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MD&A is provided as a supplement to — and should be read in conjunction with — our consolidated financial statements and the accompanying notes.
+Added: Recent Developments
+Added: Agreement to acquire Radisson Hotels Americas
+Added: The Company entered into a Share Sale and Purchase Agreement, dated June 12, 2022, by and among the Company, Radisson Holdings, Inc., Radisson Hospitality, Inc., Aplite Holdings AB and Radisson Hospitality Belgium BV/SR to acquire 100% of Radisson Hotels Americas for a base purchase price of approximately $675.2 million, adjusted for Disclosed Leakage (as defined in the Share Sale and Purchase Agreement) and certain other prepaid expenses.
+Added: The transaction closed on August 11, 2022 for a purchase price of $673.9 million, net of leakage and certain prepaid expenses.
Impact of the COVID-19 Pandemic
−Removed: The COVID-19 pandemic continues to cause disruptions to the global economy and the hospitality industry, including in the United States, where more than 80% of our franchised hotels are located.
−Removed: Since its onset, the COVID-19 pandemic has led governments and other authorities and businesses around the world at multiple times to impose or recommend measures intended to control its spread, including temporary closures of and occupancy limits on many businesses, travel restrictions, cancellation of events, social distancing measures and other governmental regulations.
−Removed: As a result, the COVID-19 pandemic and its consequences have reduced travel and demand for hotel rooms, which has adversely impacted, both financially and operationally and at varying degrees throughout the pandemic, the hospitality industry generally and the Company.
−Removed: The development of effective vaccines, the on-going distribution of such vaccines and other containment efforts have been significant positive developments that we believe have contributed to improved operating metrics since the second quarter of 2021.
−Removed: However, the extent to which the COVID-19 pandemic will impact the hospitality industry generally and our operations remains uncertain and will depend largely on future developments, including the rate and pace of vaccination in the broader population, the severity and duration of resurgences or variants of the virus, the effectiveness of actions by government authorities and the public to continue to contain the pandemic, and the potential for adverse changes in consumer sentiment with respect to travel during the pandemic.
−Removed: The impacts of COVID-19 on the Company's business were first experienced toward the end of the first quarter of 2020, with domestic occupancy levels ranging between 25.5% and 32.5% in the last ten days of March 2020 resulting in significant decreases in revenue per available room ("RevPAR").
−Removed: These trends steadily improved, albeit remained significantly impacted, over the remainder of 2020, resulting in full year 2020 domestic RevPAR declining approximately 30.7% compared to full year 2019.
−Removed: The Company continued to experience significant negative impacts through the first quarter of 2021, although an increase in leisure travel reservations was observed in March 2021 that steadily improved through the remainder of 2021.
−Removed: The fourth quarter 2021 domestic RevPAR experienced an increase of approximately 52.2% and 13.9% relative to fourth quarter 2020 and fourth quarter 2019, respectively.
−Removed: As of both December 31, 2021 and December 31, 2020, less than 1% of the Company's domestic hotel system had temporarily suspended operations due to governmental restrictions or a franchisee’s election.
+Added: The COVID-19 pandemic has caused and continues to cause disruptions to the global economy and the hospitality industry, including in the United States, where more than 80% of our franchised hotels are located.
+Added: Reduced travel as a result of COVID-19 adversely impacted the hospitality industry generally and the Company, however, the development and distribution of effective vaccines and other containment efforts have been significant positive developments that have contributed to improved operating metrics since the second quarter of 2021.
+Added: The extent to which the COVID-19 pandemic will continue to impact the hospitality industry generally and our operations remains uncertain and will depend in part on future developments, including the severity and duration of resurgences or variants of the virus, the effectiveness of actions by government authorities and the public to continue to contain the pandemic, and the potential for long-term adverse changes in consumer sentiment with respect to travel as a result of the pandemic.
+Added: Since the impacts of COVID-19 on the Company's business were first experienced in March 2020, trends have improved steadily.
+Added: The full year 2022 domestic revenue per available room ("RevPAR") experienced an increase of approximately 12.4% and 14.6% relative to full year 2021 and full year 2019, respectively.
+Added: As of both December 31, 2022 and December 31, 2021, less than 1% of the Company's domestic hotel system had temporarily suspended operations.
While the ultimate impact and duration of COVID-19 is uncertain and will depend on future developments, which are difficult to predict, the Company believes that it will continue to benefit in the long-term from its primarily franchise-only business model, which has historically provided a relatively stable earnings stream and low capital expenditure requirements.
−Removed: Further, as of December 31, 2021, the Company had approximately $1.1 billion in cash and additional borrowing capacity through its senior unsecured revolving credit facility.
−Removed: Based on our business model and information known at this time, the Company believes that cash flows from operations and available financing capacity are adequate to meet the expected future operating, investing and financing needs of the business.
−Removed: In response to the COVID-19 pandemic, we implemented measures in 2020 to focus on the safety of our customers, employees, franchisees and their staff, while at the same time seeking to mitigate the impact on franchisees' and our Company's financial position and operations.
−Removed: The duration of these measures cannot be predicted at this time.
−Removed: The measures that remained in effect during the fourth quarter of 2021 included, but were not limited to, the following:
−Removed: • Preserving fee-deferral programs for domestic and international franchisees.
−Removed: • Continuing to extend capital-intensive brand deadlines and offer more flexible brand standard options to assist franchisees.
−Removed: • Advising franchisees on benefits and eligibility requirements of government relief SBA programs and other CARES Act and American Rescue Plan Act of 2021 provisions.
−Removed: • Maintaining a proactive, ongoing multi-channel franchisee outreach and education program that is actively assisting our franchisees in accessing available capital.
−Removed: While a recovery in the hospitality industry has commenced, industry projections anticipate that recovery to 2019 operating performance will occur over multiple years.
−Removed: As the industry recovery continues, the Company believes it will continue to benefit from the faster rebound of leisure demand as a result of its higher share of leisure travel mix relative to competitors.
−Removed: The Company's properties are also well distributed in drive-to markets, which the Company believes will lead in the demand recovery and foreseeable future for the industry.
−Removed: We believe these points are illustrated by the Company's RevPAR results for full year and fourth quarter 2021, which both reflect growth relative to the comparable 2019 periods.
−Removed: In April 2020, in light of uncertainty resulting from the COVID-19 pandemic, we suspended future, undeclared dividends and activity under the Company's share repurchase program.
−Removed: Given our strong liquidity and credit profile, on May 7, 2021, the Company's board of directors declared a quarterly cash dividend of $0.225 per share of common stock and approved the resumption of the share repurchase program.
−Removed: On September 9, 2021, the Company's board of directors declared a quarterly cash dividend of $0.225 per share of common stock.
−Removed: Additionally, on December 6, 2021, the Company's board of directors approved a 6% increase in the quarterly cash dividend and declared a quarterly cash dividend of $0.2375 per share of common stock, which was paid in January 2022.
−Removed: While the Company believes that the long-term fundamentals of the business remain strong, it will continue to adjust business contingency plans as the COVID-19 pandemic evolves.
−Removed: For additional information, refer to Risk Factors in Part I, Item 1A of this Form 10-K.
−Removed: We are primarily a hotel franchisor with franchise agreements and owned hotels representing 7,030 hotels open comprising 579,746 rooms and 924 hotels under construction, awaiting conversion or approved for development comprising 79,915 rooms as of December 31, 2021, located in 50 states, the District of Columbia and nearly 40 countries and territories outside the United States.
