CHH - Earnings call transcript Q4 2018 | Choice Hotels International, Inc.

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Operator

Good day ladies and gentlemen and thank you for standing by. Welcome to the Choice Hotels International Fourth Quarter and Full Year 2018 Earnings Conference Call. At this time, all lines are in a listen-only mode. Please note, this event is being recorded. I would now like to turn the conference over to Oscar Oliveros, Investor Relations Director for Choice Hotels. ahead. go Please

Oscar Oliveros

of welcome you and Director. It's honor with an look Thank the again first join all working and for to Relations time to forward you meeting everyone. you. as I Investor

statements, Before consult Form information indicated be and that SEC during predictive about conference you events to forward-looking today's that other remind important results consider. and obligation update this its assist company to differ we no of statements in you publicly we should from statements subsequent the call the may or the will results. company date, them XX-K circumstances. would company's undertake reflect and filings begin, forward-looking to and speak as you like or forward-looking risk used certain those for in materially factors should you understanding we These affecting Actual to

our Chief XXXX morning will provide our our provide and Executive full expectations Patrick XXXX. of Chief Dominic measures on review a for our You financial This referred under operating non-GAAP fourth will website find earnings at Officer XXXX Officer year fourth results. full in our Dragisich, of overview Pacious, year results to is then an President our the our Financial and and Relations release, choicehotels.com press quarter reconciliation an posted can section. Investor update which on part as quarter of the remarks and

call their to your With Pat. Following questions. that, I'll happy be over turn the remarks, we’ll take to

Patrick Pacious

I Adjusted that EBITDA pleased of for of for diluted like the $X.XX previously results the grew per XXXX both grew great a welcome and $XXX to share he and as and earnings to I'd quarter positive continuing to will earnings to call. XXXX to share. all a prior Thank XX% the Choice know and you, earnings be adjusted year adjusted EBITDA and per end the Hotels over full-year and reported to I'm We top year-over-year Oscar. welcome for year the team, full fourth Oscar per you. report quarter Good whole. million, our conference morning diluted share. resource for exceeded fourth guidance adjusted XX% reach

Additionally, development our XXX business results. contracts. development Choice our continues franchise to decade, a franchising segment our highlighted three new of a franchise year X% The last this by domestic awarding increased growth core increase this segment. driver domestic our over A expectations, brands more outperform year-over-year. had the new in XXX% year. our for awarded number than This full-year in represents strong extended-stay of was best contracts

We total history. conversion, surpassed Ascend our domestic by XXXX, nearly construction, company's increased of development domestic X,XXX as or room pipeline number count grew upscale December X%. year-over-year Cambria nearly of rooms largest in XX% international pipeline the by under awaiting in our the of hotels hotels XX, and the for representing brands, approved Our and

a rate year trajectory, effective increase Our XX year. over with basis its royalty continued growth point

flagship our presence the strengthened Pointe. through newest Clarion brand, Comfort the introduction brand of we continued our mid-scale our year transformation of Additionally, this and

of increased year the has membership complemented in early and we growth. Finally, which revenue, average, is program comes reservations XX% by almost approximately XX% we a XX Since business outsize more delivery continued member Choice our to revamped Privileges capabilities. than revenue delivered continued to having million our of Proprietary our improve to grow. of from contribution our channels, third consecutive drives by On members. loyalty hotels XXXX, program our

brands develop in well, segments delivery Taken current and investing together, these our that to know continuing working. capabilities strong results in are business launching our proof is we brands,

I XXth health long-term its year more of and Hotels XXXX. just of in that gives single do in the good our strong performance and our brands confidence is success I also company. and outlined the strength on than Choice year. builds long business us It term. celebrates strategy in is validates working, years of performance long-term a The Our our mean

performance that by are franchisees, of pivot and our us consistent decisions in positions us like shareholders of now well the our to some our year-end Our the allows make interest for I’d strong future. and our guests, best brands. to our performance to highlighting

That's is eight was this brand. grew Quality, in founded, X% growth X,XXXth for property in midscale, Choice brand on opened which timeless The decades the First brand its domestic of XXXX. XXXX.

in Choice As is still large the our brand as Quality has upper midscale portfolio. the Comfort become, largest

with progressing Comfort its transformation. Specifically, on schedule is

Texas; this hotels already Comfort January signals in as of Seattle. common obtaining standards are as new Charlotte; certified guest been the Comfort with hotels which such Austin, elevated XXX and And XXX have installed of As rooms signage XX and have year, meeting logo, hotels areas, markets more transformations. exterior top signs the over brand in XXX interior than new

