Choice Hotels International, Inc.

Ladies and gentlemen, thank you for standing by. Welcome to Choice Hotels International's first quarter 2025 earnings call. At this time, all lines are in a listen-only mode. I'll now turn the conference over to Allie 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 Form 10-Q, 10-K, and other FCC 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 the reconciliation of our non-GAAP financial measures referred to in our remarks as part of our first quarter 2025 earnings press release, which is posted on our website at choicehotels.com under the investor relations section. This morning, Pat Patias, President and Chief Executive Officer, will speak to our first quarter operating results and update on our strategic priorities, while Scott Oaksmith, Chief Financial Officer, will discuss our financial performance and outlook for the remainder of the year. Following our prepared remarks, we'll be glad to answer your questions. And with that, I will 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 as the momentum we've created from our strategic investments has carried forward into the first quarter, driving our adjusted EBITDA 4% higher and our adjusted earnings per share 5% higher year over year. The investments in our business delivery engine have increased the attractiveness of our brands. resulting in a 3% year-over-year net increase in global rooms in the first quarter, including a 4% net increase for our more revenue-intense rooms. We also continue to excel at what we do best, delivering guests to our franchisees. In the first quarter, we outperformed our chain scales in domestic REVPAR performance, captured demand across multiple regions of the country, and achieved REVPAR index share gains versus competitors. These results reflect the improved mix of guests that we are now delivering. Today, approximately 40% of our overall mix is business travelers, which we believe is well balanced between business and leisure travel. Importantly, CHOICES business travelers have a relatively resilient profile. These are guests whose job cannot be accomplished without traveling. They comprise key categories such as construction, regional sales, utilities, and medical staffing, and we are now capturing additional longer-term opportunities from companies involved in the substantial infrastructure investments required by GenAI and the push towards the reshoring of American manufacturing. We anticipate these trends will continue to accelerate, and through our deliberate strategic positioning of our portfolio, CHOICE is poised to capture this demand. Our business travel segment grew 10% year over year in the first quarter, driven by both group and business transient travel, and supported by our expanding, upscale, and extended stay portfolio of hotels. Notably, we achieved an impressive year-over-year revenue increase of over 50% from group travel business in the first quarter. We delivered these strong results despite increased macro uncertainty, demonstrating that our strategy continues to succeed and reinforcing our confidence in our long-term outlook and ability to create value through our strategic investments. As we look to the future, our global pipeline provides a strong platform for long-term growth, with 98% of the rooms within our more revenue-intense brands. This means that our pipeline should generate significantly higher revenue compared to our existing portfolio, driven by a substantial RevPar premium, a higher average effective royalty rate, and a larger room count per hotel. The versatile business model we have built has allowed us to deliver stable returns and provide diversified avenues of growth throughout different economic cycles. Historically, in periods of economic uncertainty, our differentiated positioning has enabled us to outperform our peers, gain market share, and emerge stronger. Choice has an increasingly diverse portfolio of well-segmented brands across a wide variety of price points to suit the needs of a broad array of consumers and hotel developers. We have made tremendous progress since we embarked on our distinct strategy to strengthen the company's position in more revenue-intense segments and markets. We have added brands in our strategic growth segments over the past several years and have expanded our domestic mix of more revenue generating rooms by 11 percentage points to 88% of our system over that period. Notably, the revenue generated by an average hotel in our portfolio has increased 17% over that period. The addition of these new brands expands our opportunities to grow our hotel franchise system in all market conditions, as they offer both new construction and conversion opportunities for developers to grow their portfolio with us, depending on their needs. In addition, all of our hotels realize the benefits of our increased scale, including our technology investments, more valuable rewards program, and expanded partnerships. Diversification has also made our business more resilient. particularly with our continued growth in the cycle resilient extended stay segment. We have increased the size of our extended stay portfolio by 19% over the past five years to approximately 53,000 rooms, with the segment's pipeline now representing half of the total domestic rooms pipeline. An increased extended stay footprint gives us even more confidence in the resilience of our business because in times of uncertainty, we have historically seen demand remain relatively strong for our extended stay hotels. We have also strengthened the entire business by attracting higher income, more resilient customers who have the means to keep spending and traveling through economic cycles. And that means we're delivering customers with a greater lifetime value to our franchisees. In fact, half of our customers now have annual household incomes exceeding $100,000, which means they are more than 24% higher than the median national household income, and nearly 20% surpass $200,000. At the same time, we expanded our rewards program to over 70 million members, an 8% year-over-year increase as of the end of the first quarter. These loyal customers are six times more likely to book direct through Choice channels and stay an average of 90% more room nights per year than our non-rewards members. Growth in our membership is the direct result of us creating a more