Comfort Inn 2013 Annual Report Download - page 9

Table of Contents
reservation system fees are used for the expenses associated with marketing, media, advertising, providing a central reservation system, property management
systems, e-commerce initiatives and certain franchise services.
Our fee stream depends on the number of rooms in our system, the gross room revenues generated by our franchisees and effective royalty rates under
our franchise contracts. We enjoy significant operating leverage since the variable operating costs associated with the franchise system growth of our
established brands have historically been less than incremental royalty fees generated from new franchises. We believe that our business is well positioned in
the lodging industry since we benefit from both increases in RevPAR and unit growth from new hotel construction or conversion of existing hotel assets into
our system.
Our family of well-known and diversified brand offerings positions us well within the lodging industry. Our Cambria Suites, Comfort Inn, Comfort
Suites, Sleep Inn, Suburban Extended Stay Hotel and MainStay Suites are primarily new build brands which offer hotel developers an array of choices at
various price points for transient and extended stay business during periods of supply growth. Our Ascend Hotel Collection, Clarion, Quality, Econo Lodge
and Rodeway Inn brands offer conversion opportunities during both industry contraction and growth cycles to independent operators and non-Choice affiliated
hotels who desire to affiliate with our brands and take advantage of the services we have to offer.
Strategy. Our mission is a commitment to franchisee profitability by providing our franchisees with hotel franchises that strive to generate the highest
return on investment of any hotel franchise. Our business strategy is to create franchise system growth by leveraging Choice’s large and well-known hotel
brands, franchise sales capabilities, effective marketing and reservation delivery efforts, training and education programs, RevPAR enhancing services and
technologies and financial strength created by our significant free cash flow. We believe our brands’ growth will be driven by our ability to create a compelling
return on investment for franchisees. Our strategic objective is to improve profitability of our franchisees by providing services which increase business
delivery, reduce hotel operating and development costs, and/or improve guest satisfaction. Specific elements of our strategy include: building strong brands,
delivering exceptional services, reaching more consumers and leveraging our size, scale and distribution to reduce costs for hotel owners. We believe that by
focusing on these elements we can increase the gross room revenues generated by our franchisees by increasing the business delivered to existing franchisees
and expanding our market share of franchised hotels in the chain scale segments in which we operate or seek to operate. Improving the desirability of our
brands should also allow us to continue to improve the effective royalty rate of our contracts.
Building Strong Brands. Each of our brands has particular attributes and strengths, including awareness with both consumers and developers. Our
strategy is to utilize the strengths of each brand for room growth, RevPAR gains and royalty rate improvement that create revenue growth. We believe brand
consistency, brand quality and guest satisfaction are critical in improving brand performance and building strong brands.
We have multiple brands that are positioned to meet the needs of many types of guests. These brands can be developed at various price points and are
suitable for both new construction properties and existing hotels. This flexibility ensures that we have brands suitable for creating room growth in various
types of markets, with various types of customers, and during both industry contraction and growth cycles. During times of lower industry supply growth
and tighter capital markets, we can target conversions of existing non-Choice affiliated hotels seeking the awareness and proven performance provided by our
brands. During periods of strong industry supply growth, we expect a greater portion of our room growth to come from our new construction brands. We
believe that a large number of markets can still support our hotel brands and that the growth potential for our brands remains strong.
We strive to maintain the strength of our brands by enhancing product consistency and quality. We attempt to achieve consistency and quality for new
entrants into the franchise system by placing prospective hotels in the appropriate brand based on the physical characteristics, performance and amenities of
the hotel and by requiring property improvement plans, when necessary, to ensure the new hotel meets the quality standards of the brand. Furthermore, we
may require hotels currently in our franchise system to execute property improvement plans at specified contractual windows to ensure that they continue to
maintain the product consistency and quality standards of the brand.
We believe each of our brands appeals to targeted hotel owners and guests because of unique brand standards, marketing campaigns, loyalty programs,
reservation delivery, service levels and pricing.
Delivering Exceptional Services. We provide a combination of services and technology based offerings to help our franchisees improve performance.
We have field services staff members located nationwide that help franchisees improve RevPAR performance and guest satisfaction. In addition, we provide
our franchisees with education and training programs as well as technology products designed to improve property level performance. These services and
products promote revenue gains for franchisees and improve guest satisfaction which translate into both higher royalties for the Company and improved
returns for owners, leading to further room growth by making our brands even more attractive to prospective franchisees. We
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