Summarized financial results for the years ended December 31, 2000 and 1999 are as follows:

Franchise Revenues: Management analyzes its business based on net franchise revenue, which is total revenue excluding product sales, and franchise operating expenses which are reflected as selling, general and administrative expenses.

Net franchise revenues were $167.5 million for 2000 and $157.7 million for 1999. Royalties increased $9.0 million to $137.7 million from $128.7 million in 1999, an increase of 7.0%. The increase in royalties is attributable to a 3.2% increase in the number of domestic franchised hotel rooms, an increase in the effective royalty rate of the domestic hotel system to 3.85% from 3.7%, and an improvement in domestic RevPAR of 4.4%. Domestic initial fee revenue generated from franchise contracts signed was $6.4 million down from $9.6 million in 1999. In 2000, ninety-eight franchise agreements were entered into which included future potential rebates and/ or incentive payments. Initial franchise fees of $3.3 millon were deferred and will be recognized when the incentive criteria are met or the deal is terminated, whichever occurs first. Total franchise agreements signed in 2000 were 298, a decline from 318 total agreements executed in 1999. Despite the continued competitive hotel franchising environment, the Company believes that its refocused, centralized sales group will complete approximately 300 new franchise agreements in 2001. Revenues generated from partner service relationships increased to $10.3 million from $9.1 million in 1999. Under the partner services program, the Company generates revenue from hotel industry vendors (who have been designated as preferred providers) based on the level of goods or services purchased from the vendors by hotel owners and hotel guests who stay in the Company’s franchised hotels.

The number of domestic rooms on-line increased to 265,962 from 258,120, an increase of 3.0% for the year ended December 31, 2000. For 2000, the total number of domestic hotels on-line grew 3.9% to 3,244 from 3,123 for 1999. The total number of international hotels on-line increased to 1,148 from 1,125, an increase of 2.0% for the year ended December 31, 2000. International rooms on-line increased to 84,389 as of December 31, 2000 from 80,134, an increase of 5.3%. As of December 31, 2000, the Company had 493 franchised hotels with 39,539 rooms either in design or under construction in its domestic system. The Company had an additional 210 franchised hotels with 21,388 rooms under development in its international system as of December 31, 2000.

Franchise Expenses: The cost to operate the franchising business is reflected in selling, general and administrative expenses. Selling, general and administrative expenses were $57.8 million for 2000, an increase of $1.9 million from the 1999 total of $55.9 million. As a percentage of net franchise revenues, selling, general and administrative expenses declined to 34.5% in 2000 from 35.4% in 1999. The improvement in the franchising margins relates to the economies of scale generated from operating a larger franchisee base and improvements in franchised hotel performance.