Choice Hotels International, Inc.

Ladies and gentlemen, thank you for standing by. Welcome to Choice Hotels International's fourth quarter and full year 2021 earnings call. At this time, all lines are in a listen-only mode. I will now turn the conference over to Ali Summers, Investor Relations Director for Choice Hotels.

Good morning, and thank you for joining us today. Before we begin, we'd like to remind you that during this conference call, certain predictive or forward-looking statements will be used to assist you in understanding the company and its results. Actual results may differ materially from those indicated in forward-looking statements, and you should consult the company's forms 10Q, 10K, and other SEC filings for information about important risk factors affecting the company that you should consider. These forward-looking statements speak as of today's date, and we undertake no obligation to publicly update them to reflect subsequent events or circumstances. You can find a reconciliation of our non-GAAP financial measures referred to in our remarks as part of our fourth quarter and full year 2021 earnings press release, which is posted on our website at choicehotels.com under the investor relations section. This morning, Pat Pacius, our President and Chief Executive Officer, and Don Dragozic, our Chief Financial Officer, will speak to our fourth quarter and full year operating results and financial performance. They will be joined by Scott Oaksmith, Senior Vice President, Real Estate and Finance. Following Pat and Don's remarks, we'll be glad to take your questions. And with that, I'll turn the call over to Pat.

