Choice Hotels International, Inc. · NYSE:CHH

Choice Hotels International — Investor Presentation (March 2012)

37 slides from Choice Hotels International's investor presentation, Mar 7, 2012

  1. Slide 1: Investor Presentation March 2012

    é « —~s ia CAMBRIA HM Coronel ©. ME SLEEP i ie SUITES I COTS fm Comfore OTN fl Clarion i seein MainStay ») 7 Suites noLodg Investor Presentation March 2012 CHOICE HOTELS INVESTOR PRESENTATION

  2. Slide 2: Disclaimer

    PRESENTATION DISCLAIMER Certain matters discussed throughout all of ne piceentaous constitute He etal sone within the meaning of the federal securities laws. Generally, our u: bes rds st ‘expect,” “e: “believe,” “anticipate,” “will,” “forecast,” “ jan,” “project,” “ sun ’ similar ined of futurty Kd

  3. Slide 3: Choice Hotels Overview

    RESENTATION CHOICE HOTELS OVERVIEW Strong, Growing, Global Hotel Franchising Business = Growing US hotel market share* — 9.6% share of branded US hotels (+100 basis points over trailing 5 years)* — 24 largest U.S. hotelier = 70+ year-old hotel distribution company with well-known, diversified brands

  4. Slide 4: One of the Largest Hoteliers

    Ss tuveston > ESENTATION ONE OF THE LARGEST HOTELIERS Market Share (% of Hotels Open in U.S.) Market Share% 11.3% | 9.6% | 6.3% 6.0% 5.8% 3.8% 2.1% 1.1% 0.9% 0.7% 5yr. bps A (06-11) 0 +100 | +140 +60 +100 -70 +20 0 +20 -60 14 12 10 ze 8 @ 6 Ss 4 & 5 3 ‘Wyndham Choice Hilton IHG Marriott Best Western

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

    ESENTATION FAMILY OF WELL-KNOWN AND DIVERSIFIED BRANDS $105,000+ | New Construction CAMBRIA Suites a c jo INN fa (a Estimated Per Room Investment* $45,000+ Targeted Average Daily Rate $100+ $50 urce: Choice Internal Data, April 2011 Conversion >

  6. Slide 6: Strong Limited Service New Construction Brands

    VE STOR PR ESENTATION STRONG LIMITED SERVICE NEW CONSTRUCTION BRANDS POSITIONED WELL FOR LONG-TERM GROWTH Domestic Hotels Hampton Holiday Inn ia Guinte Fairfield Inn Country Inn Inn/Inn & Express & Suites — ypae Suites Suites INN le 2 te 2 CHOICE HOTELS NTERNATIONAL,

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

    oe HOTELS INVESTOR PRESENTATION SIGNIFICANT GROWTH OPPORTUNITIES REMAIN IN LARGE CONVERSION MARKET Domestic Hotels Chart does not include independent hotels in budget, economy and mid-scale segments 1,963 1,845 1845 4787 1,740 4 673, 9 388 349 351 337 307 303 Holiday inn Knight’ olday Ramada/ Red Ro

  8. Slide 8: Domestic Pipeline of Hotels

    RESENTATION DOMESTIC PIPELINE OF 408 HOTELS 91 = Conversion = New Construction 27 23 of Extended Stay x, Mid-scale Upscale Economy aa SEOIE OTE NATIONAL,

  9. Slide 9: Services Lifecycle Improves Brands and Property Performance

    “PRESENTATION SERVICES LIFECYCLE IMPROVES BRANDS AND PROPERTY PERFORMANCE Brand Planning Za, and Management + Targeted, differentiated Portfolio programs, amenities and Management services for each brand Opening Services + Repositioning + Relicensing + Termination FRANCHISED exceed brand standards P

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

    ee... WATELe INVEETOD DOECENTATION STRONG PRESENCE IN MAJOR TRAVEL MARKETS OUTSIDE OF THE U.S. FEO Rote! = 1,177 properties in 30 countries tinal and territories on five continents 307 hotels, jotels) | 52)hotels, = Multi-year sis Jit) investments in IT and marketing planned to enhance Besinotels :

  11. Slide 11: Marketing and Central Reservation System Leverages Size, Scale and Distribution

    So oson encscursrion 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 a

  12. Slide 12: Strong and Growing Aided Brand Awareness

    oe HOTELS INVESTOR PRESENTATION STRONG AND GROWING AIDED BRAND AWARENESS 2001 = 2011 22 NAR way 44 waka NIA <> [x stay S [ CONTIN CHOICE HOTELS SUITES

  13. Slide 13: Strong, Growing Loyalty Program

    PRESENTATION STRONG, GROWING LOYALTY PROGRAM = Comprehensive loyalty rewards program CHoIcEprivileges’ = 14 million members worldwide — TIEWAROS PROGRAM contribute over %4 of domestic 8 B. a eB. = gross room revenues eS. ic <=] = 2.1 million new members added in 2011 * Delivers incremental business

