LETTER TO SHAREHOLDERS (continued)

Another key objective is Building Strong Brands. Brand Management is creating an integrated strategic plan for our brands that will ensure each brand leverages its unique strengths for growth, while keeping all Choice brands intensely focused on customer satisfaction. These plans will go a long way toward improving Choice’s ability to grow the brands.

We are seeing real progress through the re-imaging of our Quality, Comfort Suites and Sleep Inn brands, which comprise nearly a third of our domestic system. When we undertook this program in May of 2001, we recognized that more distinctive images for these brands would help separate them from the competition and provide these brands with new growth opportunities, both conversion and new construction.

As we approach the May 31, 2002, deadline to complete re-imaging almost 1,000 hotels, we now have the critical mass needed to effectively use the new images in all of our advertising and marketing going forward. Already owners who have made the changeover are seeing the clear benefit of re-imaging, especially since our advertising and marketing programs now reflect and support the new images.

Leveraging Our Size, Scale and Distribution is another key to our growth. The significant number of hotels in our system provides great opportunity to use that size to reduce costs and improve returns for owners. The excellent results of our Partner Services group, which works on strategic partnerships with endorsed vendors, reflect our ability to use our distribution to save hotel owners money in purchasing, enable better control over brand quality and create new revenue streams.

We continue to be focused on identifying even more methods to lower operating costs for our hotel owners, thereby making Choice brands even more compelling and adding to the size so critical to customer awareness and reservations activity.

DRIVING FORWARD
We need to ensure that development sales, franchise services and brand management continue to work in concert to make sure our products meet franchisee needs both in terms of cost and performance. We have well-known, solid hotel products now, but by making them better, and by working more in tandem, we can deliver a superior product that offers great returns for our existing customers and an attractive proposition for prospective owners.

Choice is well positioned for continued success. We are the only hotel company that relies solely on pure franchising. We have a focused franchise services group that provides better delivery of valued services to franchisees. We offer powerful reservations delivery, highly effective property management systems, and well-known, established brands backed by strong national advertising and promotions. Our re-imaged brands strengthen the portfolio, and our Choice Privileges and EA$Y CHOICE frequent traveler programs give guests more rewards for loyalty.

Tough challenges lie ahead. With each new year that comes, companies reassert their determination to succeed. And, with each new year, they encounter unanticipated challenges that test their resolve. I am especially proud of how our associates responded to the unique challenges of 2001. Our success in the face of such a test gives me great confidence that Choice will drive forward in 2002 with greater success.

Charles A. Ledsinger, Jr.
President and Chief Executive Officer
March 15, 2002