Choice Hotels International, Inc. · NYSE:CHH

Choice Hotels International — Investor Presentation (December 2008)

41 slides from Choice Hotels International's investor presentation, Dec 17, 2008

  1. Slide 1: Outlook

    OUTLOOK December 17, 2008 Exhibit 99.1

  2. Slide 2: Disclaimer

    DISCLAIMER Certain matters discussed throughout all of today’s 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 si

  3. Slide 3: Choice Hotels Overview

    CHOICE HOTELS OVERVIEW Leading gainer of US hotel market share* – 9.4% share of branded US hotels (+180 basis points over last 5 years)* – 2nd largest U.S. hotelier* 65+ year-old company with well-known, diversified brands suitable for various stages of hotel life cycle Core competencies and service

  4. Slide 4: One of the Largest Hoteliers

    ONE OF THE LARGEST HOTELIERS Source: Smith Travel Research, Annual data as of October 31. October 2008 Market Share 11.9% 9.4% 5.8% 5.6% 5.2% 4.1% 1.9% 1.2% 0.8% 0.5% 5 yr. bps (03-08) -60 130 70 -40 -60 0 -70 Leading Gainer of Market Share (% of Hotels Open in U.S.) Wyndham Choice IHG Hilton Marrio

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

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

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

    1,606 1,451 678 555 431 363 532 1,557 Source: Smith Travel Research, Choice Internal Data, October 2008 WELL POSITIONED FOR LONG-TERM GROWTH IN LIMITED SERVICE NEW CONSTRUCTION SEGMENT Domestic Hotels Holiday Inn Express Hampton Inn / Inn & Suites La Quinta Inn/Inn & Suites Fairfield Inn Country Inn

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

    2,029 1,891 1,757 1,703 1,606 1,557 Domestic Hotels Source: Smith Travel Research, Choice Internal Data, October 2008 SIGNIFICANT GROWTH OPPORTUNITIES REMAIN IN LARGE CONVERSION MARKET Chart does not include 17,000+ independent hotels in budget, economy and mid-scale segments Best Western Holiday In

  8. Slide 8: Domestic Pipeline of Hotels

    DOMESTIC PIPELINE OF 955 HOTELS Mid-scale Extended Stay Economy Upscale Source: Choice Internal Data, September 2008 New Construction Conversion

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

    275 hotels Canada 16 hotels Mexico 262 hotels Continental Europe, UK & Ireland 155 hotels Scandinavia 48 hotels Brazil 49 hotels Japan 4 hotels China 2 hotels Malaysia 1 hotel Lebanon 25 hotels India Source: Choice Internal Data, September 2008 13 hotels Central America 2 hotels Singapore 258 hotels

  10. Slide 10: Franchised Properties Return on Investment

    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

  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

    98 90 62 87 83 95 58 29 15 20 41 97 76 44 86 70 13 STRONG AND GROWING AIDED BRAND AWARENESS Comfort Inn Comfort Suites Sleep Inn Quality Clarion Econo Lodge Rodeway MainStay Inn Suburban Cambria Suites Choice Hotels 2008 YTD Source: Millward Brown, September 2008

  13. Slide 13: Strong, Growing Loyalty Program

    8.3% 10.0% 12.2% 15.3% 16.2% 17.9% 20.0% 21.6% YTD 10/31/08 STRONG, GROWING LOYALTY PROGRAM Comprehensive loyalty rewards program 7.5 million members worldwide– contribute over 20% of domestic gross room revenues More than 1 million members added in 2008 Delivers incremental business to all Choice b

  14. Slide 14: Large and Growing Central Reservations System

    LARGE AND GROWING 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 $1,668 $1,161 $1,000 $1,200 $1,400 $1,600 $1,800 TTM 9/30/

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

    $66.11 $73.54 $71.59 $77.90 $73.35 $84.22 Central Channel ADR Source: Choice Internal Data, September 2008 Domestic Choice CRS Net Channel Share TTM 9/30/08 Systemwide Call Center choicehotels.com SIGNIFICANT AVERAGE DAILY RATE PREMIUM ON CENTRAL RESERVATIONS BOOKINGS 47% 61% 23% 35% 16% 18% Interne

  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 -4.0 -3.0 -2.0 -1.0 0.0 1.0 2.0 3.0 4.0 5.0 6.0 GDP Demand Supply 1990 +2.0% 1991 - 2.5% 1992 +2.5% 2001 -7.0% 2002 -2.7% 2003 +0.3% Financial Markets/ Housing Crisis IND. REVPAR IND. REVPAR 1990 +1.7% 1991 - 2.7% 1992 +1.4% CHH REVPAR CHH REVPAR 2001 -2.4% 2002 -3.8% 2003 -

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

    184 174 116 63 128 182 237 288 327 322 318 298 300 304 470 552 639 720 770 792 TTM 9/30/08 New Construction Conversion Total Source: Choice Internal Data, September 2008 CONVERSION BRAND FRANCHISE SALES OPPORTUNITY IN SOFT NEW CONSTRUCTION ENVIRONMENT

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

    153 188 158 146 190 254 332 403 383 378 5.0% 6.0% 4.9% 4.4% 5.5% 7.0% 8.7% 9.3% 8.7% 9.6% TTM 9/30/08 Relicensing Contracts Relicensings as % of the prior year's ending system size Source: Choice Internal Data, September 2008 RELICENSING ACTIVITY SIMILAR TO NEW CONSTRUCTION BRAND SALES

