- The Washington Times - Monday, April 8, 2002

Shares of Choice Hotels International Inc., the world's second-largest lodging franchisor, are holding up well as travel rebounds following the September 11 terrorist attacks and hotels enter 20-year franchise agreements with the chain.
The stock closed at $24.36 Friday on the New York Stock Exchange, up about $7 from six months ago.
Choice, based in Silver Spring, has about 5,000 hotels open or under development in 43 countries. Among its brands are Comfort Inn, Comfort Suites, Quality, Clarion, Sleep Inn, Econo Lodge, Rodeway Inn and MainStay Suites.
"The stock has performed quite well, partly because of the general rebound in lodging stocks in the past six months," says Keith Mills, an analyst with UBS Warburg. "Adding to that is our focus on the growth of their portfolio in how many new hotels they are adding. That has been tracking a 1 or 2 percent growth a year and is meeting expectations."
As a franchisor, Choice doesn't own or operate its hotels, but provides marketing and reservations support. Its franchisees typically enter 20-year agreements and pay Choice a royalty between 3 and 5 percent of their revenues.
"The nice thing about our business from a stock standpoint is that it's based on long-term contracts, so there's a predictable level of revenue coming in," says John Hawkins, a spokesman for Choice.
In the aftermath of September 11 travel dropped, as did hotel occupancies and revenues for hotels. But the industry is turning around.
In mid-January Standart & Poor's affirmed the debt ratings of Choice and some of its competitors, saying the lodging industry would have a "modest" recovery this year. S& P also says that slowing growth in the number of new hotel rooms would help lodging companies when the economy recovers in 2003.
Revenue per available hotel room, a measure of average room rate and occupancy, fell 6.7 percent in the United States last year. It's expected to fall 0.2 percent this year, before rising 5.1 percent in 2003, according to a report by PricewaterhouseCoopers.
The outlook for Choice is "stable," according to the S&P; report, because the company generates stable cash flow from the fees it collects from owners.
"Choice's performance in this difficult economy highlights the stability of the company's franchising business model," writes analyst Michael Rietbrock, of Salomon Smith Barney, in a recent report.
In late March Choice had to restate its fourth-quarter and 2001 earnings, increasing the size of a charge related to an investment in a United Kingdom hotel company. Choice increased a previously recorded charge of $7.3 million to $22.7 million a change that did not affect its stock price.
Choice's loss for the fourth quarter widened to $19.1 million (45 cents per share) from $11.9 million (28 cents) as reported. That's compared to an income of $2.53 million (5 cents) in the fourth quarter a year earlier.
Revenues rose 2 percent to $92 million from $90 million.
For the year, Choice restated its income to $14.3 million (32 cents) from $21.6 million (48 cents). That's a 66 percent drop in income compared to 2000. Meanwhile, revenues fell 3 percent to $341.43 million from $352.84 million.
Choice will be releasing first-quarter earnings on April 23.
Mr. Hawkins says the company expects to earn 16 or 17 cents per share for the quarter and projects an annual per share income of $1.07 to $1.40.

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