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| LETTER TO SHAREHOLDERS |
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Charles A. Ledsinger, Jr.
President and Chief Executive Officer
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Dear Shareholders:
This time last year I wrote to you about our optimism even in a time of
economic and geopolitical uncertainty. Our outstanding 2003 results certainly
confirm that optimism was well-founded. They also underscore the
soundness of our strategy and our franchising business model, which have
served us well in challenging times.
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Your company enters 2004 stronger than ever, thanks to the hard work and dedication of our associates and franchisees who are deeply committed to building a franchise success system second to none.
For the year 2003, Choice Hotels earned diluted earnings per share of $1.96, a 28.9% increase over the prior year. Domestic unit growth rose 4.4% and franchising revenues increased 8.7% to $187.1 million as the company generated domestic system-wide revenues of $3.5 billion for our more than 3,600 U.S. properties.
At the core of our 2003 success was record franchise development. We executed 470 new franchise contracts representing 41,000 rooms, marking the first time Choice has ever exceeded the 40,000 room level in annual development activity. Each new franchise agreement provides Choice with a steady stream of royalty revenues, as well as marketing and reservations fees to help build brand awareness and drive occupancy.
This excellent performance occurred against the backdrop of a slowly recovering economy and an industry just starting to come back from the bottom. Despite all the industry ups and downs of the past few years, Choice has been able to continually grow its hotel system because of our strong product portfolio of conversion and new build brands, our ability to deliver strong reservations and marketing programs, and our commitment to partnering with our franchisees to create a true franchise success system.
With our singular focus on our franchising business, we have been able to concentrate our strategy on reaching more consumers, delivering exceptional services, building strong brands and leveraging our size, scale and distribution to deliver more business to our hotels while lowering their costs. Underlying this focus are the mission, vision and passion that guide our operations.
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Our Mission: Deliver a franchise success system of strong brands, exceptional services, vast consumer
reach,and size, scale and distribution that delivers guests and reduces costs for our hotel owners.
Our Vision: To generate the highest return on investment of any hotel franchise.
Our Passion: Customer Profitability.
Entering 2003, we established overarching objectives for the year:
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- To grow the company aggressively, and responsibly, by focusing on RevPAR (revenue per available room) increases, unit growth and greater penetration from partner services, which helps our owners better manage their costs;
- To be totally focused and extraordinarily good at the services we deliver to franchisees at every level—in the field, through technology and with training, and to set the example for customer service to our franchisees;
- To deliver marketing that is impactful, memorable, effective and targeted;
- To keep our brands fresh, continually improving and meeting or exceeding guest expectations by designing products and services that allow franchisees to achieve a superior return on their investment.
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