We campaign, already second this a half in will investment the The owners the will paying that reap completed year, new year the this and will when late brand nationwide the to the brand their with gains multi-platform reintroduce Comfort half Hotels lift as RevPAR a ad are system Comfort after our media is help In benefits meeting certified RevPAR quarters shows which the experience analysis of the be investment off. of brand. entire the completing Our consumers standards. that elevated we renovations. anticipate two our renovations the Comfort more index experiencing that of than within will

with new its domestic new construction. brand Comfort a In addition XXX We properties, of XX% last hotels. are the which Comfort to nearly awarded agreements year system, the bringing on franchise strengthening pipeline current XXX to nearly growing construction we are focus brand

this will of of brand has reception per We We’ve the franchise expect giving us of with year Pointe. its more successful by awarded presence Clarion to open Pointe in our Building a mid-scale new since Comfort late brands, on expansion third Pointe with launch for the foundation last XXXX. year end in Choice of open hotel solid development pleased the first creating one than the record even March. week better strengthened of our hotel quarter launch proven XX an been agreements Clarion the and in Clarion XXXX. XXXX, We

now Turning several to Choice our Hotels important Cambria strategically remains to for brand reasons. upscale,

First, is the last booming. Upscale segment the supply has of XX% new contributed room industry’s years. in the five

presents country, markets even to Cambria guests growth since for a in portfolio During products. brand the the segment faster continue supply for the upscale our opportunity for grew Choice forecasting is an upscale plus across is developers a in in and demand same period, Plus to STR and add is market inventory right continued This than younger in brand alike. . and excel we the demand

held it commitment choice maximizing For today’s to element example, time the concept a franchisee traveler. like reflects for starved our build low forward brand’s And Cambria’s specific design location modern great bar to business unique make long profitability. and cost our

We pace are a the Last on footprint our Hotels $XXX a active of to of These we with the hosted ground an of brand one further have hotel upscale promise them last and three In stabilized generates experience. a guest four one the projects. TripAdvisor, Comfort is room have rooms guests top making accelerate delivering our proof projected growth year, cities will Cambria on bottom expanding as upscale with performance. the fact, Therefore to have impact times Cambria their its over strong resonating are hotels our number that ranking X,XXX line. of revenue the hotel. add over which in of a contributor construction RevPAR on average On Cambria will year, Cambria positive which to gross of Cambria new and financial we XX our record breaks, portfolio. best-in-class contracts awarded XX average

summer to property Hotels to open this construction and year, Anaheim the from guests property We an end XX opening surpass of Cambria a expect LA second spring. serving with and starting at the coast coast this

update year-over-year call rates on been increase increased year X.X% WoodSpring. conversion center we acquisition with XX%, Choice The delivery by and has by website X.X% corporate This an marks have year WoodSpring XX%. Suites. has Since joining revenue business account brand’s a of RevPAR WoodSpring’s it’s delivery of in This Choice resulted success. for by Finally, platform month a first anniversary our the one extended-stay. the

And XX As top this number year. in now XXX Choice WoodSpring the XX across contracts including year, guests that with brand’s open year. has in to across of new which will the the that. of by XXX the last to having significantly we XX the U.S. hotels WoodSpring for hotels look hotels year, brand WoodSpring than Charlotte single open Chicago, end approximately XXXX. the the markets. brand we're further with last markets XX open grow the quarter. awarded for confident and XXX a WoodSpring around size the We Detroit and U.S. new And record contracts pipeline, were serving opened forward We in joining hotels WoodSpring awarded exceeded fourth WoodSpring currently over in of Atlanta, Seattle, since even expected

seeing expectations Cambria appeal institutional investors WoodSpring between has would seeking and to been WoodSpring yield we pollination and Our the cross that brand developers. validated are our

to new For us example, new hotels last in for month, Suburban, has reignited years. extended-stay WoodSpring record The mix also pipeline WoodSpring develop our an over the next interest with Suites real and agreement XX Mainstay the conversion brands acquisition estate years. extended-stay and institutional four also other healthy experienced construction an properties. developer we a gives growth of which together, Suites, brand Taking three announced Choice’s

year more than segmented the brand attributable over is past success portfolio. to well Our a

first Choice with advanced. not to at We've reservation to center building travel by at book owners themselves. Choice empowering resources. the support the we innovative fourth guest resources We several profitability. for needs the in of At virtual case Edge, industry’s check-in. our pay created but years, that has present for allows on needing achieved ourselves. our effortlessly is delivering This website. resources XX were by quarter, in specifically without the introduced new launch been and the means travelers owners meet innovation our times, central to personal and to managers franchisee industry business platform a system best-in-class these card credit Virtual our most For to the capabilities themselves, their pay were In distribution committed their to be quickly stays more our the technology this and

online enable that group booking more reservation platform, capture group business. our our easier. are meetings solution launched this an tool makes hotels also small significantly travel and and planning Groups of growing this management and to We will

strong. members of all growth of in and book growing You double-digit Privileges the the is XX by consecutive ninth growth know pleased we're of industry, membership program. year the our of Privileges the Choice around continued year marked more Choice helped stays also members. than during our guests spend X Last These non-members. million stays well straight their why year more us with program and importance stays brand loyalty third which best is as as Readers rate million more highly XX loyalty Choice USA in the frequent U.S. Choice longer Awards than as This our They has and stays. with more they top Today's evangelists a hotel Best of become Privileges are some