Thanks, Allie, and good morning, everyone. We appreciate your taking the time to join us. 2021 was a remarkable year for Choice Hotels, a year our REVPAR and adjusted EBITDA performance surpassed both 2019 levels and our previously reported guidance. Our full year 2021 REVPAR increased 2.2% compared to 2019. and our full year 2021 adjusted EBITDA grew 8% compared to 2019. We drove RevPAR results for full year 2021 that materially outperformed the industry and gained share across all segments in which we compete. Our fourth quarter RevPAR growth was exceptional, with RevPAR increasing 13.9% from the same quarter of 2019 and marking the strongest quarter of the year. This performance was driven by a set of deliberate actions before and during the pandemic, resulting in Choice Hotels emerging as an even stronger company than we were in 2019. Throughout 2021, our performance continued to strengthen. exceeding our 2019 REVPAR levels for the last seven months of the year. As previously reported, our economy segment led the recovery, beginning in the second quarter of the year. Our upper mid-scale and mid-scale segments quickly followed, surpassing 2019 levels in the third quarter. And our REVPAR growth rates have continued to improve quarter over quarter since the onset of the pandemic. In 2022, we expect our momentum to continue into the first quarter despite the Omicron variant. In fact, our January RevPAR results exceeded 2019 levels by approximately 12%. We are very optimistic about our runway for growth because of the long-term investments we have made and will continue to make in our business. These investments are designed to capitalize on the consumer trends that have accelerated during the pandemic, favoring leisure travel, limited service hotels, and longer length of stay. We expect these trends to continue to be strong, long-term tailwinds for our company. Prior to the pandemic, four out of five trips taken in the U.S. were for leisure purposes. and the domestic leisure travel segment growth is expected to increase from pre-pandemic levels and continue to fuel the performance of our brands. The rate of workers retiring in the U.S. has more than tripled as compared to pre-pandemic levels, and the baby boomers, one of our key customer segments, have more time and disposable income to travel. In addition, domestic remote workers, whose number is expected to increase from a pre-pandemic level of 19 million to 41 million in the next five years, will have greater flexibility as to when, where, and for how long they travel for leisure. Furthermore, in strategically expanding our extended stay footprint, we have positioned choice hotels to benefit from consumer trends that favor longer length of stay travel, driven by increases in extended vacations, household relocations, and temporary remote work assignments. Speaking of work assignments, throughout 2021, we witnessed sequential quarter-over-quarter increases in our business travel bookings, with demand and overall revenues continuing the steady progression back to 2019 levels. We expect our business and group travel demand to further strengthen and serve as a catalyst for our portfolio. We are also observing business travel trends that we believe are favorable to our brands. We expect business travel in our key industry verticals to increase with the additional onshoring of the U.S. supply chain. A recent survey indicated that over 80% of North American manufacturers are likely to reshore their production operations. This trend has already contributed to the accelerated recovery of our business travelers. At the same time, we are well positioned to benefit from leisure travel, becoming more mainstream among business travelers, consistent with a recent study that nearly 90% of business travelers report wanting to add a private holiday to their business trips. And we expect upcoming investments from the infrastructure bill will favor our business travelers and locations. Finally, with over 80% of American travelers surveyed saying they are ready to travel, among the highest levels we have seen over the last two years, we are confident that these trends and segment-specific tailwinds will allow us to deliver continued RevPAR and adjusted EBITDA growth in 2022 and beyond. Our goal is not to simply exceed 2019 performance levels, but rather to capitalize on current and future investments to fuel our long-term growth and drive our RevPAR performance to new levels. I will now more specifically outline why we are confident that Choice Hotels is in a stronger position than we were in 2019. During the past two years, we established key strategic building blocks that will provide us with a solid foundation for driving our continued, sustained growth in the years to come. First, we strengthened our core portfolio of brands. We have reinvested in the future of our mid-scale brand portfolio with Comfort's Move to Modern transformation. Since its successful refresh, the Comfort brand has registered two consecutive years of unit growth, year over year, and continued to generate RevPar index gains versus its local competitors, demonstrating the attractiveness of this iconic brand to hotel developers and guests alike. Our quality in-brand with over 1,600 hotels open in the United States continues to be a leader in the mid-scale segment with strong developer demand and a 14.3% increase in RevPar during the fourth quarter versus the same period of 2019. Due to the significant developer demand for this brand, We strategically exited a number of underperforming assets in the fourth quarter in order to open attractive markets to new owners and maximize the market potential for more profitable hotels. Our Clarion Point brand has also continued to grow. In just three years since its launch, Clarion Point expanded to 43 hotels open in the U.S., with another 33 hotels awaiting conversion this year. We also further invested in the Extended Stay segment, which is a significant driver of our growth. Our Extended Stay portfolio continued its rapid expansion and drove impressive RevPar growth. Last year's strong developer interest for our Extended Stay brands exceeded 2019 levels and we expanded our domestic pipeline to over 340 hotels. Since acquiring the WoodSpring Suites brand four years ago, we have grown its portfolio of domestic hotels by 30%. Our investment in the brand's marketing and distributions capabilities reflected in the nearly 130% increase in the brand's website booking revenue since 2018 enabled us to achieve nearly 30% REVPAR growth in the fourth quarter of 2021 compared to 2019. Last year alone, the WoodSpring Suites brand's pipeline reached nearly 190 domestic properties, a 24% increase year over year, with nearly 30 construction projects started, and we expect the brand's ground breaks this year to exceed 2021 levels. In addition, the first hotel for our newest extended stay brand, Everhome Suites, is currently under construction and scheduled to open this summer. The appeal for this new product in the development community continues to grow. With 16 domestic franchise agreements awarded last year, and a significantly higher number of contracts expected for 2022. We are also pleased with the continued expansion of our other growth vector, the upscale portfolio, driven by both Cambria Hotels and the Ascend Hotel Collection. The Cambria brand continued its positive unit growth momentum, expanding to 57 units with 17 projects already under active construction at the end of December and four ground breaks in the fourth quarter alone. 2022 is shaping up to be another great year for Cambria, and we expect over 10 additional hotels to open across the country. Once open, these upscale properties are expected to further fuel the revenue intensity of our system. Consumer confidence in our upscale products drove the brand's RevPar outperformance versus their local competitors and demonstrates the attractiveness of Choice Hotels' value proposition in the upscale segment for current and prospective owners. We also continue to propel our future forward by improving the value proposition capabilities we deliver to our franchise owners. which enabled us to continue to grow our effective royalty rate while capturing more domestic franchise agreements in 2021 year over year. Specifically, our pricing optimization and merchandising capabilities are further enabling our owners to effectively capture additional market share, drive top line revenue, and reach their target customers. Our leadership in this area is reflected in the prestigious award we recently received for our leading edge revenue management tool, recognized as the industry's most innovative enterprise technology. The tools we have introduced are contributing to the outperformance our brands are experiencing. In fact, during the past two years, our REVPAR gains as compared to 2019 have been significantly higher than the competition's. What's most impressive is that we continue to drive strong performance through both rate and occupancy share gains. We expect to maintain share gains moving forward. As a result of our progress, we are well positioned for stronger profitability in the future with ample runway ahead of us as we execute our strategy. The results we achieved in 2021 confirm that our long-term strategy of further improving our revenue delivery to our franchisees while focusing on growth in more revenue-intense segments and locations is working. This is what gives us such high confidence in our ability to continue to drive exceptional results in the coming years. In addition to our performance, I want to recognize the efforts we are making to live up to our ESG commitments, which, like our strategy, are long-term focused. Our fully dedicated team within our development and franchise service departments continues to drive diverse ownership of choice franchised hotels among underrepresented and minority owners. With nearly 30 franchise contracts awarded in 2021, bringing the total agreements executed to over 290 since the program began over 15 years ago. I am especially pleased to note that eight in 10 total agreements among underrepresented and minority owners executed this year were awarded to women entrepreneurs. To take our sustainability efforts to the next level, we began piloting a property management dashboard, which will enable our franchisees to track utilities usage at the hotel level and help identify opportunities for additional energy, water, and waste conservation that can not only protect the environment, but also reduce their operating costs. We also have recently announced a commitment to phasing out single-use polystyrene products across our domestic brands by year-end 2023, and to make bulk bathroom amenities standard across domestic brands by year-end 2025. Further details regarding our efforts to live up to our long-standing commitments to diversity and sustainability are outlined in our recently published ESG report. We're proud of everything we've accomplished this year, but we certainly could not have done it without the dedication of our associates and the strength of our award-winning culture focused on diversity, equity, and belonging. I'm especially pleased to say that Choice was recently named one of the best employers by Forbes for the fourth consecutive year, one of the best places to work for LGBTQ equality by the Human Rights Campaign for the 11th year in a row, and one of the best companies for diversity by Comparably for a second straight year. In closing, I'm confident in our continued ability to create value and deliver results for our owners and shareholders through our effective strategic investments and impressive performance. As we begin this new year, we are confident that we are well positioned to build on the success achieved in 2021 and our increased earnings power to further capitalize on growth opportunities in 2022 and beyond. With that, I'll hand it over to our CFO, Dom.