Choice Hotels International Reports 3rd Qtr 2005 Income of $32.5 million, up From Prior Year's $24.9

Company Exceeds 4,000 Domestic Units Open New Domestic Hotel Franchise Contracts Rise 17%

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. October 14, 2008

SILVER SPRING, MD,October 27, 2005. Choice Hotels International, Inc., today reported the following highlights for the third quarter of 2005:

Adjusted diluted earnings per share (EPS) for the third quarter increased 16% to $0.43, excluding the tax effects related to the resolution of certain tax contingencies and the Company's repatriation of foreign earnings pursuant to the American Jobs Creation Act, compared to adjusted diluted EPS of $0.37 for the third quarter 2004, which excluded the effects of debt extinguishment costs. Diluted EPS for the third quarter 2005 was $0.48, compared to $0.36 for the same period in 2004. Operating income increased 12% to $47.8 million for third quarter 2005 compared to $42.5 million for the same period of the prior year. Domestic unit growth increased 6.1%, including the acquisition of the 67 unit Suburban Extended Stay Hotels chain on September 28, 2005. New hotel franchise contracts increased 17% for third quarter 2005 to 143, year-to-date new domestic hotel franchise contracts were up 18% to 419. Initial franchise and relicensing fees increased 17% for third quarter 2005. Royalty revenues rose 12% and franchising and total revenues each increased 11% for third quarter 2005. Domestic system-wide revenue per available room (RevPAR) increased 5.8% to $46.93 for third quarter 2005 compared to third quarter 2004. Effective royalty rate increased 3 basis points to 4.07% for third quarter 2005. The domestic hotel pipeline of hotels under construction, awaiting conversion or approved for development increased more than 25% to 497 hotels representing 37,688 rooms. the worldwide pipeline increased 18% to 581 hotels, representing 45,368 rooms. Company announces 2005 fourth quarter guidance of $0.29 to $0.31 diluted earnings per share. Full year 2005 guidance updated to $1.22 to $1.24 adjusted diluted earnings per share.

"We are pleased that royalty revenues and new hotel franchise contracts continue to grow at a strong pace," said Charles A. Ledsinger, Jr., president and chief executive officer. "Our franchise contract, unit and RevPAR growth continues to demonstrate the strength of our value proposition to hotel developers and consumers. In addition, the acquisition of the Suburban Extended Stay Hotels chain gives us an immediate leadership position in a fast-growing segment." He added, "The recent stock split and dividend increase demonstrate Choice's ongoing commitment to building and returning value to shareholders. We are enthusiastic about the company's 2005 performance to date and we expect continued success for the remainder of the year."

Two-For-One Stock Split

The Company affected a two-for-one stock split of its outstanding shares of common stock, par value $.01 per share, effective on October 21, 2005. All share information on the financial statements and in this release, including per share amounts, have been proportionally adjusted as if the two-for-one stock split had been effective as of the date or period presented.

Third Quarter 2005 Performance

Choice reported third quarter 2005 net income of $32.5 million, or $0.48 diluted earnings per share, a 33% increase in diluted EPS over the same period in 2004.

Operating income for third quarter 2005 increased 12% from $42.5 million to $47.8 million. Franchising margins for the third quarter increased to 69.8% from 69.1% reported for the same period a year ago.

Royalty revenues for third quarter 2005 were $58.1 million, compared to $51.8 million for third quarter 2004, a 12% increase.

The company also reported total revenues of $142.1 million for third quarter 2005, compared to $127.5 million in third quarter 2004, an increase of 11%. Franchising revenues, which include royalty revenues, initial franchise and relicensing fees, partner services and other revenue, increased 11% in third quarter 2005 to $68.0 million from $61.1 million for the same period a year ago.

System-wide RevPAR was $46.93 for third quarter 2005, compared to $44.35 for the same period in 2004, a 5.8% increase.

For the third quarter of 2005, the effective royalty rate increased 3 basis points from 4.04% to 4.07%.

For the first nine months of 2005, Choice reported net income of $66.0 million, or $0.99 diluted EPS, increases of 22% and 29% respectively over the $54.0 million and $0.77 diluted EPS reported for the first nine months of 2004. Operating income through September 30, 2005 increased 15% to $107.5 million, compared to $93.5 million for the same period a year ago.

For the first three quarters of 2005, royalty revenues grew 11% to $138.2 million from $124.2 million in the first nine months of 2004.

For the first nine months of 2005, total revenues were $355.7 million, an increase of 11% over the same period in 2004. Franchising revenues were $167.7 million, a 12% increase over the $150.0 million reported in the first nine months of 2004. FFranchising margins for the first nine months of 2005 increased to 63.5% from 61.9% for the same period a year ago.