−Removed: Our brand names include Comfort Inn®, Comfort Suites®, Quality®, Clarion®, Clarion Pointe TM , Ascend Hotel Collection®, Sleep Inn®, Econo Lodge®, Rodeway Inn®, MainStay Suites®, Suburban Extended Stay Hotel®, WoodSpring Suites®, Everhome Suites®, and Cambria® Hotels (collectively, the "Choice brands").
−Removed: The Company's primary segment is the hotel franchising business, which represents approximately 96% of the Company's total revenues.
−Removed: The Company's domestic operations are conducted through direct franchising relationships and the ownership of six Cambria hotels, while its international franchise operations are conducted through a combination of direct franchising and master franchising relationships.
+Added: Further, as of December 31, 2022, the Company had approximately $281.6 million in cash and additional borrowing capacity through its senior unsecured revolving credit facility.
+Added: Based on our business model and information known at this time, the Company believes that cash flows from operations and available financing capacity provide sufficient liquidity to meet the expected future operating, investing and financing needs of the business, inclusive of those for the recently acquired Radisson Hotels Americas operations.
+Added: While the Company believes that the long-term fundamentals of the business remain strong, it will continue to adjust business contingency plans as it deems necessary as the COVID-19 pandemic evolves.
+Added: For additional information, refer to Item 1A.
+Added: Risk Factors.
+Added: We are primarily a hotel franchisor with franchised, managed and owned hotels representing 7,487 hotels open comprising 627,804 rooms and 988 hotels under construction, awaiting conversion or approved for development comprising 94,558 rooms as of December 31, 2022, located in 50 states, the District of Columbia and approximately 50 countries and territories outside the United States.
+Added: Our brand names include Comfort Inn®, Comfort Suites®, Quality®, Clarion®, Clarion Pointe™, Ascend Hotel Collection®, Sleep Inn®, Econo Lodge®, Rodeway Inn®, MainStay Suites®, Suburban Studios™, WoodSpring Suites®, Everhome Suites®, and Cambria® Hotels (collectively, the "legacy Choice brands").
+Added: Additionally, through the Radisson Hotels Americas acquisition, our brands expanded to include Country Inn & Suites® by Radisson, Radisson Blu®, Radisson RED®, Radisson®, Park Plaza®, Radisson Inn & Suites SM , Park Inn by Radisson®, Radisson Individuals®, and
+Added: Table of Content s
+Added: Radisson Collection® (collectively, the "legacy Radisson brands"), which are located across the United States, Canada, the Caribbean and Latin America.
+Added: The hotel franchising business represents the Company's primary operations.
+Added: The Company's domestic operations are conducted through direct franchising relationships, the ownership of 6 Cambria and 3 legacy Radisson Hotels Americas hotels, and the management of 13 legacy Radisson Hotels Americas hotels (inclusive of the Radisson Hotels Americas owned hotels), while its international franchise operations are conducted through a combination of direct franchising and master franchising relationships.
Master franchising relationships are governed by master franchising agreements which generally provide the master franchisee with the right to use our brands and sub-license the use of our brands in a specific geographic region, usually for a fee.
−Removed: Our business strategy is to conduct direct franchising in those international markets where both franchising is an accepted business model and we believe our brands can achieve significant scale.
−Removed: We typically elect to enter into master franchise agreements in those markets where direct franchising is currently not a prevalent or viable business model.
−Removed: When entering into master franchising relationships, we strive to select partners that have professional hotel and asset management capabilities together with the financial capacity to invest in building the Choice brands in their respective markets.
−Removed: Master franchising relationships typically provide lower revenues to the Company as the master franchisees are responsible for managing certain necessary services (such as training, quality assurance, reservations and marketing) to support the franchised hotels in the master franchise area and, therefore, retain a larger percentage of the hotel franchise fees to cover their expenses.
−Removed: In certain circumstances, the Company has and may continue to make equity investments in our master franchisees.
As a result of master franchise relationships and international market conditions, our revenues are primarily concentrated in the United States.
−Removed: Therefore, our description of our business is primarily focused on the domestic operations, which encompasses the United States and Caribbean countries and territories.
+Added: Therefore, our description of our business is primarily focused on the domestic operations, which encompasses the United States.
Our Company generates revenues, income and cash flows primarily from our hotel franchising operations and the initial, relicensing and continuing royalty fees attributable to our franchise agreements.
−Removed: Revenues are also generated from partnerships with qualified vendors and travel partners that provide value-added solutions to our platform of guests, hotels, six owned hotels, and other sources.
+Added: Revenues are also generated from partnerships with qualified vendors and travel partners that provide value-added solutions to our platform of guests hotels, owned hotels, and other sources.
Historically, the hotel industry has been seasonal in nature.
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Our principal source of revenues is franchise fees based on the gross room revenues or number of rooms of our franchised properties.
−Removed: The Company’s franchise fees, as well as its owned hotels revenues, normally reflect the industry’s seasonality and historically have been lower in the first and fourth quarters than in the second and third quarters.
−Removed: However, as a result of the COVID-19 pandemic, historical trends may not be reliable to predict performance in the immediate future.
+Added: The Company’s franchise and managed fees, as well as its owned hotels revenues, normally reflect the industry’s seasonality and historically have been lower in the first and fourth quarters than in the second and third quarters.
With a primary focus on hotel franchising, we benefit from the economies of scale inherent in the franchising business.
−Removed: The fee and cost structure of our franchising business provides opportunities to improve operating results by increasing the number of franchised hotel rooms and effective royalty rates of our franchise contracts resulting in increased initial and relicensing fee
−Removed: revenue, ongoing royalty fees, and procurement services revenues.
+Added: The fee and cost structure of our franchising business provides opportunities to improve operating results by increasing the number of franchised hotel rooms and effective royalty rates of our franchise contracts resulting in increased initial fee revenue, ongoing royalty fees, and procurement services revenues.
In addition, our operating results can also be improved through our company-wide efforts related to improving property-level performance and expanding the number of partnerships with travel-related companies.
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The number of rooms in our hotel system and the occupancy and room rates at those properties significantly affect the Company’s results because our fees are based upon room revenues or the number of rooms at owned and franchised hotels.
−Removed: To varying degrees, all of these factors have been and may continue to be disrupted by the COVID-19 pandemic.
−Removed: The key industry standard for measuring hotel-operating performance is RevPAR, which is calculated by multiplying the percentage of occupied rooms by the average daily room rate realized.
−Removed: Our variable overhead costs associated with franchise system growth of our established brands have historically been less than incremental royalty fees generated from new franchises.
+Added: The key industry standard for measuring hotel-operating performance is RevPAR, which is calculated by multiplying the percentage of occupied rooms by the average daily room rate ("ADR") realized.
+Added: Our variable overhead costs associated with franchise system growth of our brands have historically been less than incremental royalty fees generated from new franchises.
Accordingly, over the long term, any continued growth of our franchise business should enable us to realize benefits from the operating leverage in place and improve operating results.
−Removed: The effects of the COVID-19 pandemic on our annual 2021 results and anticipated trends are discussed above under the heading "Impact of the COVID-19 Pandemic" and Item 7.
−Removed: Management’s Discussion and Analysis of Financial Condition and Results of Operations.
−Removed: We are required by our franchise agreements to use the marketing and reservation system fees we collect for system-wide marketing and reservation system activities.
+Added: We are required by our legacy Choice franchise agreements to use marketing and reservation system fees we collect for system-wide marketing and reservation system activities.
These expenditures, which include advertising costs and costs to maintain our central reservations and property management systems, enhance awareness and consumer preference for our brands and deliver guests to our franchisees.