  20. Slide 20: Strong, Steady Franchise System Growth

    3,039 3,123 3,244 3,327 3,482 3,636 3,834 4,048 4,211 4,445 252 258 266 271 294 310 329 339 354 282 STRONG, STEADY FRANCHISE SYSTEM GROWTH Domestic Hotels On-Line Domestic Rooms On-Line (in thousands) Source: Choice Internal Data, December 2007 CAGR = 4.4% CAGR = 5.0% CAGR = 3.9% CAGR = 4.7%

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

    FRANCHISING REVENUE STREAM LESS VOLATILE THAN REVPAR -6% -4% -2% 0% 2% 4% 6% 8% 10% $0 $50 $100 $150 $200 $250 $300 $350 CHH RevPAR STR Chain Scale (Supply Weighted) Industry RevPAR Franchising Revenue Source: Smith Travel Research, Choice Internal Data, December 2007 ($ in millions)

  22. Slide 22: 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 2007

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

    CAPITAL “LIGHT” MODEL GENERATES STRONG RETURNS ON INVESTED CAPITAL 19.5% 78.5% 15.2% 16.1% 14.7% 27.6% 36.7% 49.7% 62.9% 68.8% 63.3% TTM 9/30/08 Source: Choice Internal Data, September 2008

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

    TRACK RECORD OF STRONG EARNINGS PER SHARE GROWTH $0.40 $0.51 $0.51 $0.58 $0.76 $0.93 $1.07 $1.26 $1.49 $1.74 Source: Choice Internal Data, December 2007, Per Share Amounts Retroactively Adjusted For 2005 Stock Split Adjusted Diluted Earnings Per Share

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

    - 7.9 7.2 24.0 10.8 5.7 6.4 4.9 3.2 1.6 2.2 10.2 x 14.8 x 20.3 x 17.0 x 14.9 x 11.0 x 11.9 x 10.2 x 8.6 x 11.3 x 11.9 x YTD 12/17/08 Millions of Shares Repurchased Avg. TEV/EBITDA Source: Capital IQ, Choice Internal Data, December 2008, Share amounts for 2005 and prior years retroactively adjusted f

  26. Slide 26: High Dividend Yield Compared to Other Lodging C-Corps

    2.17% 0.00% 2.85% 0.00% 0.00% 0.00% 5.94% 2.95% 2.94% 0.00% 0.00% Choice Great Wolf Starwood Morgans Hotel Group Wyndham Gaylord Home Inns Marriott Red Lion Orient-Express IHG Source: Bloomberg Financial, December 12, 2008 HIGH DIVIDEND YIELD COMPARED TO OTHER LODGING C-CORPS

  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 $76 million available as of December 15, 2008 – No debt maturities until 2011 Substantial financial flexibility Minimal contingent

  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: Financial Projections

    Source: Choice Internal Data, December 2008 FINANCIAL PROJECTIONS Gross Domestic Unit Openings – 2008E – 332 Conversion Units (68%), 156 New Construction Units (32%) – 2009E – 344 Conversion Units (73%), 129 New Construction Units (27%) Adjusted diluted earnings per share projections assume no share

  30. Slide 30: Appendix: Reconciliation of Non-GAAP Financial Measurements to GAAP

    Appendix Reconciliation of Non-GAAP Financial Measurements to GAAP

  31. Slide 31: Disclaimer

    DISCLAIMER Adjusted franchising margins, adjusted earnings before interest depreciation and amortization (EBITDA), adjusted net income, adjusted diluted earnings per share, franchising revenues, net operating profits after taxes (NOPAT), return on invested capital (ROIC) and free cash flows are non-

  32. Slide 32: SSTOR Presentation

    SSTOR PRESENTATION CHOICE HOTELS INTERNATIONAL

  33. Slide 33: SSTOR Presentation

    SSTOR PRESENTATION CHOICE HOTELS INTERNATIONAL

  34. Slide 34: Return on Invested Capital

    RETURN ON INVESTED CAPITAL Source: Choice Internal Data, December 2008 (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. Year En

  35. Slide 35: Return on Invested Capital (Continued)

    RETURN ON INVESTED CAPITAL (CONTINUED) Trailing Twelve Year Ended Year Ended Year Ended Year Ended Year Ended Months Ended ($ in millions) December 31, December 31, December 31, December 31, December 31, September 30, Operating Income (a) $113.9 $125.0 $143.8 $166.6 $185.2 $188.6 Tax Rate(a) 36.1% 3

  36. Slide 36: ESTOR Presentation

    ESTOR PRESENTATION CHOICE HOTELS INTERNATIONAL

  37. Slide 37: ESTOR Presentation

    ESTOR PRESENTATION CHOICE HOTELS INTERNATIONAL

  38. Slide 38: Adjusted EBITDA

    ADJUSTED EBITDA Source: Choice Internal Data, December 2008 Forecasted Trailing Twelve Year Ended Months Ended Year Ended Year Ended Year Ended Year Ended ($ in thousands) December 31, September 30, December 31, December 31, December 31, December 31, TARGET 2% RevPAR Sensitivity Operating Income 175

  39. Slide 39: Adjusted EBITDA (Continued)

    ADJUSTED EBITDA (CONTINUED) Source: Choice Internal Data, December 2008 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 113,946 $ 104,700 $ 73,577

  40. Slide 40: Adjusted Diluted Earnings Per Share

    ADJUSTED DILUTED EARNINGS PER SHARE Source: Choice Internal Data, December 2008 Forecasted 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) TARGET 2% RevPAR Sensitivity Net Income 106,747

  41. Slide 41: 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) Net Income 71,863 $ 60,844 $ 14,327 $ 42,445 $ 57,155 $ 55,305 $ Ad

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