News and Report World consecutive years. three for

of the to guests first enabled applications by Google, Amazon to Consumer In never booking on to building owners’ home with with Web announced systems Choice from owners reliability. book Choice more relationship move for strategic also booking decision ourselves benefits November, This at scalability Electronics right by dates it digital migrate which which be many systems partner cloud cloud. relationships the create innovative are we AWS strategic back and over increasing the able innovating. seamlessly voice to is value and direct improving In use When building to driving profitability, month to preserving we fuel consistent the that XXXX. We'll it minimizing the first systems the our the Google recent Choice via Last to for on legacy assistance. technology choosing relationships, world X,XXX Google cloud pursue easier voice to addition or makes Google platform, has and businesses. a our formed our performance, was our our launch franchisees business, guests and to with announced hotel enabled the off. done of Show, approach, Google while class Services controlled whether comes also of our drop book we

tell but us through ahead, small results haul. well, profitability strong shareholder both things fuel XXXX Three Our for just year measure position view, long-term our us owners success we're the not brand. proven for we by the ability In long the to succeeding. value business for our and maximize

First, in for the demand proposition continuous improvement of has driven segments. our brands strong value all Choice

and the providing attractive were last value owners, of contracts means franchise those who we're well proposition XX% who year are new which existing with to awarded returning Choice. to know those about or Second, an us new

Third, always their decision In other and Dom or to industry a now Choice, voluntary results. an their it franchisee one hotel be, I’d retention Dragisich, seriously our always long-term they we us over At we Dom? case focus like words, own CFO, take this who maintain with share has our owners investment. shows the turn leading our will more on to specifics financial will whether rate. our to been that trust dozen.

Dominic Dragisich

morning, Thanks, good Pat and everyone.

another these our pleased year once results close exceeded to very strong again, are out expectations. We And with results. financial

brands delivery and financial reflects continued performance investment Our our further strengthen capabilities. business our to

and to return the grow performance our invest earnings shareholders. financial to the capital in fact, model the strong continually business our strength for business us and In allow of long-term,

to earnings Pat addition and worth several EBITDA adjusted share In noting outperformance full per specifics there outset. highlighted, year adjusted are the at diluted the that

full end $XXX.X reach to of earnings million. previously diluted This net exceeded $X per guidance top of the by than First, share more issued million $X.XX. our year represents income

income, $XXX.X adjusted over certain year XX% increased the to year full items excluding Second, prior million.

gives the top guidance And exceed for in year confidence long-term for results and proof full year-over-year off, EBITDA end of the $X top the the year adjusted by our pays full $X share. by full adjusted $X.XX focus XXXX growth. total million These and increased Third, its guidance its per company well finally, EPS of exceeded revenues and year health future our us us XX% that business of billion. now positions are end

XX% EBITDA the the quarter period more fourth Fourth the top well. guidance than year XXXX prior the franchising from fourth over million $X.XX, increased revenues adjusted nearly per exceeded procurement outperformance range our expectations end quarter same results the revenue fourth quarter was quarter share. for exceeded were by review particular, fourth also for million XXXX versus diluted over adjusted operations. entirely of procurement driven prior per better Total $X.XX quarter and period $XXX year. a to the also $XX.X the services In share increase expected quarter XXXX core in services to XXXX increased XX% now detail. Let's and very and XXXX. earnings the XX% Fourth This XX% quarter of revenues prior our our by of performed grew over

forming We continue to and partnerships franchisees both expand and leverage the procurement services that guests. platform new by our benefit

by profitability million, over tax our Finally, of revenues effective our XX% to year than franchise forecast our previous increased domestic the levers. for standing full franchisees from domestic XX% and results. increase the all Choice’s XX.X% our from of highlighted commitment was recurring XXXX. fourth $XXX.X operations franchising prior for long royalty strong Hotel franchising year growth fourth period $XXX.X fees, year quarter revenue was in quarter hotel royalty Full to increase million The higher the stems income XX.X%. increased totaled XX% franchising continues in hotel three million. fees the same year drive revenue to prior $XXX.X slightly to growth of royalty rate and while which

top This For and increased X.X%, XXXX prior of and year rate X%, XXXX. points year, acquisition RevPAR full XXXX growth drove excluding adjusted domestic WoodSpring domestic increased EBITDA basis XX% performance effective line versus royalty the franchising XX X.X%. verses for when hotel full increased the units approximately year revenue

all will in continue levers optimistic increase that royalty are are growth forecasting XXXX. three and We to this

the size, high note. the Our quarter on closed and year revenue system a first out lever,

units of to domestic X,XXX. full year XXXX, X% our in nearly nearly increased system number For the

over a domestic factors to increased count X% of growth. room rooms. While unit domestic Two for major total XXX,XXX contributed this