  14. Slide 14: Central Reservations System Delivery Puts Heads in Beds

    \ESENTATION CENTRAL RESERVATIONS SYSTEM (CRS) DELIVERY PUTS “HEADS IN BEDS” Domestic Franchise System Domestic Choice CRS Gross Room Revenue Source smunos Net Room Revenue Choice Central Reservation Contribution $1,660 All Hotel $1,342 2006 «2007 +2008 2009 2010 2011 irect Reservation ‘Source: Choic

  15. Slide 15: Central Reservations Bookings Create Significant Value for Franchisees

    ESENTATION CENTRAL RESERVATIONS BOOKINGS CREATE SIGNIFICANT VALUE FOR FRANCHISEES Domestic Choice CRS Net Channel Share 2006 §=©2007- «2008 )=S 2009 2010 2011 Internet -*-Voice —#~Travel Agent (GDS) ‘Source: Choice Internal Data, December, 2011 Central Channel ADR “Premi remium” 2006 2007 2008 2009

  16. Slide 16: Conversion Brand Franchise Sales Opportunity in Soft New Construction Environment

    oe HOTELS INVESTOR PRESENTATION CONVERSION BRAND FRANCHISE SALES OPPORTUNITY IN SOFT NEW CONSTRUCTION ENVIRONMENT New Domestic Hotel Franchise Contracts 2002 2003 2004 2005 2006 2007 2008 2009 2010 ™ New Construction = Conversion =Total

  17. Slide 17: Strong, Steady Franchise System Growth

    RESENTATION STRONG, STEADY FRANCHISE SYSTEM GROWTH Domestic Hotels On-Line Domestic Rooms On-Line (in thousands) _ seater CAGR = 3.5% CAGR = 4.2% eyc0t CAGR = 3.0% é CAGR = 3.8% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 — 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

  18. Slide 18: Franchising Revenue Stream Less Volatile Than RevPAR

    RESENTATION FRANCHISING REVENUE STREAM LESS VOLATILE THAN REVPAR ($ in millions) $350 8% $300 3% $250 -2% $200 $150 T% $100 eae $50 17% $0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 =EECHH hain ig y isi ‘Smith Travel Research, Choice Internal Data, December 2011

  19. Slide 19: Adjusted EBITDA Less Volatile Than Industry Profitability

    a HOTELS INVESTOR PRESENTATION ADJUSTED EBITDA LESS VOLATILE THAN INDUSTRY PROFITABILITY ($ in billions) ($ in millions) 250 200 150 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 ME Industry Profits ‘CHH Adjusted EBITDA. ‘Source: Smith Travel Research, Choice Internal Data, Decemb

  20. Slide 20: Capital Light Model Generates Strong Returns on Invested Capital

    oe HOTELS INVESTOR PRESENTATION CAPITAL “LIGHT” MODEL GENERATES STRONG RETURNS ON INVESTED CAPITAL After-Tax Return On Invested Capital 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

  21. Slide 21: Track Record of Strong Earnings Per Share Performance

    ESENTATION TRACK RECORD OF STRONG EARNINGS PER SHARE PERFORMANCE Adjusted Diluted Earnings Per Share $1.90 $1.81 $173 $173 565 $1.48 $1.07 $0.76 $0.51 $0.51 a ea 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 To improve comparability certain employee severance 07 through 2011

  22. Slide 22: Opportunistic Share Repurchases Key Part of Capital Allocation Strategy

    ESENTATION OPPORTUNISTIC SHARE REPURCHASES KEY PART OF CAPITAL ALLOCATION STRATEGY Remaining authority on current authorization — 993, 2.0 million shares as December 31, 2011 12.6 x 11.9x 11.3x 10.2x 10.4x 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 == Millions of Shares Re

  23. Slide 23: High Cash Dividend Yield Compared to Other Lodging C-Corps

    \ESENTATION HIGH CASH DIVIDEND YIELD COMPARED TO OTHER LODGING C-CORPS 3.4% 0.0% 0.0% 0.0% Choice Orient- Starwood Express Gaylord lyatt Marriott Red Lion Wyndham ‘Source: Bloomberg Financial, March 1, 2012

  24. Slide 24: Strong Credit Position

    \ESENTATION STRONG CREDIT POSITION = Investment grade credit rating — Moody's Baa2 — Standard & Poor's BBB = Strong liquidity position » Substantial financial flexibility ‘Source: Choice Internal Data, December 2011

