LETTER TO SHAREHOLDERS (continued)

At year’s end, in a decidedly more difficult environment, we had signed 300 new contracts, representing 25,223 rooms, compared to 298 new deals in 2000, representing 24,582 rooms. Of our 2001 contracts, 184 were conversions, substantially up from 124 conversions the year before.

More than ever, we believe our company is well-positioned with our brands to continue unit growth in the 2%+ range in 2002. We are very satisfied that we have in place a development effort that can keep producing strong unit growth for Choice.

STAYING THE STRATEGIC COURSE
So where are we headed in 2002? We still have the same overarching goals of Reaching More Consumers, Delivering Exceptional Services and Building Strong Brands. Those keys remain cornerstones of our day-to-day operations. But we need to bring a sharper focus on objectives that will help us Unlock our True Power and achieve greater growth. Accordingly, we have added a fourth key goal, Leveraging Our Size, Scale and Distribution.

Hotel owners greatly value the significant volume of guests we provide through corporate and brand marketing, reservations, key account sales and our loyalty programs, Choice Privileges and EA$Y CHOICE.

In the past year, we changed our marketing approach from brand-centered to the new Choice “Power of Being There, Go” theme. Our initial research shows consumers are responding well to the change and brand awareness is growing. Our local and regional co-op marketing campaigns leverage the national marketing program to drive more business at the local level.

Last fall, the immediate aftershock of the September 11 terrorist attacks left the travel industry reeling. Business dropped precipitously as Americans became fearful of traveling. In response, we worked with our franchisees to launch a nationwide campaign to thank those that were still traveling and encourage others to resume their normal travel activity. “Thanks for Traveling” was initially unbranded so that others in the travel industry could join in.

With thousands of banners at our properties across the country and in hundreds of airports as well, the “Thanks for Traveling” campaign received enthusiastic support from government leaders and leading organizations such as AAA, the American Society of Travel Agents and the United States Tour Operators Association. Most importantly, it earned goodwill with consumers and affirmed Choice’s role as an industry leader.

Early in 2002, the Choice Privileges program for frequent travelers was enhanced through the addition of airline mile options. Our continued focus on overall brand quality coupled with these marketing initiatives is designed to stimulate room demand for our franchised hotels through improved guest satisfaction. We are Reaching More Consumers.

Choice took on the task of evaluating service delivery, which ultimately led to the decision to create a more centralized Franchise Services function that provides more consistency in delivery and a better focus on customer needs.

Our field staff, in combination with effective training programs and strong technology products, directly helps property owners better manage their properties to improve RevPAR performance. Marketing services help create effective positioning for brands and drives guest stays. Reservations services deliver a high percentage of guests directly to the properties. As a result, hotel owners enjoy revenue gains that translate into both higher royalty rates for Choice and improved returns for owners, leading to further unit growth. These service enhancements help us better Deliver Exceptional Services.