Choice Hotels International, Inc.

Ladies and gentlemen, thank you for standing by. Welcome to Choice Hotels International's first quarter 2024 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 Senior 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 the forward-looking statements, and you should consult the company's forms in Q10K 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 first quarter 2024 earnings press release, which is posted on our website at choicehotels.com under the Investor Relations section. This morning, Pat Pacius, President and Chief Executive Officer, will speak to our first quarter operating results, while Scott Oaksmith, Chief Financial Officer, will discuss our financial performance and 2024 outlook. Following our prepared remarks, we'll be glad to answer your questions. And with that, I'll turn the call over to Pat.

Thank you, Ali, and good morning, everyone. We appreciate you taking the time to join us. It has been a successful start to the year. We drove our adjusted EBITDA 17% higher and our adjusted EPS 14% higher year over year to record first quarter levels. And we expect to carry this strong momentum through the rest of the year. The impressive results we delivered in the first quarter clearly demonstrate that we are unlocking the revenue synergies from the Radisson Americas integration. The Radisson Americas acquisition has meaningfully enhanced our growth profile as it created a step function change in the size of our business, expanded our rewards program, broadened our geographic reach, unlocked new value through our platform capabilities, and opened new incremental non-REVPAR-related earning streams, which are resulting in additional profitability. By increasing our scale, network of franchisee relationships, and customer reach, we have significantly increased our future growth opportunities, resulting in a record global pipeline of over 115,000 rooms at quarter end, which is a 10% increase quarter over quarter. And our strategic focus on more revenue-intense hotels means that the pipeline continues to be of significantly higher value than the current hotel portfolio. Importantly, the hotels in our domestic pipeline now represent a more than 30% REVPAR premium compared to our existing portfolio. a meaningfully higher average effective royalty rate driven by our strengthened value proposition to franchisees. And they have, on average, a 40% higher room count per hotel as compared to our current domestic system. With this positive momentum, we are very encouraged by our existing and future portfolio prospects. At the same time, the strategic investments we continue to make in our franchisee-facing systems and tools, our brand portfolio, and our platform capabilities are increasingly contributing to our earnings results and are providing additional levers for us to drive our growth. The successful execution of our strategy, which has accelerated over the past year demonstrates the versatility of our business model. The four growth drivers, each uniquely contributing to our performance, include first, driving the revenue intense growth of our brand portfolio with a focus on hotels that generate higher than brand average royalties per unit. Second, increasing the velocity of new hotel openings as we leverage our best in class hotel conversion capability, which remains a distinct advantage in today's development environment. Third, expanding our international growth. And finally, bolstering our platform earnings capabilities through strategic partnerships and other ancillary revenue opportunities. Just last week, we hosted our 68th annual convention. which is a hallmark of Choice Hotels. A record number of our franchisees joined us and the level of enthusiasm and support we heard about the upward trajectory of our brands and our plans to build on that momentum was remarkable. The success of this event every year is a direct outcome of our steadfast commitment to our franchise owners and the deep personal relationships we've developed with them over the years. The convention is always a significant new hotel business development opportunity. The event was a chance for us to award new franchise agreements, share our long-term brand growth plans, and discuss many new investment opportunities across the portfolio. One of the most exciting announcements we made was the relaunch of Park Inn by Radisson. This conversion brand is a part of our portfolio of revenue-intense brands. The brand delivers a premium lodging option aimed at the younger, value-conscious traveler, which we know is a growing segment. The innovative conversion model offers a compelling investment for our franchise owners while filling a market opportunity in our portfolio just below the quality-in brand. Over the past several months, hundreds of prospective owners have expressed interest in opening a Park Inn by Radisson franchise. In fact, we expect our first Park Inn by Radisson to open next quarter. We are encouraged by the initial reception, and we believe there is a meaningful opportunity for this brand offering in the coming years. Our annual convention, which is a significant learning opportunity for our franchisees, and the enhanced value proposition we continue to deliver are among the reasons why our existing owners choose to expand their hotel portfolio with Choice Hotels and contribute to our industry-leading voluntary franchisee retention rate. Our distinct unit growth strategy continues to deliver results and enriches the attractiveness of our brands. Since we embarked on our strategy of enhancing our franchise business with more revenue-intense hotels, We have meaningfully expanded our mix of higher revenue generating hotels, and importantly, we expect it to continue to increase in the coming years. These new revenue-intense franchises are more accretive to our earnings and are a key driver of future growth as hotels within a brand, on average, generated royalty revenue over 20% higher than hotels exiting the brand. In the current hotel development environment, our core competency of a best in class