X%. surpassed First brand its quality brand, locations. XXX rate added hotels an which the growth our is as XXXX, portfolio of to new recently said, Pat The impressive X,XXXth nearly during

remains portfolio, Today, a upscale room is upscale serving approximately have XX,XXX which XX% around and world. The count guests with the open other open Demand Choice domestic increased high. our hotel rooms we to its year-over-year.

a In development construction the best particular, these XX% agreements franchise domestic XXXX our was franchise in agreements agreements year Of with granted year-over-year. XXXX increase in new were awarded new XXX As XXX in awarded. over quarter. decade domestic fourth

and Additionally, brand converting the XXX success awarded healthy we and while construction long-term. the brands portfolio hotels portfolio near-term, portfolio of continue brand and for the conversion our in in well in to to quality our segmented existing have conversion XXXX. allows both This of maintaining agreements new into a strong size agreements improve us of balance

The our strategy, brands new growth entire ability gives to to renewed to stay brought Our thrive strong to WoodSpring The credence and consumer performance. successfully contributed future segments in trends extended-stay execution and demand our with development upscale portfolio. particular, favorable acquisition in our to prospects. interest continue combined enter and extended

As of Pat new Suite last brands Even for by with XXX% Suburban WoodSpring year agreements number saw our MainStay the portfolio. domestic increased XXXX and significant excluding increasing mentioned, versus full our franchise new awarded agreements extended-stay year domestic XX%. franchise growth

the feeling operating a the franchise in current our development year-end brand's largest XX these increase pipeline upscale represent the our Caribbean, of approved the XX,XXX XX% for most overall continued history. system. This hotels, conversion Choice and brand franchise nearly XX XX year Collection, of hotels At XX% globe, strong or December U.S. is the awaiting hotels awarding and Colombia, rooms pipeline awarded in or in and brand’s construction the the domestic and Hotel reached development course of agreements. was from rooms history X,XXX fueling our company's under open domestic XXXX. of key including XXXX which Ascend expansion closed Canada, agreements international markets the or XX Panama, and Spain, by Another total out across the regions in

construction over new grew catalyst domestic previous pipeline year rooms will growth. and by long-term a our and be unit, Our the for XX% RevPAR

the us since giving a solid openings. foundation for hotel construction hotel In fact, XXXX starts highest were future

XXXX, X% XXXX. strategy to For reflects accommodations. expect X%. net we underperforming guidance aligned range quality continue between for our properties strategic throughout and ensuring guests domestic high deliver hotels incremental full This unit and This year of our with long-term to growth terminations is affordable

terminations our growth. accelerate on positive believe XXXX impact and the growth future equity overall a have and RevPAR to expect unit We rate will brand

driven continues by franchise The second revenue lever, of the be royalty pricing to the agreements. rate

Our third effective XX year has which royalty the to equates points year for is basis fourth consecutive growth, increased increased of by the by the XXXX effective XXXX annualized basis. and same rate domestic royalty double-digit on XXXX points period over million for the of XXXX royalty rate grew basis points, year-over-year XX of $XX XX since an full quarter prior royalties basis versus incremental our rate year.

we Given XXXX. provide to the in attractive franchisees be effective continued expect increasingly X value basis for year proposition points their and with with growth affiliated brands an anticipated increase desire XX our our royalty between rates, full we and

final is discuss third to and revenue RevPAR. lever The

contributor Modern over and properties working to increased encouraged become this the effect this of Overall the line guidance. continued the in domestic expected our that Based due a RevPAR year, the transformation attribute on second fourth quarter tougher with in half which slightly have comps to period of as compared to primarily the the renovations. prior the results to RevPAR to growth Move was our Our are fourth program seen when quarter well the We preliminary Comfort is increased year, for Comfort will was softness as our same system guidance. is completed which we wide X.X% net half year full of throughout below XXXX X.X% industry. to RevPAR

end average second that In of by for the XX fact, an renovations saw plus properties of RevPAR quarter lift index year. basis points full the the XXXX completed

