Choice Hotels International, Inc. · NYSE:CHH

Choice Hotels International — Investor Presentation (February 2009)

40 slides from Choice Hotels International's investor presentation, Feb 25, 2009

  1. Slide 1: Investor Presentation

    Exhibit 99.1 Investor Presentation February 2009

  2. Slide 2: Disclaimer

    DISCLAIMER Certain matters discussed throughout all of 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 simil

  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 Fee-for-service business model share* Predictable, profitable growth in a variety – 9.4% share of branded US hotels (+180 of lodg

  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 11.7% 9.4% 5.8% 5.6% 5.3% 4.0% 1.9% 1.2% 0.8% 0.5% 5 yr. bps (03-08) -80 180 80 130 80 -50 -60 10 0 -70 14 12 10 8 6 4 2 0 Wyndham Choice IHG Hilton Marriott Best Accor Carlson Starwood Hyatt Western

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

    FAMILY OF WELL KNOWN AND DIVERSIFIED BRANDS Estimated Per Room Investment* New Construction Targeted Average Daily Rate Conversion $95,000+ $100+ $84,000+ $80 $76,000+ $65,000+ $70 $61,000+ $54,000+ $50 $40,000+ * Excludes cost of land Source: Choice Internal Data, April 2008 5

  6. Slide 6: Well Positioned for Long-Term New Construction Hotel Growth in Limited Service Segment

    WELL POSITIONED FOR LONG-TERM NEW CONSTRUCTION HOTEL GROWTH IN LIMITED SERVICE SEGMENT Domestic Hotels 1,622 1,579 1,462 699 560 541 438 365 Holiday Inn Hampton La Quinta Fairfield Country Express Inn / Inn & Inn/Inn & Inn Inn & Suites Suites Suites Source: Smith Travel Research, Choice Internal Dat

  7. Slide 7: Significant Growth Opportunities Remain in Large Conversion Market

    SIGNIFICANT GROWTH OPPORTUNITIES REMAIN IN LARGE CONVERSION MARKET Domestic Hotels Chart does not include 2,010 1,887 17,000+ independent hotels 1,692 1,622 1,579 in budget, economy and mid-scale segments 922 908 816 799 778 699 560 550 377 360 346 344 292 279 150 Days Inn Hampton Inn / Americas Bes

  8. Slide 8: Domestic Pipeline of Hotels

    DOMESTIC PIPELINE OF 987 HOTELS 282 Conversion New Construction 176 159 83 59 45 50 60 38 34 1 Extended Stay Economy Upscale Mid-scale Source: Choice Internal Data, December 2008 8

  9. Slide 9: Strong Presence in Major Travel Markets Outside of the U.S.

    STRONG PRESENCE IN MAJOR TRAVEL MARKETS OUTSIDE OF THE U.S. 1,111 properties 32 countries and territories on 5 154 hotels 275 hotels Scandinavia continents Canada Large global “pure 258 hotels hotel franchising” Continental Europe, UK business & Ireland Track record of consistent, 1 hotel 51 hotels

  10. Slide 10: 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

  11. Slide 11: Marketing Leverages Size, Scale and Distribution

    MARKETING LEVERAGES SIZE, SCALE AND DISTRIBUTION $300-plus million in annual marketing and reservation system fees Leverage expertise in on-line, targeted interactive marketing to influence guest hotel stay decisions Multi and single brand advertising campaigns Focus on driving guests to Choice cent

  12. Slide 12: Strong and Growing Aided Brand Awareness

    STRONG AND GROWING AIDED BRAND AWARENESS 98 99 95 90 87 89 77 82 72 62 57 43 40 29 20 14 14 Comfort Comfort Sleep Inn Quality Clarion Econo Rodeway MainStay Suburban Cambria Choice Inn Suites Lodge Inn Suites Hotels 2001 2008 Source: Percentage of survey respondents. Millward Brown, December 2008 12

  13. Slide 13: Strong, Growing Loyalty Program

    STRONG, GROWING LOYALTY PROGRAM Comprehensive loyalty rewards program 7.5 million members worldwide– contribute nearly 22% of domestic gross room revenues More than 1 million members added in 2008 Delivers incremental business to all Choice brand hotels Important selling point for franchise sales Ch