−Removed: Greater awareness and preference promotes long-term growth in business delivery to our franchisees and increases the desirability of our brands to hotel owners and developers, which ultimately increases franchise fees earned by the Company.
−Removed: Due to increased RevPAR growth during the second, third, and fourth quarters of 2021 and our disciplined management of discretionary marketing and reservation system expenditures, marketing and reservation revenues exceeded expenses for full year 2021.
+Added: Greater awareness and preference promote long-term growth in business delivery to our franchisees and increases the desirability of our brands to hotel owners and developers, which ultimately increases franchise fees earned by the Company.
+Added: The legacy Radisson Hotels Americas franchise agreements have similar provisions regarding marketing fees to be used for marketing activities.
+Added: Additionally, the legacy Radisson Hotels Americas management agreements include cost reimbursements, primarily related to payroll costs at managed hotels where the Company is the employer.
Our Company articulates its mission as a commitment to our franchisees’ profitability by providing our franchisees with hotel franchises that strive to generate the highest return on investment of any hotel franchise.
We have developed an operating system dedicated to our franchisees’ success that focuses on delivering guests to hotels and reducing hotel operating costs.
−Removed: As discussed above, the Company has taken and is continuing to take measures to combat the impact of the COVID-19 pandemic on our business.
−Removed: We believe these measures support the Company's preparedness and complement the strategic priorities we execute against to create value for our shareholders over the long-term.
+Added: We believe that executing our strategic priorities creates value for our shareholders over the long term.
These key long-term goals are as follows:
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Our success is dependent on improving the performance of our hotels, increasing our system size by selling additional hotel franchises with a focus on revenue-intense chain scales and markets, improving our effective royalty rate, expanding our qualified vendor programs and travel-related partnerships and maintaining a disciplined cost structure.
−Removed: As noted above, we have introduced several temporary measures designed to assist franchisees during the COVID-19 pandemic.
−Removed: We attempt to improve our revenues and overall profitability by providing a variety of products and services designed to increase business delivery and/or reduce operating and development costs.
+Added: Table of Content s
+Added: attempt to improve our revenues and overall profitability by providing a variety of products and services designed to increase business delivery and/or reduce operating and development costs.
These products and services include national marketing campaigns, a guest loyalty program, a central reservation system, property and yield management programs and systems, revenue management services, quality assurance standards, qualified vendor relationships and partnerships with other travel-related companies that provide services to our franchisees and guests.
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This ensures that we have brands suitable for creating growth in a variety of market conditions.
−Removed: Improving the performance of the hotels in our system, strategically growing the system through additional franchise sales, and improving franchise agreement pricing while maintaining a disciplined cost structure are the keys to profitable growth.
−Removed: As disclosed above, prior to the second quarter of 2021, the Company's hotels experienced declines in occupancy and RevPAR resulting from the impacts of the COVID-19 pandemic.
−Removed: The declines impacted the profitability of the Company and the negative impact to the Company could return if a resurgence of the COVID-19 pandemic significantly impacts travel.
+Added: The addition of the legacy Radisson brands in the Americas increased Choice's footprint in the upper midscale and upscale chain scales and introduced presence in the upper upscale chain scale.
+Added: We expect that the Radisson Americas acquisition will enable us to further build on our momentum in the upscale chain scale, accelerating the growth of our Cambria Hotels and Ascend Hotel Collection brands and allowing us to expand the Radisson portfolio.
Maximizing Financial Returns and Creating Value for Shareholders.
Our capital allocation decisions, including capital structure and uses of capital, are intended to maximize our return on invested capital and create value for our shareholders.
−Removed: We believe our historically strong and predictable cash flows create a strong financial position that provides us a competitive advantage.
−Removed: We maintain a capital structure intended to generate high financial returns and use our excess cash flow to provide returns to our shareholders primarily through share repurchases, dividends and investing in growth opportunities.
−Removed: In April 2020, in light of uncertainty resulting from the COVID-19 pandemic, we suspended future, undeclared dividends and activity under
−Removed: the Company's share repurchase program.
−Removed: Given our strong liquidity and credit profile, the Company's board of directors declared on May 7, 2021, a quarterly cash dividend of $0.225 per share of common stock and approved resumption of the share repurchase program.
−Removed: On September 9, 2021, the Company's board of directors declared a quarterly cash dividend of $0.225 per share of common stock.
−Removed: Additionally, on December 6, 2021, the Company's board of directors approved a 6% increase in the quarterly cash dividend and declared a quarterly cash dividend of $0.2375 per share of common stock, which was paid in January 2022.
−Removed: In addition to our hotel franchising business, we have also developed or acquired six Cambria hotels.
+Added: Since our business has not historically required significant reinvestment of capital, we typically utilize cash in ways that management believes provide the greatest returns to our shareholders, which include acquisitions, share repurchases and dividends.
+Added: Refer to the heading Liquidity and Capital Resources under Item 7.
+Added: Management's Discussion and Analysis of Financial Condition and Results of Operations for additional analysis.
+Added: In April 2020, in light of uncertainty resulting from the COVID-19 pandemic, we suspended future, undeclared dividends and activity under the Company's share repurchase program.
+Added: Given our strong liquidity and credit profile, in May 2021, the Company resumed the payment of quarterly dividends, subject to future declarations by our Board of Directors, and activity under the share repurchase program.
+Added: On December 6, 2021, the Company's Board of Directors approved a 6% increase in the quarterly cash dividend and declared a quarterly cash dividend of $0.2375 per share of common stock, which was paid in January 2022.
+Added: On February 24, 2022, May 24, 2022, September 22, 2022, and December 7, 2022, the Company's Board of Directors declared a quarterly cash dividend of $0.2375 per share of common stock.
+Added: In addition to our hotel franchising business, we have also developed or acquired 6 Cambria and 3 legacy Radisson Hotels Americas hotels.
We intend to continue to strategically develop hotels to increase the presence of our brands in the United States, drive greater guest satisfaction and brand preference, and ultimately increase the number of franchise agreements awarded.
−Removed: When developing hotels, we seek key markets with strong growth potential that will deliver strong operating performance and improve the recognition of our brands.
−Removed: Our hotel development and ownership efforts currently focus on the Cambria Hotels and Everhome Suites brands.
−Removed: We believe our owned hotels provide us the opportunity to support and accelerate growth of our brands.
+Added: When developing hotels, we seek key markets with strong growth potential that will deliver strong operating performance.
+Added: For legacy Choice brands, our hotel development and ownership efforts currently focus on the Cambria Hotels and Everhome Suites brands.
+Added: We believe our owned hotels provide us the opportunity to support and accelerate the growth and recognition of our brands.
We do not anticipate owning hotels on a permanent basis and expect to target dispositions to a franchisee in the future.
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Results of Operations:
−Removed: Royalty fees, operating income, net income and diluted earnings per share ("EPS") represent key measurements of our financial performance.
+Added: Royalty, licensing and management fees, operating income, net income and diluted earnings per share ("EPS") represent key measurements of our financial performance.
These measurements are primarily driven by the operations of our hotel franchise system and therefore, our analysis of the Company's operations is primarily focused on the size, performance and potential growth of the hotel franchise system, as well as our variable overhead costs.
−Removed: Our discussion of results excludes the Company’s marketing and reservation system revenues and expenses.
−Removed: The Company's franchise agreements require the payment of marketing and reservation system fees to be used exclusively by the Company for expenses associated with providing franchise services such as central reservation systems, national marketing, and media advertising.
