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Choice Hotels Reports Strong Second Quarter 1998 Results

Choice Hotels International, Inc. (NYSE: CHH) today reported a 31 percent increase in per share earnings for the quarter ending November 30, 1997. The company said earnings were driven by a 14 percent increase in franchise royalty fees.
The global hotel franchising company said net income rose to $12.3 million, or $0.21 per share, for the second fiscal 1998 quarter ended November 30, 1997, up 23 percent compared with the same period in 1997 of $10.0 million, or $0.16 pershare.

This is the first quarter Choice is reporting results as a pure franchising company since it separated in October, 1997 from its real estate operations, now known as Sunburst Hospitality Corporation (NYSE: SNB). This quarter also marks the last full quarter Choice will report on a fiscal year ending May 31st. Starting January 1, 1998, the Company will report on a calendar year.

For the second quarter of fiscal year 1998, Choice generated $79.6 million in total revenues, and operating income of $23.6 million, as compared to $69.4 million in revenues, and $19.9 million in operating income for the same fiscal 1997 period. RevPar (revenue per available room) rose from $35.98 in the year-ago quarter to $36.99 for the quarter just ended. This represents a year-over-year RevPar increase of $1.01, or 2.8 percent. The company`s net franchising margins for the second quarter of fiscal year 1998 improved to 65 percent from 59 percent for the same period a year ago.

Said William R. Floyd, president and chief executive officer of Choice: “This quarter`s strong performance underscores the soundness of our decision to focus solely on franchising. The strong improvement in franchise royalty fees coupled with continuing cost control measures has resulted in positive gains in our operating margins. Our single franchising focus and a continuing strong performance will fuel the company`s strategic expansion in key growth markets in the U.S. and abroad. The new Choice is better positioned than ever to exploit changing industry dynamics and increase returns to investors over time.”

Franchise royalty fees rose 13 percent to $62.3 million from $55.1 million for the first half of fiscal 1998. Net income for the first half of fiscal 1998 was $24.4 million, or $0.41 per share, compared with net income of $21.0 million, or $0.33 per share, in the comparable 1997 period. RevPar (revenue per available room) rose from $36.94 in thefirst half of fiscal 1997 to $37.83 for the first half of this fiscal year. This represents a year-over-year RevPar increase of $0.89, or 2.4 percent.


For the period ended November 30, 1997, the total number of Choice hotels on-line grew 8.3 percent from 3,225 in the second fiscal quarter 1997 to 3,494 in the quarter just ended. Total room growth increased 7.9 percent from 272,372 in the year-ago quarter to 293,772 in the quarter just ended. The company added 36 opened hotels to its system in the second fiscal quarter of this year. Average daily charge rates increased from $52.51 in the second fiscal 1997 quarter to $55.17 in the quarter just ended, representing a year-over-year increase of 5.1 percent across Choice brands.

Choice Hotels International is the second-largest hotel franchisor in the world with 3,494 hotels open and representing 293,772 rooms in 32 countries under the brand names Quality, Comfort, Clarion, Sleep Inn, Rodeway Inn, Econo Lodge, and Mainstay Suites.

This news release contains certain forward-looking statements. Investors are cautioned that actual results could materially differ and are referred to documents filed by the company with the Securities and Exchange Commission on investment considerations.