Choice Hotels International, Inc. · NYSE:CHH

Choice Hotels International — Investor Presentation (March 2010)

39 slides from Choice Hotels International's investor presentation, Mar 3, 2010

  1. Slide 1: Investor Presentation March 2010

    Exhibit 99.1 Investor Presentation March 2010

  2. 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

  3. Slide 3: Choice Hotels Overview

    CHOICE HOTELS OVERVIEW Strong, Growing, Global Hotel Highly Attractive Business Model Franchising Business With Strong Financial Returns Leading gainer of US hotel market share* Fee-for-service business model – 9.6% share of branded US hotels (+160 basis points over trailing 5 years)* Predictable, p

  4. Slide 4: One of the Largest Hoteliers

    ONE OF THE LARGEST HOTELIERS Leading Gainer of Market Share (% of Hotels Open in U.S.) Market Share % 11.4% 9.6% 6.0% 5.9% 5.5% 3.9% 2.0% 1.2% 0.9% 0.6% 5 yr. bps (04-09) -30 +160 +80 +150 +100 -50 -70 +10 +20 -80 14 12 10 8 6 4 2 0 Wyndham Choice IHG Hilton Marriott Best Western Accor Carlson Starw

  5. Slide 5: Family of Well-Known and Diversified Brands

    FAMILY OF WELL-KNOWN AND DIVERSIFIED BRANDS New Construction Targeted Average Daily Rate Conversion $105,000+ $100+ $85 $70 $50 $45,000+ * Excludes cost of land; based on average domestic per-room investment. Source: Choice Internal Data, April 2009 5

  6. Slide 6: Challenging Near-Term Environment for New Construction Hotel Development

    CHALLENGING NEAR-TERM ENVIRONMENT FOR NEW CONSTRUCTION HOTEL DEVELOPMENT 0% Sources: Lodging Econometrics (Q4 2009),Smith Travel Research, December 2009 *2009 - 2010 supply growth projections are averages based on STR and PwC forecasts 6

  7. 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, 2009 7

  8. Slide 8: Significant Growth Opportunities Remain in Large Conversion Market

    SIGNIFICANT GROWTH OPPORTUNITIES REMAIN IN LARGE CONVERSION MARKET Domestic Hotels Chart does not include 17,000+ independent hotels in budget, economy and mid-scale segments Super 8 Hampton Inn/ Holiday Fairfield Howard Knight’s Hampton Inn Inn/Holiday Inn Inn Johnson Inn & Suites Select Motel 6 Am

  9. Slide 9: Domestic Pipeline of 727 Hotels

    DOMESTIC PIPELINE OF 727 HOTELS Conversion New Construction 6 Extended Stay Economy Upscale Mid-scale Source: Choice Internal Data, December 31, 2009 9

  10. Slide 10: Strong Presence in Major Travel Markets Outside of the U.S.

    STRONG PRESENCE IN MAJOR TRAVEL MARKETS OUTSIDE OF THE U.S. 1,115 properties in more than 30 countries and 281 hotels 161 hotels territories on 5 Canada Scandinavia continents. 236 hotels Continental Europe, UK Multi-year investments & Ireland in IT and marketing planned to enhance value proposition

  11. Slide 11: Services Lifecycle Improves Brands and Property Performance

    SERVICES LIFECYCLE IMPROVES BRANDS AND PROPERTY PERFORMANCE Brand Planning and Management • Targeted, differentiated programs, amenities and Portfolio services for each brand Management Opening Services • Repositioning • Ensure hotels open successfully and meet or • Relicensing exceed brand standard

  12. Slide 12: 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

  13. Slide 13: Strong and Growing Aided Brand Awareness

    STRONG AND GROWING AIDED BRAND AWARENESS 98 99 95 90 87 88 77 80 72 59 57 43 43 14 26 14 19 Comfort Comfort Sleep Inn Quality Clarion Econo Rodeway MainStay Suburban Cambria Choice Inn Suites Lodge* Inn* Extended Suites Hotels Stay* 2001 2009 Source: Percentage of survey respondents. Millward Brown,

