Research, Choice Internal Data, December 2011
Slide 19: Adjusted EBITDA Less Volatile Than Industry Profitability
ADJUSTED EBITDA LESS VOLATILE THAN INDUSTRY PROFITABILITY Source: Smith Travel Research, Choice Internal Data, December 2011 ($ in millions) ($ in billions) Industry Profits CHH Adjusted EBITDA
Slide 20: 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% 47.2% After-Tax Return On Invested Capital Source: Choice Internal Data, December 2011
Slide 21: Track Record of Strong Earnings Per Share Performance
TRACK RECORD OF STRONG EARNINGS PER SHARE PERFORMANCE Adjusted Diluted Earnings Per Share Note: See appendix for reconciliation of adjusted diluted earnings per share to diluted earnings per share. To improve comparability certain employee severance amounts included in the determination of adjusted
Slide 22: Opportunistic Share Repurchases Key Part of Capital Allocation Strategy
Remaining authority on current authorization – 1.6 million shares as of March 31, 2012 OPPORTUNISTIC SHARE REPURCHASES KEY PART OF CAPITAL ALLOCATION STRATEGY Source: Capital IQ, December 2011, Choice Internal Data, March 31, 2012 and December 31, 2011. Share amounts for 2005 and prior years retroac
Slide 23: High Cash Dividend Yield Compared to Other Lodging C-Corps
HIGH CASH DIVIDEND YIELD COMPARED TO OTHER LODGING C-CORPS Source: Thomson One, May 31, 2012 Choice Great Wolf Wyndham Gaylord Hyatt Orient- Express Starwood Red Lion Marriott IHG
Slide 24: 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 25: Appendix: Reconciliation of Non-GAAP Financial Measurements to GAAP
Appendix Reconciliation of Non-GAAP Financial Measurements to GAAP
Slide 26: 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
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Slide 29: Return on Invested Capital
RETURN ON INVESTED CAPITAL (a) Operating income and tax rate for the year ended December 31, 2001 have been adjusted to exclude the effect of a $22.7 million impairment charge related to the write-off of the company’s investment in Friendly Hotels. Source: Choice Internal Data, December 2011 Year En
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Slide 31: Free Cash Flows
FREE CASH FLOWS Source: Choice Internal Data, December 2011 Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended December 31, December 31, December 31, December 31, December 31, December 31, December 31, ($ in thousands) Net Cash Provided by Operating Activities 134,844 $ 144
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Slide 33: 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 2011 ADJUSTED EBITDA Year
Slide 34: Adjusted EBITDA (Continued)
ADJUSTED EBITDA (Continued) Source: Choice Internal Data, December 2011 Year Ended 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, December 31, Operating Income 124,983 $ 113,946 $ 104,70
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