Choice Hotels International Reports Record Revenues, Operating Income And Net Income

Domestic Pipeline of Hotels Awaiting Conversion or Approved for Development Increased 19%

ROCKVILLE, Md., Feb. 18, 2016 // PRNewswire // -- Choice Hotels International, Inc. (NYSE:CHH) today reported the following highlights for the fourth quarter and full-year 2015:

Fourth Quarter Highlights

  • Diluted earnings per share ("EPS") from continuing operations for the three months ended December 31, 2015 totaled $0.51, an increase of 19 percent from the same period of 2014.
  • Revenues for the three months ended December 31, 2015 totaled $211.0 million, an increase of 14 percent from the same period of 2014.
  • Earnings before interest, taxes, depreciation and amortization ("EBITDA") from franchising activities for the three months ended December 31, 2015totaled $55.7 million, an increase of 6 percent from the same period of 2014.
  • Franchising margins for the three months ended December 31, 2015 were 62.3 percent, an increase of 20 basis points from the same period of 2014.
  • Domestic royalty fees for the three months ended December 31, 2015 totaled $63.1 million, an increase of 6.7 percent from the same period of 2014.
  • Domestic system-wide revenue per available room ("RevPAR") increased 4.3 percent in the fourth quarter of 2015, as occupancy and average daily rates increased 60 basis points and 3.2 percent, respectively from the same period of 2014.
  • Domestic units as of December 31, 2015 increased 1.1 percent from December 31, 2014.
    Effective royalty rate for the three months ended December 31, 2015 was 4.37 percent, an increase of 9 basis points from the same period of 2014.
  • Domestic relicensing and contract renewal transactions totaled 104 for the three months ended December 31, 2015, an increase of 12 percent from the same period of 2014.
  • The company's domestic pipeline of hotels awaiting conversion, under construction or approved for development as of December 31, 2015 increased 19 percent from December 31, 2014.

"We are pleased to report another record year of revenue, operating income and net income performance," said Stephen P. Joyce, president and chief executive officer, Choice Hotels. "Our performance was driven by continued improvement in our domestic royalty revenues resulting from growth all in 3 critical levers – RevPAR, system-size and effective royalty rate, as well as our franchise development results. Our effective royalty rates for the domestic system increased 9 basis points during the quarter and, excluding the impact of our Comfort rejuvenation strategy, our domestic units under franchise grew 4% from the prior year. As domestic franchise contracts for both new construction and conversion sales continue to strengthen, we are expecting an acceleration of the growth rates for our domestic system size in 2016.  We are optimistic that developers will continue to respond to our strong family of brands and are optimistic that RevPAR performance and growth of our effective royalty rates will continue to be strong in 2016."

Full-Year Highlights

  • EBITDA from franchising activities in 2015 totaled $255.8 million, an increase of $15.8 million or 7 percent from 2014.
  • Revenues for 2015 totaled $859.9 million, an increase of 13 percent from 2014.
  • Franchising revenues for 2015 totaled $366.7 million, an increase of $21.9 million or 6 percent from 2014.
  • Franchising selling, general and administration ("SG&A") expenses in 2015 totaled $110.9 million, an increase of 5.8 percent from 2014.
  • Franchising margins for 2015 were 67.3 percent, an increase of 10 basis points from 2014.
  • Diluted EPS from continuing operations in 2015 totaled $2.22, an increase of 7 percent from 2014.
  • Domestic royalty fees in 2015 totaled $281.3 million, an increase of 7 percent from 2014.
  • Domestic system-wide RevPAR increased 6.5 percent in 2015 as occupancy and average daily rates increased 160 basis points and 3.7 percent, respectively, from 2014.
  • The effective royalty rate in 2015 was 4.30 percent, a 2 basis point increase from 2014.
  • Initial and relicensing fees for 2015 totaled $24.7 million, an increase of 27 percent from 2014.
  • New franchise contracts executed in 2015 for domestic hotels, totaled 630, an 11 percent increase from 2014.
  • Domestic relicensing and contract renewal transactions in 2015 totaled 408 contracts, an increase of 21 percent from 2014.
  • During 2015, non-franchising activities, which primarily relate to SkyTouch, and an acquired vacation rental technology business drove $4 million of revenues and a net $19 million operating expense.

Use of Cash Flows


During the fourth quarter of 2015, the company's board of directors announced a 5% increase in the current quarterly dividend rate per common share to$0.205 per share.  During the year ended December 31, 2015, the company paid cash dividends totaling approximately $45 million.

Share Repurchases

The company repurchased 1.3 million shares of common stock under its share repurchase program during 2015, at a total cost of approximately $66 million. The company currently has authorization to purchase up to 1.7 million additional shares under this program. 