+Added: Our discussion of results generally excludes the Company’s other revenues and expenses from franchised and managed properties, which reflect franchise marketing and reservation system revenues and expenses and management agreement cost reimbursements.
+Added: The Company's legacy Choice franchise agreements require the payment of marketing and reservation system fees to be used exclusively by the Company for expenses associated with providing franchise services such as national marketing, media advertising, and central reservation systems.
The Company is obligated to expend the marketing and reservation system fees it collects from franchisees in accordance with the franchise agreements.
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Over time, the Company expects cumulative revenues and expenses to break even and, therefore, no income or loss will be generated from marketing and reservation system activities.
−Removed: As a result, the Company generally excludes the financial impacts of this program from the analysis of its operations.
−Removed: Due to the seasonal nature of the Company’s hotel franchising business and the multi-year investments required to support franchise operations, in addition to the Company's incremental spend to support franchisees and lower marketing and reservation system fees for certain periods most significantly impacted by the COVID-19 pandemic, quarterly and/or annual deficits may be generated.
−Removed: During the year ended December 31, 2021, marketing and reservation system revenues exceeded expenses by $83.9 million.
−Removed: During the years ended December 31, 2020 and 2019 marketing and reservation system expenses exceeded revenues by $44.3 million and $1.7 million, respectively.
+Added: The franchised and management contracts acquired in the Radisson Hotels Americas acquisition have similar terms as those described above with the exceptions of certain contractual elements concerning reservation fees, which are not required to breakeven over time and which are insignificant to overall operating net
+Added: Table of Content s
+Added: As a result, the Company generally excludes the other revenues and expenses from franchised and managed properties from the analysis of its operations.
+Added: Due to the seasonal nature of the Company’s hotel franchising and management business and the multi-year investments required to support franchise operations, in addition to the Company's incremental spend to support franchisees and lower marketing and reservation system fees for certain periods most significantly impacted by the COVID-19 pandemic, quarterly and/or annual deficits may be generated.
+Added: During the years ended December 31, 2022 and 2021 other revenues from franchised and managed properties exceeded expenses by $49.7 million and $83.9 million, respectively.
+Added: During the year ended December 31, 2020, other expenses from franchised and managed properties exceeded revenues by $44.3 million.
Refer to MD&A heading "Operations Review" for additional analysis of our results.
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Historically, the Company has generated significant cash flows from operations .
−Removed: Since our business has not historically required significant reinvestment of capital, we typically utilize cash in ways that management believes provide the greatest returns to our shareholders which include share repurchases and dividends.
−Removed: The Company's declaration of quarterly dividends and activity under the share repurchase program were temporarily suspended at the height of the COVID-19 pandemic, as detailed above within the Maximizing Financial Returns and Creating Value for Shareholders section.
+Added: Since our business has not historically required significant reinvestment of capital, we typically utilize cash in ways that management believes provide the greatest returns to our shareholders which include acquisitions, share repurchases and dividends.
+Added: The Company's declaration of quarterly dividends and activity under the share repurchase program have resumed, subject to future declarations by our Board of Directors, after being temporarily suspended at the height of the COVID-19 pandemic.
+Added: The Company completed the acquisition of Radisson Hotels Americas on August 11, 2022 for a purchase price, net of Disclosed Leakage of approximately $673.9 million.
We believe the Company’s cash flow from operations and available financing capacity is sufficient to meet the expected future operating, investing and financing needs of the business.
1 unchanged sentence
We believe that moderate increases in the rate of inflation will generally result in comparable or greater increases in hotel room rates.
−Removed: We are monitoring the implications of governmental assistance programs related to COVID-19 on future inflation trends and any resulting impacts on our business.
+Added: We are monitoring future inflation trends and any resulting impacts on our business.
Non-GAAP Financial Statement Measurements
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We have included a reconciliation of these measures to the comparable GAAP measurement below as well as our reasons for reporting these non-GAAP measures.
−Removed: Revenues, excluding marketing and reservation system activities:
−Removed: The Company utilizes revenues, excluding marketing and reservation system activities, rather than total revenues when analyzing the performance of the business.
−Removed: Marketing and reservation activities are excluded since the Company is contractually required by its franchise agreements to utilize the fees collected specifically for system-wide marketing and reservation activities.
−Removed: This non-GAAP measure is a commonly used measure of performance in our industry and facilitates comparisons between the Company and its competitors.
−Removed: Calculation of Revenues, excluding marketing and reservation system activities
+Added: Revenues excluding reimbursable revenue from franchised and managed properties and extraordinary termination fees from franchisee.
+Added: The Company’s other revenues from franchised and managed properties financial statement line item reflect franchise marketing and reservation system revenues and management agreement cost reimbursements.
+Added: The legacy Choice franchise marketing and reservation activities, legacy Radisson Hotels Americas franchise marketing activities, and legacy management agreement cost reimbursements operate at break-even based on the Company's contractual commitments regarding the manner such fees will be utilized.
+Added: The legacy Radisson Hotels Americas reservation revenue, which is also recorded in the other revenues from franchised and managed properties line item, does not break even, based on the legacy Radisson Hotels Americas franchise contracts.
+Added: Additionally, the Company recognized $22.6 million in termination fees resulting from the exit of 110 WoodSpring units in the third quarter of 2022.
+Added: As a result, the Company excludes reimbursable revenue from franchised and managed properties and the extraordinary termination fees from franchisee when analyzing the performance of the business.
+Added: A similar non-GAAP measure is a commonly used measure of performance in our industry and facilitates comparisons between the Company and its competitors.
+Added: Calculation of Revenues excluding reimbursable revenue from franchised and managed properties and extraordinary termination fees from franchisee
Year Ended December 31,
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Total revenues $ 1,401,949 $ 1,069,298 $ 774,072
−Removed: Marketing and reservation system revenues (528,843) (402,568) (577,426)
−Removed: Revenues, excluding marketing and reservation system activities $ 540,455 $ 371,504 $ 537,394
+Added: Reimbursable revenue from franchised and managed properties (682,612) (528,843) (402,568)
+Added: Extraordinary termination fees from franchisee (22,647) — —
+Added: Revenues excluding reimbursable revenue from franchised and managed properties and extraordinary termination fees from franchisee $ 696,690 $ 540,455 $ 371,504
Operations Review
−Removed: Comparison of 2021 and 2020 Operating Results
Summarized financial results for the years ended December 31, 2022 and 2021 are as follows:
(in thousands) 2022 2021
−Removed: Royalty fees $ 397,218 $ 263,308
−Removed: Initial franchise and relicensing fees 26,342 25,906
+Added: Royalty, licensing and management fees $ 471,759 $ 397,218
+Added: Initial franchise fees 28,074 26,342
Procurement services 63,800 50,393
−Removed: Marketing and reservation system 528,843 402,568
Owned hotels 70,826 37,833
Other 64,740 28,669
+Added: Other revenues from franchised and managed properties 702,750 528,843
Total revenues 1,401,949 1,069,298
2 unchanged sentences
Depreciation and amortization 30,425 24,773
−Removed: Marketing and reservation system 444,946 446,847
Owned hotels 48,837 24,754
+Added: Other expenses from franchised and managed properties 653,060 444,946
Total operating expenses 939,597 640,096
Impairment of long-lived assets — (282)
−Removed: Gain (loss) on sale of business and assets, net 13 —
+Added: Gain on sale of business and assets, net 16,249 13
Operating income 478,601 428,933
2 unchanged sentences
Interest income (7,288) (4,981)
−Removed: Loss on extinguishment of debt — 16,565
−Removed: Other gains, net (5,134) (4,533)
−Removed: Equity in net loss of affiliates 15,876 15,289
−Removed: Total other expenses (income), net 52,441 68,661
+Added: Other loss (gain) 7,018 (5,134)
+Added: Equity in net (gain) loss of affiliates (1,732) 15,876
+Added: Total other income and expenses, net 41,795 52,441
Income before income taxes 436,806 376,492
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The Company recorded income before income taxes of $436.8 million for the year ended December 31, 2022, a $60.3 million increase from the same period of the prior year.