  14. Slide 14: Strong, Growing Loyalty Program

    STRONG, GROWING LOYALTY PROGRAM Comprehensive loyalty rewards program More than 9.5 million members worldwide – contribute over ¼ of domestic gross room revenues 2.0 million new members added in 2009 Delivers incremental business to all Choice brand hotels Important selling point for franchise sales

  15. Slide 15: Central Reservations System Delivery Puts Heads in Beds

    CENTRAL RESERVATIONS SYSTEM (“CRS”) DELIVERY PUTS “HEADS IN BEDS” Domestic Franchise System Domestic Choice CRS Gross Room Revenue Source Net Room Revenue Choice Central Reservation Contribution 1/3 All Hotel Direct Reservation Source: Choice Internal Data, December 2009 15

  16. Slide 16: Central Reservations Bookings Create Significant Value for Franchisees

    CENTRAL RESERVATIONS BOOKINGS CREATE SIGNIFICANT VALUE FOR FRANCHISEES Domestic Choice CRS Central Channel ADR Net Channel Share “Premium” $79.50 $73.35 $73.32 $71.59 $70.71 $66.11 2005 2006 2007 2008 2009 Systemwide Call Center choicehotels.com Source: Choice Internal Data, December, 2009 16

  17. Slide 17: Lodging Downcycle Trends

    LODGING DOWNCYCLE TRENDS Gulf war Recession 9/11 Recession Source: Blue Chip Economic Indicators (2/10), Smith Travel Research, Choice Internal Data 17

  18. 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 31, 2009 18

  19. Slide 19: Strong, Steady Franchise System Growth

    STRONG, STEADY FRANCHISE SYSTEM GROWTH Domestic Hotels On-Line Domestic Rooms On-Line (in thousands) CAGR = 5.1% CAGR = 4.6% CAGR = 4.6% CAGR = 4.2% 3,1233,2443,3273,4823,6363,8344,0484,2114,4454,7164,906 258 266 271 282 294 310 329 339 354 374 389 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2

  20. Slide 20: Franchising Revenue Stream Less Volatile Than RevPAR

    FRANCHISING REVENUE STREAM LESS VOLATILE THAN REVPAR ($ in millions) $350 8% $300 3% $250 $200 -2% $150 -7% $100 -12% $50 -17% $0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 CHH RevPAR STR Chain Scale (Supply Weighted) Industry RevPAR Franchising Revenue Source: Smith Travel Research

  21. Slide 21: Adjusted EBITDA Less Volatile Than Industry Profitability

    ADJUSTED EBITDA LESS VOLATILE THAN INDUSTRY PROFITABILITY 30 Industry Profits Adjusted EBITDA 250 25 200 20 150 15 100 10 50 5 0 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Source: Smith Travel Research, Choice Internal Data, December 2009 21

  22. Slide 22: Capital Light Model Generates Strong Returns on Invested Capital

    CAPITAL “LIGHT” MODEL GENERATES STRONG RETURNS ON INVESTED CAPITAL After-Tax Return On Invested Capital 78.5% 68.8% 62.9% 59.5% 49.7% 48.1% 36.7% 27.6% 19.5% 15.2% 16.1% 14.7% 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Source: Choice Internal Data, December 2009 22

  23. Slide 23: Track Record of Strong Earnings Per Share Performance

    TRACK RECORD OF STRONG EARNINGS PER SHARE PERFORMANCE Adjusted Diluted Earnings Per Share $1.73 $1.73 $1.68 $1.48 $1.25 $1.07 $0.93 $0.76 $0.51 $0.51 $0.58 $0.40 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Note: See appendix for reconciliation of adjusted diluted earnings per share t

  24. Slide 24: Opportunistic Share Repurchases Key Part of Capital Allocation Strategy

    OPPORTUNISTIC SHARE REPURCHASES KEY PART OF CAPITAL ALLOCATION STRATEGY Remaining authority on current authorization – 3.6 million shares as of March 1, 2010 20.3 x 17.0 x 14.9 x 14.8 x 11.9 x 11.9 x 11.3 x 11.0 x 10.2 x 10.2 x 10.3 x 8.6 x 1.6 2.2 2.1 7.9 7.2 3.2 24.0 10.8 5.7 6.4 - 4.9 1998 1999 2