X.X% of expect For we RevPAR of the approximately in the first RevPAR quarter quarter remain against unchanged of XXXX, to XXXX. strong a first growth comparable

cycle our continued RevPAR to generated us we to to our year, share In between our dividends back return allows These continued target X.X% grow record times. to been allow Additionally, approximately X of to executing the we in key returns repurchases. our in WoodSpring $XXX make came and will flow, long-term capital returns the that the and investments to investment Comfort’s X%. XXXX, of have setting a investments areas we XXXX of performance. the long-term growth with which in Clarion pipeline Move we Throughout continue and program that continued key our to capital Throughout strong of form million ratio expect business cash our and against $XXX range Cambria. these million shareholders. and shareholders. In leverage the times of momentum below be in the XXXX, and will of significant X.X brands year approximately million Pointe, continue brand completion expect to cash returned margin strategy X long-term we initiatives operating us full closing, in growth fuel and of with drivers Even Modern the and $XX ended with

capabilities to Additionally, make the bolstering predictive insights in us and we consumer of at investments our and and guests owners our innovation analytics understand will keep better hospitality. and forefront our

expect these beyond. investments for to We well XXXX us and position

full share. the share earnings and to XXXX, And range per per for diluted For to we between per to $X $X.XX adjusted range range $X.XX to quarter and expect earnings million $XXX of adjusted million from and between per we per the $X.XX diluted XXXX, EBITDA share share adjusted expect $XXX first year share.

Operator? that our continue success are our optimistic drive executing and very for this results performance long-term strong create and XXXX time, happy growth. with investments that additional We our At make we we on runway Pat are to I answer any by as strategy be would and questions. pleased will

Operator

comes of Please Kelley go first with from ahead. The Instructions] America. Bank question [Operator Shaun

Shaun Kelley

still little on maybe, dragged. your and do -- why what algorithm you of everyone. unit bridge of good to the guidance overall growth your gave I think last touched your royalty in rate your start expectations Dom, part and think areas a and lot are net of here. alluded Hi, earnings remarks, to think, SG&A this investments around a of bit the the RevPAR I and to with I so a prepared with good we Maybe color just we're morning, has sort of maybe is walk part one of the prepared and when get the we of do the elevated. implying remarks. to probably you I growth guidance, some growth But the imagine to bridge bit in EBITDA the

So maybe sense bit elaborate there us and in could you discrete much a give that? any how year-on-year a SG&A is for us of items little call going to out up be could you

Dominic Dragisich

Sure element Obviously, take the about the a you nail it growth going the normalize of will for timing, to or look thing so, we're when we of decelerate the X% call call consumer making growth, do so hit other at these in the just opportunities is continuing insights a Shaun. of top-line in those WoodSpring. look is it it to horizon. does in EBITDA that comp you investments some That into SG&A it the have just that timing you're were in growth EBITDA X% given is at or XXXX with on XXXX. XXXX when the see some bit XXXX. investment we be really brand business revenue, And XXXX the business. saw of little tougher take particular, we're you you that to When on a you it and elevated, that a trend making head, result investments also the there those the some slightly

on about when rate, tax flow local tax call a X%. to you're And just that elevated some comp through. you drag so that down EBITDA XXXX, XXXX talking also and in state Slightly it was

down as essentially those normalized well, EPS to growth So X% net-net, for you do or it at a if normalize call you're X% you drag if year. EPS, over it taxes year

Shaun Kelley

a out kind in it as bit we as move in Great, time a just XXXX is that seeing up that's of, those elevated up to from going where these of as perspective get be -- wouldn't perfect. or enough algorithm that about we – beyond, come something the rate attacking think nature, meaning, or investments a to level, move is maybe here. more this repeat something And and the to to again, okay, for going but to we they growth you’re then, business you're keep things sense longer term one opportunities

Patrick Pacious

Shaun, it’s Yes, Pat.

you a where be see in for as at segments we we think brand and I something point not going about opportunity. that baked is cycle the at done term. there's the in now We're growing the we've for we're of where the think lot new it that's a us should long right look when launches to opportunity

is actually a brand extensions in what launches to And of midscale, amenities or to so, brand new now. lot the both the there's prototypes, a -- where time or guests our upscale, that lead this and from translating cycle really doing information at is extended-stay the lot segments research we're in insights and refreshing you your going want that's we're be right potentially of and information now looking into to consumer collecting

the to there. out look proprietary that you contribution the in at that's think And value which so, our as should also I the we is proposition demand capture continuing product that portfolio investment of these and back in sell, number, guest sort

of we accelerate our definition. is the meet and this couple sort an to expected RevPAR next in in at at So, have to the time invest growth It’s lodging that in portfolio this to -- our opportunity our look looking to that brands the continuing brands the of of we tomorrow's part cycle and look continue at that are unit those as brands years. in and really

Dominic Dragisich

opportunistic to long-term line. call it opportunity still alluded, the Yes, as Pat mid-single we would we say speaking, top probably additional what growth, to just I drive digit see we obviously quantitatively if is Shaun, will SG&A be

Shaun Kelley

One growth Great, if unit may, I where you’re all below more which you targeting -- and that and the makes at also think the normal your alluded I target to leverage sense. range. is

been have having You the with that’s super the WoodSpring, portfolio. successful and across it appears impact

line, growth the kind of of M&A, and buybacks return also does and EPS what’s capital below the both -- kind XXXX? any what’s what’s So the and include sort of -- in contemplate go-forward algorithm, the between the

