Charles A. Ledsinger, Jr.
President and Chief Executive Officer

”Choice is organized better for success now, with a new centralized franchise sales effort and enhanced localized services to our franchised hotels through a realignment in our regional operations from five to three Market Areas. Our field people now will focus solely on providing service to franchisees.

These strategic moves enable us to create a new operating plan that will strengthen our core hotel franchising business and give us new avenues for growth in hotel management and development.”

As we take our first steps into the new millennium, it is clear what Choice Hotels must do to maintain its role as a global hospitality leader.

We must make every effort to know what travelers need when they enter our franchisees’ hotels. We must create marketing and reservations programs that capture their attention and make it easy to use our services.

We must thoroughly understand an increasingly competitive environment.

And, since our customers are both the hotel guests and the franchisees who choose to develop and operate hotels under one of our brands, we must provide the support needed in order to deliver a level of hospitality worthy of our brands.

We must master the road they all travel, so that we become their destination of choice.

We must be travelers, too.

The year 2000 proved pivotal for Choice. We faced – and resolved with significant success – a range of changes and challenges affecting our organization and our industry. We entered the year with great optimism, even while dealing with key issues regarding our capital base. And we exited the year on a much firmer footing, with a greatly enhanced balance sheet, strong cash flow and the benefit of long-term franchise contracts delivering higher royalty rates.

We began 2000 with an outstanding receivable from Sunburst Hospitality and continued negative results from our investment in Friendly Hotels PLC in Europe, which limited our ability to grow our core hotel business more aggressively.

The good news is that we reached agreement with Sunburst on restructuring the outstanding note last fall, which resulted in a cash payment of $102 million in January 2001.

We also realized improvement in the Friendly situation, as that company undertook a comprehensive restructuring to revalue its real estate portfolio, dispose of non-core assets, restructure its banking arrangements and business relationship with Choice, and strengthen its management team.

Overall, we performed reasonably well. In 2000, domestic RevPAR grew 4.4%, royalty revenues increased 7% and our (EBITDA) grew almost 8%. We continued to make substantial progress in improving our brands and delivering more services and technology to our franchisees to help grow the business.