Hotel Development & Financing

Pursuant to its program to encourage acceleration of the growth of our upscale select-service Cambria hotel & suites brand, the company's net advances in support of the Cambria brand totaled $61 million during the year ended December 31, 2015.  These advances are primarily in the form of joint venture investments, forgivable key money loans, senior and mezzanine lending and site acquisitions.  At December 31, 2015, the Company had approximately $129 million outstanding pursuant to these financial support activities. With respect to lending and joint venture investments, the company generally expects to recycle these loans and investments within a five year period.

Discontinued Operations

During 2014, the company entered into and completed a plan to sell its three owned hotels operated under the MainStay Suites brand. The company determined that the sale of these hotels met the definition of a discontinued operation since the operations and cash flows of these components have been eliminated from the on-going operations of the company and the company does not have significant continuing involvement in the operations of the hotels after the transaction. As a result, the company's consolidated statement of income for the three months and year ended December 31, 2014, reflects these three company-owned hotels as discontinued operations.

Summarized financial information related to these discontinued operations is presented in Exhibit 9 of this press release.                  


The company's consolidated 2016 outlook reflects the following assumptions:

Hotel Franchising

  • EBITDA from franchising activities for full-year 2016 are expected to range between $270 million and $275 million;
  • Net domestic unit growth for 2016 is expected to be between 2% and 3%;
  • RevPAR is expected to increase approximately 2% for first quarter and range between 3.75% and 4.75% for full-year 2016; and
  • The effective royalty rate is expected to increase between 6 and 8 basis points for full-year 2016 as compared to full-year 2015.

Non-Hotel Franchising Activities

  • Net reductions in EBITDA relating to our non-hotel franchising operations, which primarily relate to SkyTouch and vacation rental activities, for full-year 2016 are expected to range between approximately $16 million and $19 million.

Other Items

  • The effective tax rate for continuing operations is expected to be approximately 33.5% for the first quarter and full-year 2016; and
  • All figures assume no further repurchases of common stock under the company's share repurchase program.

Consolidated Outlook

The company's first quarter 2016 diluted EPS is expected to be at least $0.38. The company expects full-year 2016 diluted EPS to range between $2.30 and $2.36and full year 2016 EBITDA to range between $252 million and $257 million. The EPS and consolidated EBITDA estimates assume that we incur net reductions in EBITDA related to non-hotel franchising activities at the midpoint of the range for these investments.

Conference Call

Choice will conduct a conference call on Thursday, February 18, 2016 at 10:00 a.m. EST to discuss the company's fourth quarter and full-year 2015 results. The dial-in number to listen to the call is 1-855-638-5678, and the access code is 32610371. International callers should dial 1-920-663-6286 and enter the access code 32610371.  The conference call also will be webcast simultaneously via the company's website,  Interested investors and other parties wishing to access the call via the webcast should go to the website and click on the Investor Info link.  The Investor page will feature a conference call microphone icon to access the call.

The call will be recorded and available for replay beginning at 1:00 p.m. EST on Thursday, February 18, 2016 through Thursday, February 25, 2016 by calling 1-855-859-2056 and entering access code 32610371. The international dial-in number for the replay is 1-404-537-3406 and the access code is 32610371. In addition, the call will be archived and available on via the Investor Info link.

About Choice Hotels

Choice Hotels International, Inc.® (NYSE: CHH) is one of the world's largest lodging companies. With more than 6,400 hotels franchised in more than 35 countries and territories, we represent more than 500,000 rooms around the globe. As of December 31, 2015, 720 hotels were in our development pipeline. Our company's Ascend Hotel Collection®, Cambria® hotels & suites, Comfort Inn®, Comfort Suites®, Sleep Inn®, Quality®, Clarion®, MainStay Suites®, Suburban Extended Stay Hotel®, Econo Lodge® and Rodeway Inn® brands provide a spectrum of lodging choices to meet guests' needs. With more than 25 million members and counting, check out our Choice Privileges® rewards program to see how you can reap the benefits of being a member of the Choice Hotels®family. Visit us at for more information.

SkyTouch Technology® is a business division of Choice Hotels that develops and markets cloud-based technology products, including inventory management, pricing and connectivity to third party channels, to hoteliers not under franchise agreements with the company.

Forward-Looking Statements

Certain matters discussed in this press release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  Generally, our use of words such as "expect," "estimate," "believe," "anticipate," "should,"  "will," "forecast," "plan,"  "project," "assume" or similar words of futurity identify such forward-looking statements.  These forward-looking statements are based on management's current beliefs, assumptions and expectations regarding future events, which in turn are based on information currently available to management.  Such statements may relate to projections of the company's revenue, earnings and other financial and operational measures, company debt levels, ability to repay outstanding indebtedness, payment of dividends, repurchases of common stock and future operations, among other matters.   We caution you not to place undue reliance on any such forward-looking statements.  Forward-looking statements do not guarantee future performance and involve known and unknown risks, uncertainties and other factors.

