Choice Reportd 4th Qtr Net Income Compared with a Year Earlier

System-wide RevPAR Fell 7.7% in the Quarter

. February 11, 2009

SILVER SPRING, MD, February 10, 2009 - Choice Hotels International, Inc. (NYSE: CHH) today reported the following highlights for fourth quarter and full year 2008:

Adjusted diluted earnings per share ("EPS") for full year 2008 were $1.78, compared to $1.74 for full year 2007. Diluted EPS were $1.60 for full year 2008 compared to $1.70 for 2007.
Adjusted earnings before interest, taxes and depreciation ("Adjusted EBITDA") were $200.5 million for the year ended December 31, 2008, compared to $198.1 million for the same period of 2007. Operating income for full year 2008 was $174.6 million compared to $185.2 million for the same period of 2007.
Adjusted EBITDA and adjusted EPS for the year ended December 31, 2008 excludes special items totaling $17.7 million and $0.18 diluted EPS, respectively related to $6.6 million of benefits resulting from the previously announced acceleration of the company's management succession plan, $3.5 million related to employee termination costs and $7.6 million related to an increase in reserves related to impaired notes receivable. Adjusted EBITDA and adjusted EPS for the year ended December 31, 2007 excludes special items totaling $4.3 million and $0.04 diluted EPS, respectively related to employee termination benefits.
Adjusted EPS for the three months ended December 31, 2008 were $0.41, compared to $0.44 for the same period of 2007. Diluted EPS for the three months ended December 31, 2008 were $0.30 compared to $0.44 for the same period of 2007.
Adjusted EBITDA were $46.9 million for the quarter ended December 31, 2008, compared to $50.4 million for the same period of 2007. Operating income for the three months ended December 31, 2008 was $34.1 million compared to $48.1 million for the same period of 2007.
Adjusted EBITDA and adjusted EPS for the three months ended December 31, 2008 excludes special items totaling $10.8 million and $0.11 diluted EPS, respectively related to $0.5 million of benefits resulting from the previously announced acceleration of the company's management succession plan, $2.7 million related to employee termination benefits and $7.6 million related to an increase in reserves related to impaired notes receivable. Adjusted EBITDA for the same period of 2007 excludes $0.1 million of employee termination benefits.
Domestic unit and room growth increased 6.1 percent and 5.6 percent, respectively, for full year 2008.
Domestic system-wide revenue per available room (RevPAR) declined 1.8% for full year 2008 and 7.7% for fourth quarter 2008 compared to the same periods of 2007. The declines for full year and fourth quarter 2008 were primarily due to a 260 basis point and 500 basis point decline in occupancy, respectively, which was partially offset by increases in the average daily rate.
The effective royalty rate increased 6 basis points to 4.20% for the full year 2008 compared to 4.14% for the same period of the prior year.
Franchising revenues and total revenues increased 2% and 4%, respectively for full year 2008 compared to the same period in 2007. Franchising revenues declined 8% and total revenues declined 9% for fourth quarter 2008 compared to the same period in 2007.
As a result of the current economic environment and credit market conditions, new domestic hotel franchise contracts for the three months ended December 31, 2008 declined 31% to 207 compared to 301 contracts executed in the same period of the prior year. Overall, new domestic hotel franchise contracts executed for full year 2008 declined 9% to 698 compared to 770 for full year 2007.
The number of domestic hotels under construction, awaiting conversion or approved for development declined 2% from December 31, 2007 to 987 hotels representing 78,915 rooms; the worldwide pipeline increased 1% from December 31, 2007 to 1,108 hotels representing 89,105 rooms.

"While the last six months of 2008 represented a challenging time for the hotel industry, for the year, Choice Hotels was able to demonstrate strong domestic unit and room growth and increase its effective royalty rate, franchising revenues and total revenues," said Stephen P. Joyce, president and chief executive officer. "While we do not see any immediate economic turnaround or increased liquidity in the credit markets, Choice is uniquely positioned for long-term growth in this climate. With our proven, fee-based business model and financial strength, we have historically been able to perform well in a wide range of industry and economic environments. We remain focused on taking advantage of our tremendous long-term growth prospects while at the same time returning excess cash flows to our investors by way of share repurchases and dividends."

Outlook for 2009

The uncertainty around the current economic environment and credit market conditions and their impact on travel patterns and hotel development activities makes it difficult to predict future results, particularly as it relates to underlying assumptions for RevPAR, new hotel franchise and relicensing sales and interest and investment income and expense.

The company's first quarter 2009 diluted EPS is expected to be $0.24. The company expects full year 2009 diluted EPS of $1.68. EBITDA for full-year 2009 are expected to be approximately $178 million. These estimates include the following assumptions:

The company expects net domestic unit growth of approximately 3.0% in 2009;
RevPAR is expected to decline approximately 12% for first quarter 2009 and decline approximately 10% for full-year 2009;
The effective royalty rate is expected to increase 3 basis points for full-year 2009;
All figures assume the existing share count and an effective tax rate of 36.5% for first quarter 2009 and 36.5% for full year 2009.

Use of Free Cash Flow

The company has consistently used its free cash flow (cash flow from operations less capital expenditures) to return value to shareholders, primarily through share repurchases and dividends.

For the year ended December 31, 2008 the company paid $43.1 million of cash dividends to shareholders. The current quarterly divided rate per common share is $0.185, subject to declaration by our board of directors.

During the fourth quarter of 2008, the company's board of directors authorized an increase under the company's existing stock repurchase program to acquire up to an additional five million shares of its outstanding common stock. For the year ended December 31, 2008, the company purchased approximately 2.2 million shares of its common stock at an average price of $24.56 for a total cost of $54.7 million. Subsequent to December 31, 2008 and through February 10, 2009, the Company repurchased 0.5 million shares at a total cost of $13.5 million at an average price of $26.97 per share. The company has authorization to purchase up to an additional 5.5 million shares under the share repurchase program. We expect to continue making repurchases in the open market and through privately negotiated transactions, subject to market and other conditions. No minimum number of share repurchases has been fixed. Since Choice announced its stock repurchase program on June 25, 1998, the company has repurchased 41.3 million shares of its common stock for a total cost of $964.1 million through February 10, 2009. Considering the effect of a two-for-one stock split in October 2005, the company has repurchased 74.3 million shares under the share repurchase program at an average price of $12.98 per share.

Our Board has authorized us to enter into programs which permit us to offer financing, investment and guaranty support to qualified franchisees to incent multi-unit franchise development in top markets. We expect to opportunistically deploy this capital over the next several years. Our annual investment in these programs is dependent on market and other conditions. In addition to these programs, the company expects to continue to return value to its shareholders through a combination of share repurchases and dividends, also subject to market and other conditions.

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