  14. Slide 14: Large and Growing Central Reservations System Delivery

    LARGE AND GROWING CENTRAL RESERVATIONS SYSTEM (“CRS”) DELIVERY PUTS “HEADS IN BEDS” Domestic Franchise System Domestic Choice CRS Gross Room Revenue Source Net Room Revenue Choice Central $ in Millions Reservation $1,800 Contribution 1/3 $1,638 $1,600 All $1,400 Hotel Direct Reservation $1,161 $1,20

  15. Slide 15: Significant Average Daily Rate Premium on Central Reservations Bookings

    SIGNIFICANT AVERAGE DAILY RATE PREMIUM ON CENTRAL RESERVATIONS BOOKINGS Domestic Choice CRS Central Channel ADR Net Channel Share 62% $84.03 47% $77.78 $73.35 $73.72 $71.59 35% $66.11 23% 18% 15% 2005 2006 2007 2008 2005 2006 2007 2008 Internet Voice Travel Agent (GDS) Systemwide Call Center choiceh

  16. Slide 16: Managing Differently in Lodging Downturn

    MANAGING DIFFERENTLY IN LODGING DOWNTURN Leverage brand preference and conversion opportunity during lodging down cycle to drive market share Reallocate resources and deliver tools to position franchisees to capture larger share of shrinking travel demand Implement contingency plans at all levels of

  17. Slide 17: Lodging Downcycle Trends

    LODGING DOWNCYCLE TRENDS 6.0 5.0 Gulf war 4.0 recession 9/11 recession 3.0 2.0 Financial Markets/ 1.0 Housing Crisis 0.0 -1.0 IND. REVPAR CHH REVPAR IND. REVPAR CHH REVPAR -2.0 1990 +2.0% 1990 +1.7% 2001 -7.0% 2001 -2.4% 1991 - 2.5% 1991 - 2.7% 2002 -2.7% 2002 -3.8% -3.0 1992 +2.5% 1992 +1.4% 2003 +

  18. Slide 18: Conversion Brand Franchise Sales Opportunity in Soft New Construction Environment

    CONVERSION BRAND FRANCHISE SALES OPPORTUNITY IN SOFT NEW CONSTRUCTION ENVIRONMENT 770 720 698 639 552 470 432 443 437 402 370 342 327 318 304 298 300 288 261 241 237 184 174 184 182 134 124 128 116 63 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 New Construction Conversion Total Source: Choice

  19. Slide 19: Relicensing Activity Similar to New Construction Brand Sales

    RELICENSING ACTIVITY SIMILAR TO NEW CONSTRUCTION BRAND SALES 9.6% 8.7% 9.3% 7.0% 7.0% 6.0% 5.5% 5.0% 4.9% 4.4% 153 188 158 146 190 254 332 378 403 312 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Relicensing Contracts Relicensings as % of the prior year's ending system size Source: Choice Inter

  20. Slide 20: Strong, Steady Franchise System Growth

    STRONG, STEADY FRANCHISE SYSTEM GROWTH Domestic Hotels On-Line Domestic Rooms On-Line (in thousands) CAGR = 5.3% CAGR = 4.9% CAGR = 4.5% CAGR = 4.0% 3,123 3,244 3,3273,482 3,636 3,834 4,0484,2114,445 4,716 258 266 271 282 294 310 329 339 354 374 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 1999

  21. Slide 21: Franchising Revenue Stream Less Volatile Than RevPAR

    FRANCHISING REVENUE STREAM LESS VOLATILE THAN REVPAR ($ in millions) $350 10% 8% $300 6% $250 4% $200 2% $150 0% $100 -2% -4% $50 -6% $0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 CHH RevPAR STR Chain Scale (Supply Weighted) Industry RevPAR Franchising Revenue Source: Smith Travel Resear

  22. Slide 22: Adjusted EBITDA Less Volatile Than Industry Profitability

    ADJUSTED EBITDA LESS VOLATILE THAN INDUSTRY PROFITABILITY 30 250 25 200 20 150 15 100 10 50 5 0 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Industry Profits Adjusted EBITDA Source: Smith Travel Research, Choice Internal Data, December 2008 22

  23. Slide 23: Capital Light Model Generates Strong Returns on Invested Capital

    CAPITAL “LIGHT” MODEL GENERATES STRONG RETURNS ON INVESTED CAPITAL 78.5% 68.8% 62.9% 59.5% 49.7% 36.7% 27.6% 19.5% 15.2% 16.1% 14.7% 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Source: Choice Internal Data, December 2008 23