System-wide RevPAR was $37.99 for the nine months ended September 30, 2005, compared to $35.95 for the same period in 2004, an increase of 5.7%.

The effective royalty rate for the first three quarters of 2005 was 4.08%, a 4 basis point improvement from 4.04% for 2004.

Net income and diluted earnings per share for the three and nine months ended September 30, 2005 include additional income tax expense of approximately $1.2 million related to the Company's plan to repatriate approximately $23.5 million of foreign earnings pursuant to the American Jobs Creation Act and a reduction of income tax expense related to the resolution of certain tax contingencies of approximately $4.9 million. Those items represent diluted EPS of $0.05, net, for the three and nine months ended September 30, 2005.

Net income and diluted earnings per share for the quarter and nine months ended September 30, 2004 include a loss of approximately $0.7 million ($0.4 million, net of the related tax effect) related to the extinguishment of debt. This item represented diluted EPS of $0.01 for the three and nine months ended September 30, 2004.

Unit Growth

The number of domestic Choice hotels on-line, excluding franchises obtained in the acquisition of Suburban Extended Stay Hotels, grew by 4.3% to 3,961 (319,357 rooms on-line) as of September 30, 2005, from 3,796 (306,797 rooms on-line) as of the same period a year ago. Net domestic franchise additions in third quarter 2005 were 35, compared to 73 for the same period in 2004. For the first nine months of this year, net domestic franchise additions were 127, compared to 160 for the same period a year ago. Net domestic franchise additions declined as a result of franchise terminations increasing from 120 in 2004 to 174 in 2005. The increase in franchise terminations reflects a concerted effort to terminate under performing franchises and replace them with higher quality units.

On September 28, 2005, the Company acquired the Suburban Extended Stay Hotels brand representing 67 units open and operating in the United States. Acquisition of this brand increased the Company's domestic units under contract to 4,028 units a 6.1% increase over the number of units at September 30, 2004.

Choice executed 143 new domestic hotel franchise contracts representing 11,757 rooms in third quarter 2005, compared to 122 new contracts representing 10,162 rooms for the same period a year ago, increases of 17% and 16%, respectively. For the year through September 30, 2005, Choice has executed 419 new domestic hotel franchise contracts, representing 34,995 rooms, compared to 354 contracts, representing 30,149 rooms, for the same period in 2004, increases of 18% and 16%, respectively. These increases in executed contracts and an increase in the number of existing franchise relicensings have contributed to a 17% and 23% increase in initial franchise and relicensing fees for the three and nine months ended September 30, 2005, respectively, over the same periods of the prior year.

For third quarter 2005, 46 contracts for new construction hotel franchises, representing 3,435 rooms, were executed, compared to 40 contracts, representing 2,722 rooms for the same period a year ago, increases of approximately 15% and 26%, respectively. For the nine months ended September 30, 2005, 139 contracts for new construction hotels representing 10,490 rooms were executed, representing increases of 39% and 53%, respectively, compared to 100 contracts, representing 6,858 rooms, for new construction hotels for the same period a year ago.

As of September 30, 2005, Choice had 497 hotels under development in its domestic hotel system, representing 37,688 rooms, compared to 397 hotels and 30,776 rooms at the same date in 2004, increases of 25% and 22%, respectively.

Also as of September 30, 2005, the number of Choice hotels on-line worldwide grew 3% to 5,128 from 4,959 as of the same date a year ago. This growth represents an increase of 4% in the number of rooms open to 417,415 from 402,519. As of September 30, 2005, Choice had 581 hotels under development worldwide, representing 45,368 rooms, compared to 492 hotels, representing 39,127 rooms, at the same date in 2004.

Use of Free Cash Flow

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

For the nine months ended September 30, 2005, the company purchased 0.8 million shares of its common stock at an average price of $30.15 per share for a total cost of $23.9 million. Since October 1, 2005 and through October 27, 2005, the company has purchased an additional 0.6 million shares of its common stock at an average price of $32.02 per share for a total cost of $17.9 million. The company has remaining authorization to purchase up to 2.3 million shares. Since Choice announced its stock repurchase program on June 25, 1998 and through October 27, 2005, the company has purchased 66.4 million shares of its common stock at an average price of $10.61 per share and a total cost of $704.5 million.

For the nine months ended September 30, 2005, the company paid $21.8 million of cash dividends to shareholders. On September 14, 2005, the Company's board of directors approved an increase in the quarterly cash dividend on the common stock from $0.1125 to $0.13 per common share payable on October 21, 2005 to shareholders of record on October 7, 2005. This increase will result in an annual dividend rate per share of $0.52, a 15.5% increase from the previous annual dividend rate of $0.45.

The company expects to continue to return value to its shareholders through a combination of share repurchases and dividends.