−Removed: The increase in income before income taxes primarily reflects a $307.3 million increase in operating income, a $16.6 million loss on the extinguishment of debt in 2020, a $2.3 million decrease in interest expense, partially offset by a $2.7 million decrease in interest income.
−Removed: Operating income increased $307.3 million primarily due to a $133.9 million increase in royalty revenues, a $128.1 million increase in the net surplus generated from marketing and reservation system activities, the recognition of $14.8 million in impairments of long-lived assets in 2020, a $11.8 million increase in other revenue, an $8.9 million increase in owned hotels revenues in excess of expense, a $5.2 million increase in procurement services revenues, and a $3.3 million decrease in selling, general and administrative (“SG&A”).
−Removed: The primary reasons for these fluctuations, including the impact of the COVID-19 pandemic, are described in more detail below.
−Removed: Domestic royalty fees for the year ended December 31, 2021 increased $131.2 million to $382.4 million from $251.2 million for the year ended December 31, 2020, an increase of 52%.
−Removed: The increase in domestic royalties reflects a 47.5% increase in domestic RevPAR.
−Removed: System-wide RevPAR increased due to a 17.3% increase in average daily rates and a 1,180 basis point increase in occupancy.
−Removed: The increase in domestic royalties is partially offset by a decrease in the number of domestic franchised hotel rooms and a 7 basis point increase in the effective royalty rate from 4.94% for the year ended December 31, 2020 to 5.01% for the year ended December 31, 2021.
−Removed: A summary of the Company’s domestic franchised hotels operating information for the years ending December 31, 2021 and 2020 is as follows:
+Added: The increase in income before income taxes primarily reflects a $49.6 million increase in operating income and a $17.6 million increase in equity in net (gain) loss of affiliates, partially offset by a $12.1 million increase in other loss (gain).
+Added: Operating income increased $49.6 million primarily due to a $74.6 million increase in royalty, licensing and management fees, a $36.0 million increase in other revenue, a $16.2 million increase in gain on sale of business assets, net, a $13.4 million increase in procurement services revenues, and a $9.0 million increase in owned hotels revenues in excess of expense, offset by a $61.7 million increase in selling, general and administrative (“SG&A”), a $34.2 million decrease in the net surplus generated from other franchised and managed properties activities, and an increase of $5.6 million in depreciation and amortization expense.
+Added: The primary reasons for these fluctuations, including the impact of the Radisson Hotels Americas acquisition, are described in more detail below.
+Added: Royalty, licensing and management fees
+Added: Domestic royalty fees for legacy Choice brands the year ended December 31, 2022 increased $43.0 million to $425.4 million from $382.4 million for the year ended December 31, 2021, an increase of 11%.
+Added: The increase in domestic royalties for legacy Choice brands reflects a 12.4% increase in domestic RevPAR.
+Added: System-wide RevPAR increased due to a 10.8% increase in average daily rates, a 80 basis point increase in occupancy, and a 4 basis point increase in the effective royalty rate from 5.01%
+Added: for the year ended December 31, 2021 to 5.05% for the year ended December 31, 2022, partially offset by a 3.3% decrease in the number of domestic franchised hotel rooms.
+Added: A summary of the Company’s domestic franchised hotels operating information for legacy Choice brands for the years ending December 31, 2022 and 2021 is as follows.
+Added: These statistics exclude the acquired legacy Radisson brands.
+Added: Additionally, the operating statistics for the Everhome Suites brand are not provided as the operating statistics are not representative of a stabilized brand which the Company defines as having at least 25 units open and operating for a twelve-month period.
2022 2021* Change
14 unchanged sentences
Total $ 93.17 58.0 % $ 54.06 $ 84.06 57.2 % $ 48.10 10.8 % 80 bps 12.4 %
−Removed: A summary of domestic hotels and rooms in our franchise system at December 31, 2021 and 2020 by brand is as follows:
+Added: *The Company calculates RevPAR based on information as reported by franchisees.
+Added: To accurately reflect RevPAR, the Company revised its prior years' operating statistics for the most current information provided.
+Added: A summary of domestic hotels and rooms for legacy Choice brands in our franchise system at December 31, 2022 and 2021 by brand is as follows:
December 31, 2022 December 31, 2021 Variance
7 unchanged sentences
WoodSpring (2)
+Added: 212 25,592 302 36,374 (90) (29.8) % (10,782) (29.6) %
+Added: Everhome 1 99 — — 1 NM 99 NM
MainStay 115 7,891 101 6,994 14 13.9 % 897 12.8 %
2 unchanged sentences
Ascend Hotel Collection 196 20,091 200 20,473 (4) (2.0) % (382) (1.9) %
−Removed: Total Domestic Franchises 5,920 459,182 5,967 464,682 (47) (0.8) % (5,500) (1.2) %
+Added: Total (1), (2)
+Added: 5,788 442,936 5,913 458,030 (125) (2.1) % (15,094) (3.3) %
+Added: (1) In 2022, the Company reclassified seven properties located in the Caribbean from Domestic Franchises to International Franchises.
+Added: Prior year hotel and room data have been reclassified for comparability.
+Added: (2) In July 2022 the Company received notice from an ownership group of its intent to exit 110 WoodSpring properties from the Choice system, which occurred in September 2022.
+Added: Refer to Note 2 of our consolidated financial statements.
As of both December 31, 2022 and 2021, less than 1% of the Company's domestic hotel system had temporarily suspended operations due to governmental restriction or a franchisee’s election.
−Removed: These temporarily suspended hotels are included in the summary table above of domestic hotels in our franchise system.
−Removed: International royalty fees for the year ended December 31, 2021 increased $2.7 million to $14.8 million compared to the year ended December 31, 2020 as a result of improvements in RevPAR performance, despite reductions of the international franchise system size by 70 hotels (from 1,180 as of December 31, 2020 to 1,110 as of December 31, 2021) and 12,731 rooms (from 133,295 as of December 31, 2020 to 120,564 as of December 31, 2021.
+Added: These temporarily suspended hotels are included in the summary table above of legacy Choice domestic hotels in our franchise system.
+Added: International royalty fees for legacy Choice brands for the year ended December 31, 2022 increased $3.6 million to $18.4 million compared to the year ended December 31, 2021 as a result of improvements in RevPAR performance, despite reductions of the international franchise system size by 16 hotels (from 1,117 as of December 31, 2021 to 1,101 as of December
+Added: 31, 2022), and a decrease by 1,248 rooms (from 121,716 as of December 31, 2021 to 120,468 as of December 31, 2022).
As of December 31, 2022 and December 31, 2021, approximately 1% and 2%, respectively, of the Company's international branded hotels temporarily suspended operations due to governmental restriction or a franchisee’s election.
−Removed: As a result of the acquisition of AMResorts®, the Company’s relationship with AMResorts® was terminated during the fourth quarter of 2021 and 17 domestic and 37 international open AMResorts®-branded hotels exited the Ascend Hotel Collection portfolio.
