Choice Hotels Reports Drop in 2008 Operating Income

Choice Hotels International, Inc., parent company of the Comfort Inn, Comfort Suites and Clarion brands, reported that its operating income for 2008 was $174.6 million, a 5.7 percent decline from the $185.2 million operating income in 2007.

Operating income for the three months ended Dec. 31, 2008 was $34.1 million, compared to $48.1 million for the same period in 2007, a drop of 29.1 percent.

The company’s adjusted diluted earnings per share (EPS) for full year 2008 were $1.78, compared to $1.74 for full year 2007. Diluted EPS were $1.60 for full year 2008 compared to $1.70 for 2007.

Its adjusted earnings before interest, taxes and depreciation (adjusted EBITDA) were $200.5 million for the year ended Dec. 31, 2008, compared to $198.1 million for the same period of 2007.

Its adjusted EBITDA and adjusted EPS for the year ended Dec. 31, 2008, excludes special items totaling $17.7 million and $0.18 diluted EPS, respectively, related to $6.6 million of benefits resulting from the previously announced acceleration of the company’s management succession plan, $3.5 million related to employee termination costs and $7.6 million related to an increase in reserves related to impaired notes receivable.

Adjusted EBITDA and adjusted EPS for the year ended Dec. 31, 2007, excludes special items totaling $4.3 million and $0.04 diluted EPS, respectively, related to employee termination benefits.

Domestic unit and room growth increased 6.1 percent and 5.6 percent, respectively, for full year 2008, while domestic system-wide revenue per available room (RevPAR) declined 1.8 percent for full year 2008 and 7.7 percent for fourth quarter 2008 compared to the same periods of 2007.

Franchising revenues and total revenues increased 2 percent and 4 percent, respectively, for full year 2008 compared to the same period in 2007. Franchising revenues declined 8 percent and total revenues declined 9 percent for fourth quarter 2008 compared to the same period in 2007.

New domestic hotel franchise contracts for the three months ended Dec. 31, 2008, declined 31 percent to 207 compared to 301 contracts executed in the same period of the prior year. Overall, new domestic hotel franchise contracts executed for full year 2008 declined 9 percent to 698 compared to 770 for full year 2007.

The number of domestic hotels under construction, awaiting conversion or approved for development declined 2 percent from Dec. 31, 2007 to 987 hotels representing 78,915 rooms; the worldwide pipeline increased 1 percent from Dec. 31, 2007, to 1,108 hotels representing 89,105 rooms.