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  • While the domestic new construction sales environment in NA will remain challenging, they will benefit from conversions when M&A activity picks up
  • See tremendous growth for their conversion brands
  • Returned 90% of their generated cash flow through dividends and buybacks in 2009
  • Grew membership in Choice Privileges (CP) by 2MM, and now CP members now deliver 25% of gross revenues. Hope to add 2.2MM CP members in 2010
  • New construction franchise sales are more impacted - declined 72%. Conversion sales decreased 32%
  • Repurchased an additional 200k shares through Feb 11, 2010
  • Had $65MM R/C availability as of Feb 11, 2010
  • It's clear that conversions are where the action will be for the next 18 months


  • Conversion demand outlook?
    • New construction demand will be challenged with the lending environment through 2011.  However, when it comes back it will come back first to limited service.
    • Conversions will accelerate when they feel more comfortable that trends have bottomed and when transaction volumes pick up.  Independent conversion is also an opportunity.
    • In the meantime, they have the ability to incentivize some deals by providing sliver capital
  • Why does upscale makes sense for them
    • Because they are unrepresented there... need to be in more urban locations, which tend to be more upscale and upper upscale opportunities. Will also give them the opportunity to grow more internationally
    • Hope that they will find the right opportunity this year
  • Why is Comfort Inn room down sequentially?
    • "pruning" hotels that aren't meeting brand standards and moving a significant number of those into Quality bands
  • Why are they confident that their limited service brands will see a steep RevPAR recovery throughout the year
    • They usually are a few quarters behind full service.  Believe that there will be an upturn in RevPAR mid year, and that they will have a more dramatic recovery in back half
    • RevPAR in Q2-Q3, down mid single digits and Q4 flat
    • Q1 gets less weighting 
    • Their busiest time is the summertime - since they are leisure oriented and looking for value
  • Have less RevPAR sensitivity and hence its easier for them to "make their numbers" by tweaking below the line items
  • What kind of brands are they interested?
    • It will include brands that own real estate but they are not interested in owning that real estate
    • Thinks that there should be some attractive acquisitions in the next 18 months, but they haven't shown themselves yet
  • SG&A for 2010?
    • Low single digit % increase.  To the extent the development is better or worse, commissions will impact that.
    • Believe that they have some more flexibility on the SG&A but that they are sized appropriately and would like scale their structure
  • Have they considered helping their franchisees access larger banks?
    • They are most likely not going to be able to help since the majority of loans are sub $7MM and don't have multiple franchises
  • Do they think that leisure travelers are taking advantage of trading up?
    • No - they gained share last year.  They did see some of their competitors "buying" share late last year. This is still a definite value orientation on a net net basis
    • Giving people what they want: Free breakfast, free parking, free internet
  • R/C refinancing?
    • Tenor is shorter now than what is was before. So they will consider terming out some debt.  Will need to address the R/C refinancing sometime in 2010- but not sure when. There is a possibility that they will put some fixed rate debt back in the structure at a 5-6.5% rate for a CHH like credit, depending on tenor.
    • Not counting on significant interest rate hikes in the near term, so that's why they are thinking about fixing some debt. Despite it being near term dilutive, its a good move in the longer term
    • Will not use FCF to delever, want to keep returning cash to shareholders
  • Would they need to see to accelerate the buyback
    • If they saw a significant gap btw share price and their perceived value of the company
  • They will stay with the franchise model when and if they go upscale.  When they go internationally they sometimes need to adjust their model.  If they buy a brand with significant management business they will figure out what to do with that.  Want to stick with just franchise
  • They are participating with EXPE at similar levels that they have done historically.  EXPE is not a significant distribution channel for them
  • SG&A decreased as a result of lower variable commissions and reduced headcount by low single digit
  • Ok this guy is a little slow... yes interest rates declined in 2009 and CHH has all variable debt