−Removed: We expect the uncertainty surrounding the potential duration of the pandemic, including resurgences and new variants, as well as the rate and pace of vaccinations around the world, to continue to have the potential to impact the number of domestic and international hotels that remain open and operating.
−Removed: Initial Franchise and Relicensing Fees
−Removed: Initial franchise fees are fees paid to the Company when a franchisee executes a franchise agreement;
−Removed: relicensing fees include fees charged to new owners of a franchised property whenever an ownership change occurs and the property remains in the franchise system, as well as fees required to renew existing franchise agreements.
−Removed: During the year ended December 31, 2021, the Company awarded 528 franchise agreements representing 49,784 rooms compared to 427 franchise agreements representing 35,308 rooms for the year ended December 31, 2020.
−Removed: Domestic franchise agreements awarded for new construction hotels totaled 175 representing 16,787 rooms during the year ended December 31, 2021 compared to 126 contracts representing 11,847 rooms for the year ended December 31, 2020.
−Removed: Conversion hotel awarded franchise agreements totaled 353 representing 32,997 rooms for the year ended December 31, 2021 compared to 301 agreements representing 23,461 rooms for the year ended December 31, 2020.
−Removed: The Company awarded 346 domestic relicensing contracts during the year ended December 31, 2021 compared to 204 executed during the year ended December 31, 2020.
−Removed: The Company awarded 24 domestic renewal agreements during the year ended December 31, 2021 compared to 38 during the year ended December 31, 2020.
−Removed: Initial franchise and relicensing fees are generally collected at the time the franchise agreement is awarded.
−Removed: However, the recognition of revenue is deferred until the hotel is open or the franchise agreement is terminated.
+Added: Royalty fees for the newly acquired Radisson Hotels Americas brands since the acquisition date of August 11, 2022 through December 31, 2022 were $19.5 million.
+Added: As of December 31, 2022, Radisson Hotels Americas brands accounted for 508 and 51,473 domestic hotels and rooms, respectively, and 90 and 12,927 international hotels and rooms, respectively.
+Added: We expect the uncertainty surrounding the potential duration of the pandemic, including resurgences and new variants, as well as the rate and pace of vaccinations around the world, to continue to have the potential to impact the number of domestic and international hotels that remain open and operating and their operating performance.
+Added: Initial franchise fees
+Added: Initial franchise fee revenue increased $1.8 million from $26.3 million to $28.1 million during the years ended December 31, 2021 and 2022, respectively.
+Added: Initial franchise fees are generally paid to the Company when a franchisee executes a franchise agreement for a new property entering the system or an existing franchised property at time of an ownership change (referred to as a relicensing) or agreement renewal, however, the recognition of revenue is deferred until the hotel associated with the franchise agreement is open or the franchise agreement is terminated.
Upon hotel opening, revenue is recognized ratably as services are provided over the enforceable period of the franchise license agreement.
−Removed: Upon the termination of a franchise agreement, previously deferred initial and relicensing fees are recognized immediately in the period the agreement is terminated.
−Removed: Initial franchise and relicensing fee revenue increased $0.4 million from $25.9 million to $26.3 million during the years ended December 31, 2020 and 2021, respectively.
−Removed: As of December 31, 2021, the Company had 876 franchised hotels with 75,163 rooms under construction, awaiting conversion or approved for development in its domestic system as compared to 966 hotels and 79,470 rooms at December 31, 2020.
−Removed: The number of new construction franchised hotels in the Company’s domestic pipeline decreased from 727 at December 31, 2020 to 659 at December 31, 2021.
+Added: Upon the termination of a franchise agreement, previously deferred initial franchise fees are recognized immediately in the period the agreement is terminated.
+Added: During the year ended December 31, 2022, the Company awarded 542 franchise agreements to legacy Choice brands representing 50,057 rooms compared to 528 franchise agreements representing 49,784 rooms for the year ended December 31, 2021.
+Added: Domestic franchise agreements awarded to legacy Choice brands for new construction hotels totaled 194 representing 20,042 rooms during the year ended December 31, 2022 compared to 175 contracts representing 16,787 rooms for the year ended December 31, 2021.
+Added: Conversion hotel awarded franchise agreements to legacy Choice brands totaled 348 representing 30,015 rooms for the year ended December 31, 2022 compared to 353 agreements representing 32,997 rooms for the year ended December 31, 2021.
+Added: The Company awarded MDA commitments to legacy Choice brands of 44 franchise agreements representing 5,256 rooms during the year ended December 31, 2022, and 5 franchise agreements representing 610 rooms during the year ended December 31, 2021.
+Added: The Company awarded 519 domestic relicensing contracts to legacy Choice brands during the year ended December 31, 2022 compared to 346 executed during the year ended December 31, 2021.
+Added: The Company awarded 36 domestic renewal agreements to legacy Choice brands during the year ended December 31, 2022 compared to 24 during the year ended December 31, 2021.
+Added: Since the August 11, 2022 acquisition date through December 31, 2022, the Company awarded 4 franchise agreements to Radisson Hotels Americas brands.
+Added: As of December 31, 2022, the Company's legacy Choice brands had 882 franchised hotels with 82,148 rooms under construction, awaiting conversion or approved for development in its domestic system as compared to 874 hotels and 75,017 rooms at December 31, 2021.
+Added: The number of new construction franchised hotels in the Company’s legacy Choice brands domestic pipeline decreased from 657 at December 31, 2021 to 653 at December 31, 2022.
New construction hotels typically average 18 to 36 months to open after the franchise agreement is executed.
−Removed: The number of conversion franchised hotels in the Company’s domestic pipeline decreased from 217 at December 31, 2020 to 239 hotels at December 31, 2021.
+Added: The number of conversion franchised hotels in the Company’s legacy Choice brands domestic pipeline increased from 217 at December 31, 2021 to 229 hotels at December 31, 2022.
Conversion hotels typically open three to six months after the execution of a franchise agreement.
−Removed: The Company had an additional 48 franchised hotels with 4,752 rooms under construction, awaiting conversion or approved for development in its international system as of December 31, 2021 compared to 56 hotels and 6,794 rooms at December 31, 2020.
+Added: The Company's domestic legacy Choice brands also had outstanding MDAs committing owners to future franchise development for 102 franchised hotels and 12,332 rooms at December 31, 2022 and 29 franchised hotels and 3,506 rooms December 31, 2021.
+Added: Further, the Company had an additional 40 legacy Choice brands franchised hotels with 4,306 rooms under construction, awaiting conversion or approved for development in its international system as of December 31, 2022 compared to 40 hotels and 4,090 rooms at December 31, 2021.
+Added: As of December 31, 2022, the Company's Radisson Hotels Americas brands had 66 franchised hotels with 8,104 rooms under construction, awaiting conversion or approved for development in its global system.
Fluctuations in the Company’s pipeline are primarily due to the timing of hotel openings and the timing of signing new franchise agreements.
−Removed: While the Company’s hotel pipeline provides a strong platform for growth, a hotel in the pipeline does not always result in an open and operating hotel due to various factors.
−Removed: Given the uncertainty as to the potential duration of the COVID-19 pandemic and its severity, there is additional uncertainty with respect to the opening of new construction hotels, which are reliant on, amongst other things, access to liquidity, availability of construction labor, and local governmental approvals and entitlements, all of which may be constrained during the duration of the pandemic.
+Added: While the Company’s hotel pipeline provides a strong platform for growth, a hotel in the pipeline does not always result in an open and operating hotel due to various macroeconomic factors that could impact items such as access to liquidity, availability of construction labor, and local governmental approvals and entitlements.