hotel conversion capability has an even greater impact. Through our superior speed to market conversion processes and best in class franchisee support, we are able to move projects quickly through the pipeline, which allows Choice to start generating revenues sooner. In fact, Of the domestic franchise agreements we executed for conversion hotels over the trailing 12 months, we opened 113 during the same period, a 43% increase over the same period of the prior year. This core competency will continue to be a key growth driver throughout this year as developers choose to convert to our brands. Specifically, as of the end of March, We grew our global rooms pipeline for conversion hotels by 36% quarter over quarter, including a 9% increase coming from our Radisson upscale brand. We are especially encouraged by the prospects for this brand, given that each hotel generates, on average, six times more royalty revenue than our economy portfolio. Fueling our success is our ongoing commitment to strengthening the value proposition we provide to our franchise owners. This is supported by our investments in creating a best-in-class franchisee success system. In fact, over the past two years, we have grown the direct online contribution to our franchisees by over 10%. We continue to meaningfully enhance the performance of our Radisson Americas hotels by driving higher traffic and booking conversion rates, which in turn lowers customer acquisition costs for our franchisees. Specifically, since the digital integration back in August last year through March of 2024, we drove over a 20% increase in stays through our domestic direct online channels for the Radisson Americas brands year over year. with particularly strong results for the Country Inn & Suites brand, which grew by over 30%. The significant performance lift since the integration is attracting new hotel development commitments. In fact, in the first quarter, we saw a 60% year-over-year increase in new applications for domestic franchise agreements for the Country Inn & Suites by Radisson brand. Thanks to our portfolio being better positioned, we organically grew our rewards program by 9% in the first quarter year over year, and this increase is exclusive of the Radisson America's rewards program integration. We now have approximately 65 million Choice Privileges members, and these loyal guests book directly through our lowest cost channels. They drive more revenue. and return more often than non-members, which translates to lower customer acquisition costs and higher margins for our franchisees. In addition, our recently enhanced partnership with the world's largest independent hotel brand, Preferred Hotels and Resorts, is expected to provide expanded opportunities for our rewards members to redeem their stays at more than 300 luxury properties. Another benefit of our broader and higher quality portfolio of hotels is that it allows us to attract more blue chip national travel brands and it strengthens our existing strategic partnerships. For example, we were recently named the first new AAA preferred hotel supplier in a decade. All our key brands were awarded the prestigious AAA's diamond designated status which brings added visibility and credibility to our hotels. This endorsement is particularly meaningful given that AAA and its Canadian counterpart CAA's 64 million members account for over 30% of paid room nights annually across North America and look to these exclusive designations to help them make travel choices. We are excited about the long-term opportunity from this partnership and anticipate that it will start to deliver more business to our franchisees as we enter the busy summer leisure travel season. Turning now to our international business, we had another strong quarter with growth across all our key metrics, including unit growth, rev par, EBITDA performance, and guest satisfaction scores. Importantly, in France, we recently signed a franchise agreement with Zenitude Residential Hotels, representing more than 4,000 rooms. And as the Summer Olympics approach, I'm pleased to say we are on track to onboard these units, which will double our hotel footprint in the country. We believe we have a significant opportunity to further gain international market share and realize additional EBITDA growth in the coming years. Moving on to our platform business, we are very encouraged by the traction we are gaining in our efforts to expand that business and our non-REVPAR ancillary revenue growth opportunities. One of these revenue streams is our new co-brand credit cards, which have exceeded our target for new account signups in the first quarter. This strategic partnership is a long-term tailwind, given that it drives loyalty to our brands as our rewards members with credit cards stay with us, on average, four times as often as non-rewards members. And it delivers revenues based on cardholder spend. In closing, we remain focused and committed to executing on each of our long-term growth drivers that I have discussed. Choice Hotels has a meaningfully enhanced growth profile with additional embedded value, which we will continue to unlock as we move forward to create incremental shareholder value. We have positioned the company with a portfolio of brands and a value proposition that allows our franchisees to capitalize on the long-term trends propelling travel. Specifically, we are capitalizing on the increasing number of retirees, the continuation of remote work, rising middle class wages, and the rebuilding of American manufacturing and infrastructure, all of which expand the pool of our target travelers. Furthermore, with more than 5,000 choice hotels within two minutes of a highway, our portfolio is well positioned to continue to benefit from the ongoing affinity for drive-to vacations. We are confident that these long-term trends that favor our brands will allow us to attract and capture an even larger share of leisure and business travel demand and enable us to maximize growth opportunities well into the future. I will now be turning the call over to our CFO. Scott?