compelling program, including introducing new aspirational hotels and exciting new experiences such as music, racing, and college sport event redemption options, as well as adding new rewards program features. We are seeing the results with a more engaged customer base, as demonstrated by a 28% year-over-year increase in the number of global reward night redemptions during the first quarter. With gas prices trending lower and approximately 90% of our domestic portfolio within one mile of a highway, we provide value-seeking travelers the opportunity to travel and take vacations in a more affordable way closer to home. This is particularly compelling for our customer base, which is comprised primarily of domestic travelers. Additionally, our strong portfolio of mid-scale hotels offers an affordable, high-quality option for travelers who might be seeking to trade down. Likewise, we see attractive tailwinds coming from one of our core customer segments, baby boomers. Over 4 million people are expected to reach retirement age this year in the U.S., and they have more time and disposable income to travel for leisure, and seek brands like ours that provide value for their money. And the pool of these retired travelers continues to expand, with more than one in five Americans expected to be 65 years old or over by 2030. Just last week, we hosted our 69th annual convention. The level of enthusiasm and support we heard from our thousands of franchisees about the ways we are driving growth and the future of our brands was remarkable. The convention is also a significant business development opportunity for us to sign new franchise agreements. During the event, we highlighted some of our recent investments, specifically our new Choice Hotels website and mobile apps, which have helped drive improved performance through strong year-over-year increases in booking conversion rates across all of our chain scales, including double digit increases for our upscale properties. Our targeted hotel profitability tools, which continue to drive potential cost savings of up to 20% on the franchisee level. And our recently launched one stop owners platform, which makes it even easier for our franchisees to access actionable intelligence to run their businesses. Our larger scale has allowed us to invest more in technology to enhance the guest experience and the value we bring to our franchisees. This is one of the key reasons our existing owners choose to expand their hotel portfolio with Choice Hotels and contributes to our industry-leading voluntary franchisee retention rate. As we look to grow our brand portfolio, we remain very well positioned. In addition to our proven strength in the mid-scale segment, the company has well-established brands with significant growth potential in the two segments with the highest developer and guest demand, extended stay and upscale limited service. These segments are more accretive to our earnings and continue to be a key driver of our future growth. Continuing to innovate has contributed to us further expanding our lead in the extended stay segment. as we added more than 5,000 extended stay rooms domestically in the first quarter. For seven consecutive quarters, we have grown our domestic extended stay room system size by double digits year over year. And we expect this higher than industry average growth to continue, with nearly half of the economy and mid-scale extended stay segment rooms currently under construction being Choice Hotels brands we are well positioned for future growth. We also continue to strengthen our core brand portfolio, which outperformed overall mid-scale REBPAR chain scale and attracted strong development growth in the first quarter. Importantly, we recently introduced new value-engineered prototypes for the Comfort brand family and the Country Inn & Suites by Radisson brand, that provide more revenue-driving spaces for owners and achieve a 10 to 15% reduction in construction costs. We are already realizing returns from these investments. In fact, during the first quarter, our Country Inn & Suites by Radisson Brands RevPar outperformed the upper mid-scale segment by nearly two percentage points. In the upscale segment, we continued to expand our presence increasing the global room system size by 16% year over year to over 110,000 rooms, now representing 17% of our overall system. With nearly 27,000 more upscale global rooms in the pipeline, an 8% increase over the prior quarter, we will be providing our guests even more aspirational locations to visit. We've often spoken about a key differentiator for our business, the velocity with which we move hotels through our pipeline. I'm pleased to say that velocity in the first quarter accelerated versus the prior quarter. Of the domestic franchise agreements we executed for conversion hotels for the 12 months ending March 31st, we opened 170 within that timeframe. a 26% increase compared to the same period of the prior year. This conversion capability benefits Choice as we capture royalties in the system faster, and it benefits our franchise owners who can quickly join our distribution platform and start generating revenues. We are encouraged by the continued traction for our conversion brands, and we expect this hotel conversion core competency to be a key growth driver this year. I'd now like to turn to another growth area, our international business, where in the first quarter, we expanded our rooms portfolio by over 4% year over year. And with a rooms pipeline that has increased by 13% compared to the prior quarter, we continue to see a significant opportunity to further gain international market share in the coming years. In closing, by successfully executing our strategy, we have transformed the company to be future ready and have established a strong foundation for near-term stability and long-term growth. Our proactive investments and a versatile asset light fee-based model have meaningfully enhanced our company's growth profile and allow us to generate multiple avenues of growth throughout various economic cycles. We continue to grow our significant free cash flow annually, and our priority use of this capital is to create long-term value as we remain focused on enhancing our value proposition and driving organic growth while returning excess cash to shareholders. I will now turn the call over to our CFO. Scott?