Procurement services:
Procurement services revenues increased $13.4 million from $50.4 million for the year ended December 31, 2021 to $63.8 million for the year ended December 31, 2022.
−Removed: These results reflect an increase in fees generated from travel-related partnerships and qualified vendors resulting from increased occupancy during 2021 at our franchised hotels.
+Added: These results reflect an increase in fees generated from travel-related partnerships and qualified vendors.
Owned hotels:
The Company's revenues, net of expenses, from owned hotels increased $9.0 million from $13.0 million for the year ended December 31, 2021 to $22.0 million for the year ended December 31, 2022.
−Removed: These results reflect improved operating performance at our owned hotels and the addition of an owned hotel during the fourth quarter of 2021 (refer to Note 24 of our consolidated financial statements).
+Added: These results reflect improved operating performance at our owned hotels and the net addition of 3 owned hotel during the comparative period as a result of the Radisson Hotels Americas acquisition (refer to Note 24 to our consolidated financial statements).
Other revenues:
−Removed: Other revenues increased $11.8 million from $16.9 million the year ended December 31, 2020 to $28.7 million for the year ended December 31, 2021 driven by an increase in termination fees, non-compliance fees and other franchising revenues.
+Added: Other revenues increased $36.0 million from $28.7 million the year ended December 31, 2021 to $64.7 million for the year ended December 31, 2022 driven by an increase in termination fees, including $22.6 million resulting from the exit of 110 WoodSpring units in the third quarter of 2022, and other franchising revenues.
Selling, general and administrative expenses:
−Removed: The cost to operate the business is reflected in selling, general and administrative ("SG&A") on the consolidated statements of income.
−Removed: SG&A expenses were $145.6 million for the year ended December 31, 2021, a decrease of $3.3 million from December 31, 2020.
−Removed: SG&A expenses for the years end December 31, 2021 and 2020 include approximately $1.9 million and $2.3 million, respectively, related to the Company's alternative growth initiatives and expenses related to the operations of an office building.
−Removed: Excluding the SG&A for alternative growth initiatives and office building operations, SG&A for the year ended December 31, 2021 decreased $2.9 million to $143.7 million in the current year.
−Removed: This fluctuation is primarily due to a $26.9 million decrease in provision for credit losses in accounts and notes receivable.
−Removed: This is partially offset by approximately $24.0 million in cost increases for general corporate purposes and lifting of certain cost mitigation measures related to the COVID-19 pandemic, including compensation and benefits;
−Removed: impairments against franchise agreement acquisition intangible assets;
−Removed: and an increase in the Company's deferred compensation liabilities based on increases in the underlying investments.
−Removed: Impairment of Long-lived Assets:
−Removed: For the year ended December 31, 2020, the Company recognized a $1.2 million charge related to a prospective development project the Company is no longer pursing, a $4.3 million impairment charge related to the long-lived assets of a commercial office building owned by the Company, and a $9.2 million impairment charge related to a parcel of real estate.
−Removed: For the year ended December 31, 2021, the Company recognized a $0.3 million impairment charge resulting from a parcel of land meeting held for sale classification in October 2021.
−Removed: Interest Expense:
−Removed: The Company recorded interest expense of $46.7 million for the year ended December 31, 2021, a decrease of $2.3 million from the year ended December 31, 2020.
−Removed: The decrease in interest expense is a result of lower effective interest rates on outstanding borrowings in the comparative periods.
−Removed: Interest Income:
−Removed: Interest income decreased $2.7 million to $5.0 million in the current year primarily due to an increase in certain loans being in non-accrual of interest status resulting from impacts of the COVID-19 pandemic.
−Removed: The notes receivable relate to the Company’s program to incentivize development of its Cambria Hotel and Everhome Suites brands.
−Removed: Loss on Extinguishment of Debt:
−Removed: During the first quarter of 2020, the Company recorded a loss on the extinguishment of debt of $0.6 million related to the early pay off of a construction loan in the amount of $33.1 million, inclusive of accrued and unpaid interest.
−Removed: During the third quarter of 2020, the Company recorded a loss on the extinguishment of debt of $16.0 million related to the Tender Offer and early pay off of the Term Loan, as such terms are defined below.
−Removed: The Company recorded other net gains of $5.1 million for the year ended December 31, 2021, compared to other net gains of $4.5 million for the year ended December 31, 2020.
−Removed: The gains for the year ended December 31, 2021 relate to increases in the Company's deferred compensation assets based on increases in the underlying investments, partially offset by foreign currency transaction losses.
−Removed: Equity in Net Loss of Affiliates:
−Removed: The Company recorded net losses of $15.9 million from its unconsolidated affiliates during the year ended December 31, 2021 compared to net losses of $15.3 million for the year ended December 31, 2020.
+Added: The cost to operate the business is reflected in SG&A expenses on the consolidated statements of income, which were $207.3 million for the year ended December 31, 2022, an increase of $61.7 million from December 31, 2021.
+Added: SG&A expenses experienced an increase resulting from the acquisition of Radisson Hotels Americas, inclusive of severance and transaction related-costs incurred of $39.6 million.
+Added: SG&A expenses experienced further increases from general corporate purposes;
+Added: lifting cost mitigation measures for the Company related to the COVID-19 pandemic, including compensation, benefits, travel, and conventions & meetings;
+Added: and an increase in provision for credit losses in accounts receivable recorded in accordance with Topic 326.
+Added: These were partially offset by a $11.5 million decrease in the Company's deferred compensation liabilities based on decreases in the underlying investments.
+Added: Depreciation and amortization:
+Added: Depreciation and amortization expense was $24.8 million and $30.4 million for the year ended December 31, 2021, and 2022, respectively, increasing primarily due to the acquisition of Radisson Hotels Americas on August 11, 2022 and associated amortization from the portion of the purchase price allocated to contract asset acquisition costs.
+Added: Gain on sale of business and assets, net:
+Added: The Company recognized gains of $16.2 million for the year ended December 31, 2022, primarily related to the sale of two owned hotel assets in the second and third quarters of 2022.
+Added: These gains are partially offset by a reduction to the carrying value of an asset held for sale in the third quarter of 2022 and the sale and conversion of an international direct franchising market to a master franchising market in the second quarter of 2022.
+Added: Other loss (gain):
+Added: The Company recorded other net loss of $7.0 million for the year ended December 31, 2022, compared to other net gains of $5.1 million for the year ended December 31, 2021.
+Added: The losses for the year ended December 31, 2022 relate to decreases in the Company's deferred compensation assets based on decreases in the underlying investments and by foreign currency transaction losses.
+Added: Equity in net (gain) loss of affiliates:
+Added: The Company recorded net gains of $1.7 million from its unconsolidated affiliates during the year ended December 31, 2022 compared to net losses of $15.9 million for the year ended December 31, 2021.
These investments in affiliates relate to the Company's program to offer equity support to qualified franchisees to develop and operate Cambria Hotels in strategic markets.
The activity for the year ended December 31, 2021 reflects other-than-temporary impairments of multiple unconsolidated affiliates resulting in losses of $19.3 million, partially offset by sales of ownership interests of and distributions resulting from sales of underlying assets from multiple unconsolidated affiliates resulting in gains of $6.9 million.
−Removed: The activity for the year ended December 31, 2020 reflects other-than-temporary impairments of four unconsolidated affiliates resulting in losses of $7.3 million and increased losses of operating affiliate hotels as impacted by the COVID-19 pandemic.