Patrick Pacious

not opportunistic Yes, dislocated historically, intrinsic our more that’s call any to EPS value it attributed have stock as because share is That’s guided from we our price strategy the really repurchase growth look has repurchase. our where calculation. for we been share where

year-over-year, look you the EPS not growth guidance include repurchase. our at does share So

to look the is have continuing work really build there, doing launching our we’re to I side and M&A to for think I at Clarion WoodSpring which a who it of Invest and Pointe, across Cambria the more owners we brand sites, a helping you in On help growth when lot capacity our number to the house, -- of capital with of do more can when because that things. capital WoodSpring them. it’s fuel the find our a excitement we market business, and adds only opportunity if putting look of right segments

that’s those sort where are capital of So going. investments

make We’re which always fit nicely M&A looking that portfolio opportunities sense, our that at asset in are light. and

that add current be a continue to we’ll to nice opportunities would those portfolio. and for sense look our So make

Shaun Kelley

Thank much you very

Operator

David Katz go Okay, with Please ahead. the next question Jefferies. comes from

David Katz

Hi, good morning everyone.

Patrick Pacious

Good morning, David.

David Katz

of that past aspiration or some discuss made to for so of sort focus a you could comments any Is of trajectory that? there earlier aspiration talked just and minute, to or the I north we’ve XX about that the I on we Cambria about timing the in getting know about hotels is getting wanted still and XXX.

Patrick Pacious

which we ground open seeing at was hotels had XX that breaks really and now year. good year, feel we’re double the prior Yes, so the about in XX, we both aspiration the progress last

getting getting about new we and So good into progress pipeline. open the that we’re hotels on the feel making awarded contracts

I as north lot believe up demand And huge we XXX with of that we level of is so significant support in in we it’s about current of investments I and well. and clearly excitement there. we’re pipeline are seeing remarks at as continuing there’s the at interest some XX a we’re talked around the a forward amount units look I the at think well. to look really the we’re get that’s brand to pickup significant company as as institutional making, the segment growth path that where there’s I supply consumer the think in the our to of a brand seeing a segment

about continue So sector very industry feel good fundamentals positive for and progress we’re we making. that the really be the to

Dominic Dragisich

take Yes, have do Pat when David, construction you open, XX currently point under and XX look good that a just as you are mentioned is have one you data today.

So look three take the a probably the so. XXX so the hit it you within number then you could when or that in about that at XX next years XX and XX, call or pipeline

David Katz

I from, just missed I apologize And you subject to which of in is and have XXXX back it, the specific there it. indicated if that -- you brands is catalyst have terminations but in a Got for competition -- those are anything or intensified the terminations? And thinking? any is obviously maybe there’s systems industry cleansing that others also function that of function is area certain in a of a

Patrick Pacious

higher this that's the terminations slightly No, interesting or move portfolio, sure brand normal specific I really making year for consumers. into more our asset. with out one in those willingness of the proved wouldn’t aligned brands with would maybe capital portfolio, turnaround, than staying many put And is Choice more we hotels that sort Comfort leave in this our brand another of it And the owners’ to the of a about what's that into conversion the I several across brand it call product call relevant brand, normal them. I around call would

So even the though many hotels, as of those in may they we will well. terminate system stay

Dominic Dragisich

incremental of out some add take I the thing terminations. And only would if strategic you is those

For to would mentioned the rate. that And prepared around as X% XXXX, XXXX growth do I that right remarks. accelerate in expect we have we in been

David Katz

Got you much. it, very thank

Operator

Stanley. question Morgan The go Allen ahead. with Thomas Okay. Please next from comes

Thomas Allen

on just some up so those of earlier. Yes, questions guidance following Hey.

you on mid-single guys quarter third XXXX. expected digits growth up over said call, the unit then that and So you to grow be your rates royalty X%, to in

of guess, in past three all these I have or to many what's So move -- so months Thank the you. changed kind things have around?

Dominic Dragisich

that. about on result growth net talked a those we strategic So it’s just Primarily terminations. of incremental I the think unit front,

then, goes is mix flow below providing, the the opportunity we really to the materially which just a rate, term. of when and So development our royalty the models. pretty on do in Obviously, the discount rates. longer historicals. the And best on effective to that it's team with that's the market interest think And they're business of really the of refinement so through rack you the mix very when product low see well. effective higher compared royalty front, continued We as product the we're royalty rate models still the

to sustain and rate mid-single historical that this the and year year we it we call forecast so, beyond can next still digit think increase. updated we the double effective royalty those digit it then And call

Thomas Allen

of the follow-up better I'm than just But fell if of you XXXX And for investments Helpful. -- you're in some slightly you think next quarter talking in is CapEx that us that I doing kind can the about growth my so? or fourth correctly, calculated you. unit about, guessing these Thank too because also were than years help few then question expected. better