  25. Slide 25: Strategy for Choice's Brands, Growth and Shareholders

    RESENTATION 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

  26. Slide 26: Reconciliation of Non-GAAP Financial Measurements to GAAP

    “PRESENTATION Reconciliation of Non-GAAP Financial Measurements to GAAP

  27. Slide 27: Disclaimer

    RESENTATION 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

  28. Slide 28: Franchising Revenues and Adjusted Franchising Margins

    PRESENTATION FRANCHISING REVENUES AND ADJUSTED FRANCHISING MARGINS Total Revenves S 638793 § 595076 $ 56AI78 ‘Adjustments: ‘Marketing and Reservation (349,036) (929246) (905,379) (906,477) (16.827) Product Sales " , : 2 S e460 $ 615404 $53,903 $472,008 Hotel Operations Franchising Revenues Operating

  29. Slide 29: Franchising Revenues and Adjusted Franchising Margins (Continued)

    BN iycetcn oncsenrarion FRANCHISING REVENUES AND ADJUSTED FRANCHISING MARGINS (Continued) s 985,562 (190,145) S mia $ se § | sm $85 4TA (168,170) (195367) (162,609) : : : (ant) (20.78) (3.215) (1.248) (1.098) $170,088 15779 $ —163.628 Total Revenues S ame $3508 ments Marketing and Reservaton (229,73

  30. Slide 30: Return on Invested Capital

    Sector racseurarion RETURN ON INVESTED CAPITAL Opera iene @ Tax Rate( Ater-Tax co ane + Depreciafon eee - wancoane Net Op. Profit aiact r-tax (NOPAT) send seat iabiltes invested Capital [Retum on Average Invested Capital ‘Source: Choice Internal Data, December 2011 CHOICEROTELS

  31. Slide 31: Return on Invested Capital (Continued)

    Sector racseurarion RETURN ON INVESTED CAPITAL (Continued) Operating Income (a) Tax Rate(a) - Maintenance CAPEX [Net Op. Profit After-tax (NOPAT) Total Asses - CurrentLiabiliies [Invested Capital [Retum on Average Invested Capital ‘Source: Choice Internal Data, December 2011 CHOICEROTELS

  32. Slide 32: Free Cash Flows

    STOR PRESENTATION FREE CASH FLOWS Net Cash Provided by Operating Activities $ 194,844 $144,935 § «112.218 $104,909 $145,886 $159,680 «$193,588 Net Cash Provided (Used) by Investing Activities (23,804) 32,158) (3,349) (20,268) (21,284) 17,244) (24.531 Free Cash Flows $111,040 |$_112,780, |$_ 108,967,

  33. Slide 33: Free Cash Flows (continued)

    PRESENTATION FREE CASH FLOWS (continued) Net Cash Provided by Operating Activities $ 108.908 $ 115,904 $ 99018 $ 101,712 $ 53879 § 65040 $ 98,952 Net Cash Provided (Used) by Investing Activities (14,544) 27,784 14,689) 87,738 16,617) (36,031) (9,086) Free Cash Flows $94,364 $143,088 $94,995 $109,450

  34. Slide 34: Adjusted EBITDA

    INVESTOR PRESENTATION ADJUSTED EBITDA Operating income $ 171863 $ 160,762 -$ 148.073 «$ ©=—«174596 «$185,199 $ 166625 $ Adjustments Acpaletn of onapanet Suooatnon Pan - : 6,605, - 3 : 388 on Sublease of Office Spac : 1,508 : 5 . ecutive Termination Benefits 2,704 1217 3321 3,690 : 2 Curtailment of S

  35. Slide 35: Adjusted EBITDA (Continued)

    INV ESTOR PRESENTATION ADJUSTED EBITDA (Continued) Operating came $ 124,983 $§ 113946 $ 104700 $ 73577 $ 92427 $ 94170 § Adjust ezoeraton of Mana ‘agement Succession Plan r . : ‘ - - . Loss Space : : rves Related to Impaired Notes Receivable E 2 é i 4 Product Sales E i ‘paiement Fen investment : fs

  36. Slide 36: Adjusted Diluted Earnings Per Share

    N VESTOR PR ESENTATION ADJUSTED DILUTED EARNINGS PER SHARE S 1030 $ toraer § oszso § voozt $ tHaor Ss tHz7er STs r 2 ar wm 702 2a79 : 210 a9 2 on : 18 é (2709) (6855) i 4 1.192 juste is Fes Foe Ses Ee Swe ‘Woighte Average Shares Outstanding Oued 0505 50686 coz 62004 5780 Onions Poh ] aus tonto nonst

  37. Slide 37: Adjusted Diluted Earnings Per Share (Continued)

    NVES STOR PRESENTATION ADJUSTED DILUTED EARNINGS PER SHARE Continued Neticome jason: aria ranean tebe ‘peceleraon oft sion Pian, Netol Takes ‘aveneTormhoto tori, rf an rato momento Eu ose Fey He PLC sa NTs ‘Adjusted Net Weighted Average Shares Outstanding iuted Dies Eamings Pee Share Las( Gai) on Ex

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