Several factors could cause actual results, performance or achievements of the company to differ materially from those expressed in or contemplated by the forward-looking statements.  Such risks include, but are not limited to, changes to general, domestic and foreign economic conditions; foreign currency fluctuations; operating risks common in the lodging and franchising industries; changes to the desirability of our brands as viewed by hotel operators and customers; changes to the terms or termination of our contracts with franchisees; our ability to keep pace with improvements in technology utilized for marketing and reservations systems and other operating systems; or ability to grow our franchise system; exposure to risks related to development activities; fluctuations in the supply and demand for hotels rooms; our ability to realize anticipated benefits from acquired businesses; the level of acceptance of alternative growth strategies we may implement; operating risks associated with our international operations; the outcome of litigation; and our ability to manage our indebtedness.  These and other risk factors are discussed in detail in the company's filings with the Securities and Exchange Commission including our annual reports on Form 10-K and our quarterly reports filed on Form 10-Q.  We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Statement Concerning Non-GAAP Financial Measurements Presented in this Press Release

EBITDA, franchising revenues, franchising SG&A, EBITDA from franchising activities and franchising margins are non-GAAP financial measurements.  These measures should not be considered as an alternative to any measure of performance or liquidity as promulgated under or authorized by generally accepted accounting principles in the United States ("GAAP"), such as operating income, total revenues and operating margins.  The company's calculation of these measurements may be different from the calculations used by other companies and therefore comparability may be limited.  The company has included an exhibit accompanying this release that reconciles EBITDA, franchising revenues, franchising SG&A and franchising margins to the most comparable GAAP financial measures. We discuss management's reasons for reporting these non-GAAP measures below.

Earnings Before Interest, Taxes, Depreciation and Amortization: EBITDA reflects income from continuing operations excluding the impact of interest expense, interest income, provision for income taxes, depreciation and amortization, other (gains) and losses and equity in net income of unconsolidated affiliates. We consider EBITDA to be an indicator of operating performance because we use it to measure our ability to service debt, fund capital expenditures, and expand our business. We also use EBITDA, as do analysts, lenders, investors and others, to evaluate companies because it excludes certain items that can vary widely across different industries or among companies within the same industry. For example, interest expense can be dependent on a company's capital structure, debt levels and credit ratings. Accordingly, the impact of interest expense on earnings can vary significantly among companies. The tax positions of companies can also vary because of their differing abilities to take advantage of tax benefits and because of the tax policies of the jurisdictions in which they operate. As a result, effective tax rates and provision for income taxes can vary considerably among companies. EBITDA also excludes depreciation and amortization because companies utilize productive assets of different ages and use different methods of both acquiring and depreciating productive assets. These differences can result in considerable variability in the relative costs of productive assets and the depreciation and amortization expense among companies.

Franchising Revenues, Franchising EBITDA, Franchising SG&A and Margins:  The company reports franchising revenues, EBITDA, SG&A and margins which exclude marketing and reservation revenues, the SkyTouch Technology division, recently acquired operations that provide SaaS technology solutions to vacation rental management companies and revenue generated from the ownership of an office building that is leased to a third-party.  Marketing and reservation activities are excluded since the company is required by its franchise agreements to use the fees collected for marketing and reservation activities; as such, no income or loss to the company is generated. Cumulative marketing and reservation system fees not expended are recorded as a liability in the company's financial statements and are carried over to the next year and expended in accordance with the franchise agreements. Cumulative marketing and reservation expenditures in excess of fees collected for marketing and reservation activities are deferred and recorded as an asset in the company's financial statements and recovered in future periods.  SkyTouch Technology is a division of the company that develops and markets cloud-based technology products, including inventory management, pricing and connectivity to third party channels, to hoteliers not under franchise agreements with the company. The operations for SkyTouch Technology and our vacation rental technology solutions provider are excluded since they do not reflect the company's core franchising business but are adjacent, complimentary lines of business. These non-GAAP measures are a commonly used measure of performance in our industry and facilitate comparisons between the company and its competitors.

For full spreadsheet reports, please go to: [].

SOURCE Choice Hotels International, Inc.


David White
Senior Vice President
Chief Financial Officer & Treasurer
(301) 592-5117

Scott Carman
Public Relations
(301) 592-6361


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Choice Hotels International is one of the largest and most successful lodging franchisors in the world.


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