Dominic Dragisich

forecast fairly CapEx the well. say line would I historicals as with in So

$XX million we very delever continue look your So is a right still when million, or $XX million, the But that million think current million you $XX million to to flow I so $XX the historically. at why to take it's the as been under And call around positive $XX it cash what a that to trends right $XX anticipate EBITDA that at we we're company which being around bet well. X.X. expected is have best that's less

Thomas Allen

Okay, perfect. you. Thank

Dominic Dragisich

welcome. You're

Operator

Powell with question go ahead. Okay. comes Please The next Barclays. Anthony from

Anthony Powell

guys. morning, Hi, good

and them land. labor on lengthening do higher have any shelters you new and construction expect signing any a concerns increase impact Did those the cost of in the notable, impact the XX% pretty given to all activity of financing, is Your cost on materials? given construction signings labor about timeline and have your

Patrick Pacious

usually look they friends where into either is banks. the is owner financing getting brands the picture opened on are sort used that And window towards I new a be regional Now, lot when ago, more -- on we've or month probably values from talked to loan their equity to the financing of months think, past in local I trending XX put hotels. up. is these XX would at one It there construction. of particular how that it's say now you midscale to in several our and closer years family financing or

is more in there as but significant intensive maybe not an So impact, it's projects. as capital

on financing an construction seen holding new be for regard back with our So brands. issue we to haven't

Anthony Powell

on forward? do in how Got it few year that it, every And trend should trended normal the rooms years termination system how out over you terminations, and coming past rate of terms the thanks. of have going kind has the and of a

Patrick Pacious

we So X% overall initiate, terminations that typically of they're the it's typically around portfolio.

Anthony Powell

And considerably not that changed the few years? has past over

Patrick Pacious

It has not.

So when to incremental we're above, we range. that and around XXXX call X% speaking XX be been right historically we've basis the would points talking in over expect X% that about in but the that

Anthony Powell

you. thank Great,

Operator

next Patrick ahead. go Scholes The from Okay. question SunTrust. Please with comes

Patrick Scholes

Hi, morning. Good

looking from year makes you guidance earnings your be had Thank wondered of lower little that Going in back a I indicated RevPAR your a X.X%. for this bit softness to chain and little last -- a now lower. some is little is or X% at the midpoint that be you. bookings of bit of call some that -- for commentary in the reflective near scales

Patrick Pacious

think take story, you unit Inn I and XXXX. Inn without it's Comfort. we you growth Comfort is Yes, point, a Comfort growth grew if you of X% brands at a Patrick, -- story when in think all RevPAR RevPAR is units and X.X% I at Inn about other look on similar our was when good Comfort the out issue the

of So out we're for Dom the of had hotels and mentioned that renovating sort taking rooms point fact XX has year. the to Move basis call really Modern RevPAR that as it inventory on lowering the

going basis index mentioned gain positive. XXXX Move our that hotels early the we've is XX the completed RevPAR points Modern As renovation to the that other way

a and real here it's throughout process we renovations to the the our through be get Inn story accelerator really about year for flip it's Comfort as a growth. RevPAR to going So

their inventory is think, where And of then those hotels rooms renovations renovation really of that complete reaping and control, determine have are beyond that But of individual our is aspects the decisions then we begin drag are all XX% I it on do it and XXXX during and because out you some will owners benefits of start is a a seasonality XX% on point make our other The peak XXXX in to remaining The positive are the just it catch process the completed in sense at they already in XX% types of not that taken expect beginning XXXX. RevPAR. brand under around so of the the XXXX. there's of the have sort up of this a isn't essentially underway. the rooms when those to market, by be of side. it's with going to to news that based precision willingness of service, we out driver their on their RevPAR things have in periods, great end the to doing about significant

Patrick Scholes

Okay, that. on I clarification you. the Thank appreciate

Operator

next Jared go The Okay. with Wolfe ahead. question Please Research. Shojaian

Jared Shojaian

question. my everyone. Hey, for Thanks taking morning, good

So development help from some initiatives announced. total you Cambria of XXXX but about And other in spending, it obviously, wanted should have a the we us just between total a you ask guess think ramping, financing, from know question. lot the and at I how I you've the going that -- go I perspective, joint to back of equity that perspective breaks to XXXX the beyond? then of development just out CapEx method, And about the key-money forward can and think spend how ventures

Dominic Dragisich

Sure.