  25. Slide 25: High Cash Dividend Yield Compared to Other Lodging C-Corps

    HIGH CASH DIVIDEND YIELD COMPARED TO OTHER LODGING C-CORPS 2.9% 2.3% 2.12% 0.6% 0.5% 0.0% 0.0% 0.0% 0.0% 0.0% Choice Great Starwood Wolf IHG Orient-Express Gaylord Hyatt Marriott Red Lion Wyndham Source: Bloomberg Financial, February 26, 2010 25

  26. Slide 26: Strong Credit Position

    STRONG CREDIT POSITION Investment grade credit rating – Moody’s Baa3 – Standard & Poor’s BBB Strong liquidity position – $350 million committed revolver matures June 2011 – No debt maturities until 2011 Substantial financial flexibility Minimal contingent liability exposure Source: Choice Internal D

  27. Slide 27: Strategy for Choice's Brands, Growth and Shareholders

    STRATEGY FOR CHOICE’S BRANDS, GROWTH AND SHAREHOLDERS Grow and Improve Brands Continue progress toward long-term goal of domestic market share leadership Increase portfolio profitability of the Comfort brand family Refresh Sleep Inn to improve long-term brand growth potential Invest in and expand em

  28. Slide 28: Appendix: Reconciliation of Non-GAAP Financial Measurements to GAAP

    Appendix Reconciliation of Non-GAAP Financial Measurements to GAAP 28

  29. 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

  30. Slide 30: Franchising Revenues and Adjusted Franchising Margins

    FRANCHISING REVENUES AND ADJUSTED FRANCHISING MARGINS ($ amounts in thousands) 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, 2009 2008 2007 2006 2005 2004 2003 Total Revenues $ 5

  31. 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, 2002 2001 2000 1999 1998 1997 Total Revenues $ 365,562 $ 341,428

  32. Slide 32: Return on Invested Capital

    RETURN ON INVESTED CAPITAL Year Ended Year Ended Year Ended Year Ended Year Ended ($ in millions) December 31, December 31, December 31, December 31, December 31, 1998 1999 2000 2001 2002 Operating Income (a) $85.2 $94.2 $92.4 $96.3 $104.7 Tax Rate(a) 41.7% 39.5% 39.0% 35.0% 36.5% After-Tax Operatin

  33. Slide 33: Return on Invested Capital (Continued)

    RETURN ON INVESTED CAPITAL (CONTINUED) 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, 2003 2004 2005 2006 2007 2008 2009 Operating Income (a) $113.9 $125.0 $143.8

  34. Slide 34: Free Cash Flows

    FREE CASH FLOWS 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) 2009 2008 2007 2006 2005 2004 Net Cash Provided by Operating Activities $ 112,216 $ 104,399 $ 145,666 $ 153,680 $ 133,588 $

  35. Slide 35: Free Cash Flows (continued)

    FREE CASH FLOWS (continued) 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) 2003 2002 2001 2000 1999 1998 Net Cash Provided by Operating Activities $ 115,304 $ 99,018 $ 101,712 $ 53,879 $

  36. Slide 36: Adjusted EBITDA

    ADJUSTED EBITDA 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, 2009 2008 2007 2006 2005 2004 Operating Income $ 148,073 $ 174,596 $ 185,199 $ 166,625 $ 143,750 $ 124,983 Adjustments Acce

  37. Slide 37: Adjusted EBITDA (Continued)

    ADJUSTED EBITDA (CONTINUED) 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, 2003 2002 2001 2000 1999 1998 1997 Operating Income $ 113,946 $ 104,700 $ 73,577 $ 92,4

  38. Slide 38: Adjusted Diluted Earnings Per Share

    ADJUSTED DILUTED EARNINGS PER SHARE 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) 2009 2008 2007 2006 2005 Net Income $ 98,250 $ 100,211 $ 111,301 $ 112,787 $ 87,565 Adjustments: Loss(G

  39. 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) 2004 2003 2002 2001 2000 1999 1998 Net Inco

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