  24. Slide 24: Track Record of Strong Earnings Per Share Growth

    TRACK RECORD OF STRONG EARNINGS PER SHARE GROWTH Adjusted Diluted Earnings Per Share $1.74 $1.75 $1.49 $1.26 $1.07 $0.93 $0.76 $0.58 $0.51 $0.51 $0.40 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Note> See appendix for reconciliation of adjusted diluted earnings per share to diluted earnin

  25. Slide 25: Opportunistic Share Repurchases Key Part of Capital Allocation Strategy

    OPPORTUNISTIC SHARE REPURCHASES KEY PART OF CAPITAL ALLOCATION STRATEGY Remaining authority on current authorization – 5.5 million shares as of February 10, 2009 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 8.6 x 9.1 x 7.9 7.2 24.0 10.8 5.7 6.4 1.6 - 2.2 0.5 3.2 4.9 1998 199

  26. Slide 26: [Page 26 not used]

    ee OR PRESENTATION [Page 26 not used] CHOICE HOTELS INTERNATIONAL

  27. Slide 27: Credit Strengths

    CREDIT STRENGTHS Solid investment grade company – Moody’s Baa3 – Standard & Poor’s BBB Strong liquidity position – $350 million committed revolver matures June 2011 with $65.6 million available as of December 31, 2008 – No debt maturities until 2011 Substantial financial flexibility Minimal continge

  28. Slide 28: Strategic Agenda for Choice's Brands, Growth and Shareholders

    STRATEGIC AGENDA FOR CHOICE’S BRANDS, GROWTH AND SHAREHOLDERS Continue core brand market share, unit growth and brand performance improvements Continue shareholder-friendly capital allocation policies Leverage financial capacity/strength to expand scale of emerging brands Evaluate opportunities to e

  29. Slide 29: Appendix: Reconciliation of Non-GAAP Financial Measurements to GAAP

    Appendix Reconciliation of Non-GAAP Financial Measurements to GAAP 29

  30. Slide 30: 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

  31. Slide 31: 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 December 31, December 31, December 31, December 31, December 31, December 31, 2008 2007 2006 2005 2004 2003 Total Revenues $ 641,680 $ 615,494 $ 539,903 $

  32. Slide 32: 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

  33. Slide 33: Return on Invested Capital

    RETURN ON INVESTED CAPITAL 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, 1997 1998 1999 2000 2001 2002 Operating Income (a) $77.1 $85.2 $94.2 $92.4 $96.3 $104.7 Tax Rate(a) 41.7% 41.7% 3

  34. Slide 34: Return on Invested Capital (Continued)

    RETURN ON INVESTED CAPITAL (CONTINUED) 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, 2003 2004 2005 2006 2007 2008 Operating Income (a) $113.9 $125.0 $143.8 $166.6 $185.2 $174.6 Tax Rate

  35. Slide 35: Free Cash Flows

    FREE CASH FLOWS Year Ended Year Ended Year Ended Year Ended Year Ended December 31, December 31, December 31, December 31, December 31, ($ in thousands) 2008 2007 2006 2005 2004 Net Cash Provided by Operating Activities $ 104,399 $ 145,666 $ 153,680 $ 133,588 $ 108,908 Net Cash Provided (Used) by In

  36. Slide 36: 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 $

  37. Slide 37: 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, 2008 2007 2006 2005 2004 2003 Operating Income $ 174,596 $ 185,199 $ 166,625 $ 143,750 $ 124,983 $ 113,946 Adjustments Acce

  38. Slide 38: Adjusted EBITDA (Continued)

    ADJUSTED EBITDA (CONTINUED) 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, 2002 2001 2000 1999 1998 1997 Operating Income $ 104,700 $ 73,577 $ 92,427 $ 94,170 $ 85,151 $ 77,068 Adjustmen

  39. Slide 39: 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) 2008 2007 2006 2005 2004 Net Income $ 100,211 $ 111,301 $ 112,787 $ 87,565 $ 74,345 Adjustments: Loss(G

  40. Slide 40: Adjusted Diluted Earnings Per Share (Continued)

    ADJUSTED DILUTED EARNINGS PER SHARE (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, except per share amounts) 2003 2002 2001 2000 1999 1998 Net Income $ 71,863 $ 60,844 $ 14,327

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