So this is with what is And in you what I XXXX. Dom. fairly in say would line saw

was million saw south XXXX mezz, $XX a take provide overall XXXX. the that XXXX. also when actually publicly you cetera. But somewhere of we from think you we et pretty advances JV at just a look million that proxy the called acceleration program, increased outlays don't you saw I it Key-money of just at the $XXX look for call the Cambria when the for the good was Cambria breakdown year-over-year with and about that's between majority it take pipeline. by vast into into a The So

historically. well. key-money as million in figure we of remain in that $XXX to part what Net-net other basically overall And sheet so item that it also has balance that's fairly brands Cambria for baked that with figure constant the line been is expect

Jared Shojaian

thank Okay, you.

the a a that's factors function rates to mix in right sort maybe, through some coming going of benefiting of pay I highly will mean, on royalty, do this of or is where direct you sort when book someone as you like booking this positive know if royalty like other will brands a consider the versus new sort have depending you now? terms OTA, franchisee higher pay direct campaign just some on any brands offer increases, In effect goes mean, have and may I structure example, there's rate that you there lower for at be are incentives higher of royalty the of that -- I

Patrick Pacious

fact on No, our channel that hotel we the royalty don't hotels, the -- channel the the proprietary than deliver through mix depend I doesn't mean, that other value that to comes higher mix the we rate the prop. more can

a you the our about half. ago, raised if other higher remember, year we half previous are we I royalty around on Two expectations rate royalty. the talked of the brands and this we think our and on We raised have, And ago, I mean, years calls. then

a And of to -- to higher that's pay a quality reflective in contribution proprietary loyalty lower of the our and contribution rate our function and join brands all so, have system also the getting willing owners with our it discounting. is royalty better, been

seen are all effect years. the those of we've increase over rate as of royalty to two contributing the So things last

Jared Shojaian

And you thanks. RevPAR year maybe of parse would RevPAR me, bit just in mind. terms Great, versus how the Can talk [ph] you're more out your about guidance. seeing for the business just you date, what if right environment now, and little to don't you one a

Patrick Pacious

really off to sort the quarter I a have government so January little a only softer I think, given Yes, numbers, got of we of bit shutdown mean, the spot.

XX shutdown. because way, in probably calendar the month shift the in Sunday we're where XX a an points shift. It basis up to be the the we from think goes January impact interesting helped picking the Easter here other will of the I by quarter. think was We'll get QX government

lot February see a March strong guiding into of XXXX So to I think so QX there's But takes, point. and we're essentially and some this there at X.X%. at the a flat through of puts isn't was really quarter, given

Jared Shojaian

very Okay, much. thank you

Patrick Pacious

Thank you.

Operator

Alton question The with Please Research. next comes Longbow Okay. ahead. Stump from go

Alton Stump

for the you question. Thank taking

free buyback ever step in sheet share to cash big buybacks I follow obviously for an continue here or the balance up consider to pretty buybacks flow mean opportunities, up step a guys focus would core XXXX. essence a you discussion, on on using if we there's acquisition for Just in you of to that up endeavor.

Dominic Dragisich

look it buyback I opportunity weren't, say think as it I really XXXX value. a Pat is, saying we the what intrinsic where at for So take this when would to in we at at you we what goes was you back an trading us opportunity look to are where

see would And XXXX some buybacks I think, in well. you to so, as level of expect

capacity return on As have of take of in -- context in bit Cambria, it the context a and the a take look we're shareholders. capital at Pat to a balance it we quite of sheet are going right our we look we'll to at mentioned, certainly now M&A

level be don't M&A strategic fairly saw internal of some will I a consistent good it's it's pretty in absent with what into So of well probably I assumption -- investments. think or that there you buybacks think incremental those as some XXXX XXXX

Alton Stump

full it easier up safe ramp your year half? of back in expecting the way And front, the RevPAR the are Makes a compares sense, read assume to be because currently over course thanks. as moving kind I for get then of just question you would that year any obviously a on of guidance

Patrick Pacious

quarter-over-quarter as into strengthening we year. we further RevPAR get the Yes, look

Dominic Dragisich

and comps add the would I there get is as Yes, what easier well.

you that result drag of year had hurricanes. we think and QX the if about last QX in So as the of a

into believe around we QX, sequentially probably that jump another going If based right you're you those and QX, jump you'll look probably and model QX stabilizing to a see QX then see levels. today the on

Alton Stump

helpful, you. Very Great. thank

Operator

turn conference answer over Pat remarks. and our session, Pacious closing question for the I back to like to would any concludes This

Patrick Pacious

us everyone today. for you, joining Thank

to their own capital resources decades enhance owners profitability. creating us and just term. proud of built we're the heard, for innovating you confidence talk clearly franchisees hotels we one today are are As resonates we flying with our system, the great our we flag brands we May. only a as joining with to their over our reputation the These as XXXX, of Have that to more and their hotel. do eight on opening treat thank our shareholders I'd in constantly and us Choice know seriously and investment staying for The will and who not day. again in give like you you for us factors proudly but longer

Operator

concluded. The attending today's for Thank conference now has presentation. you

now disconnect. may You

Choice Hotels International (CHH) 15 Feb 192018 Q4 Earnings call transcript