Refer to Note 8 to our consolidated financial statements for additional information.
−Removed: Income Tax (Benefit) Expense :
+Added: Income tax expense (benefit) :
The Company's effective income tax rates were 24.0% and 23.3% for the years ended December 31, 2022 and 2021, respectively.
−Removed: On January 1, 2018, the Company adopted ASU 2016-16, which provides guidance on recognition of current income tax consequences for intercompany asset transfers (other than inventory) at the time of transfer.
−Removed: On January 1, 2020, the Company completed a reorganization of its foreign legal entity structure.
−Removed: In accordance with ASU 2016-16, the Company recorded a $34.6 million tax benefit and a corresponding deferred tax asset due to the reorganization.
−Removed: In 2020, due to a decrease in the forecasted international income resulting from adverse impacts of the COVID-19 pandemic, the Company recorded a valuation allowance of $5.7 million reflecting a change in the anticipated realizability of this deferred tax asset.
−Removed: The effective income tax rate for the year ended December 31, 2020 was lower than the U.S.
−Removed: federal income tax rate of 21.0% due to the impact of our international reorganization under ASU 2016-16 (partially offset by the related valuation allowance), $3.0 million tax credits recognized during the year, $3.1 million of additional tax benefit related to compensation, and the impact of foreign operations, partially offset by the impact of state income taxes and a change in estimated uncertain tax positions.
−Removed: The effective income tax rate for the year ended December 31, 2021, was higher than the U.S.
−Removed: federal income tax rate of 21.0% primarily due to the impact of state income taxes, $1.7 million of additional tax expense related to compensation, and a $1.5 million reduction in the net carrying value of our Dutch deferred tax asset, partially offset by $3.7 million of tax credits recognized during the year.
+Added: The effective income tax rates for the years ended December 31, 2022 and December 31, 2021 were higher than the U.S.
+Added: federal income tax rate of 21.0% primarily due to state income taxes and tax expense related to compensation, partially offset by federal income tax credits.
+Added: The effective income tax rate for the year ended December 31, 2021 was also higher due to a reduction in the net carrying value of its Dutch deferred tax asset.
Refer to Choice Hotels International, Inc.
2 unchanged sentences
Liquidity and Capital Resources
−Removed: Our Company historically generates strong and predictable operating cash flows primarily from our hotel franchising operations and the initial, relicensing and continuing royalty fees attributable to our franchise agreements.
+Added: Our Company historically generates strong and predictable operating cash flows primarily from our hotel franchising operations and the initial and continuing fees attributable to our franchise agreements.
Our capital allocation decisions, including capital structure and uses of capital, are intended to maximize our return on invested capital and create value for our shareholders, while maintaining a strong balance sheet and financial flexibility.
−Removed: The Company's short-term and long-term liquidity requirements primarily arise from working capital needs, debt obligations, income tax payments, dividend payments, share repurchases, capital expenditures and investments in growth opportunities.
−Removed: The Company's 2012 Senior Notes mature on July 1, 2022 with a principal maturity, net of unamortized deferred issuance costs, of $216.4 million.
+Added: The Company's short-term and long-term liquidity
+Added: requirements primarily arise from working capital needs, debt obligations, income tax payments, dividend payments, share repurchases, capital expenditures and investments in growth opportunities.
+Added: The Radisson transaction closed on August 11, 2022 with a purchase price of $673.9 million, net of leakage and certain prepaid expenses.
+Added: The purchase price, net of cash acquired, was $550.4 million.
+Added: The Company's 2012 Senior Notes matured on July 1, 2022.
+Added: The outstanding principal of $216.6 million was repaid at maturity.
In April 2020, in light of uncertainty resulting from the COVID-19 pandemic, we suspended future, undeclared dividends and activity under the Company's share repurchase program.
−Removed: Given our strong liquidity and credit profile, the Company's board of directors declared on May 7, 2021, a quarterly cash dividend of $0.225 per share of common stock and approved resumption of the share repurchase program.
−Removed: On September 9, 2021, the Company's board of directors declared a quarterly cash dividend of $0.225 per share of common stock.
−Removed: Additionally, on December 6, 2021, the Company's board of directors approved a 6% increase in the quarterly cash dividend and declared a quarterly cash dividend of $0.2375 per share of common stock, which was paid in January 2022.
−Removed: As a result, the Company paid dividends totaling approximately $25.0 million during 2021 and, subject to future board of director declarations, expects to pay dividends totaling $52.8 million during 2022.
+Added: Given our strong liquidity and credit profile, in May 2021, the Company resumed the payment of quarterly dividends, subject to future declarations by our Board of Directors and activity under the share repurchase program.
+Added: On December 6, 2021, the Company's Board of Directors approved a 6% increase in the quarterly cash dividend and declared a quarterly cash dividend of $0.2375 per share of common stock, which was paid in January 2022.
+Added: During the year ended December 31, 2022, the Company's Board of Directors declared cash dividends at a quarterly rate of $0.2375 per share of common stock.
Our Board of Directors authorized a program which permits us to offer financing, investment, and guaranty support to qualified franchisees, and allows us to acquire or develop and resell hotels to incentivize franchise development of our brands in strategic markets.
4 unchanged sentences
As of December 31, 2022, the Company had commitments to extend an additional $330.4 million for these purposes provided the conditions of the payment are met by its franchisees.
−Removed: The Company's primary sources of liquidity as of December 31, 2021 consisted of $1.1 billion in cash and available borrowing capacity through its senior unsecured revolving credit facility.
+Added: The Company's primary sources of liquidity as of December 31, 2022 consisted of $281.6 million in cash and available borrowing capacity through its senior unsecured revolving credit facility.
As of December 31, 2022, the Company was in compliance with the financial covenants of its credit agreements and expects to remain in such compliance.
−Removed: Based on our business model and information known at this time, the Company believes that cash, available borrowing capacity, and cash flows from operations will provide sufficient liquidity to meet the expected future operating, investing and financing needs of the business for at least the next 12 months.
+Added: Based on our business model and information known at this time, the Company believes that cash flows from operations and available financing capacity provide sufficient liquidity to meet the expected future operating, investing and financing needs of the business, inclusive of those for the recently acquired Radisson Hotels Americas operations.
Operating Activities
−Removed: During the years ended December 31, 2021 and 2020, net cash provided by operating activities totaled $383.7 million and $110.1 million, respectively.
−Removed: Operating cash flows increased $273.6 million primarily due to an increase in operating income, excluding certain non-cash charges, and timing of working capital items.
+Added: During the years ended December 31, 2022, 2021 and 2020, net cash provided by operating activities totaled $367.1 million, $383.7 million, and $110.1 million, respectively.
+Added: Operating cash flows decreased $16.6 million from the year ended December 31, 2021 to the year ended December 31, 2022 primarily due to increases in franchise agreement acquisition cost payments and timing of working capital and deferred items, partially offset by an increase in operating income, excluding certain non-cash charges.
In conjunction with brand and development programs, we strategically make certain payments to franchisees as an incentive to enter into new franchise agreements or perform-designated improvements to properties under existing franchise agreements ("franchise agreement acquisition costs").
2 unchanged sentences
During the years ended December 31, 2022, 2021 and 2020, the Company's net advances for these purposes totaled $54.5 million, $38.2 million, and $36.5 million, respectively.
−Removed: The timing and amount of these cash flows are dependent on various factors including the implementation of various development and brand incentive
−Removed: programs, the level of franchise sales and the ability of our franchisees to complete construction or convert their hotels to one of the Company’s brands.
+Added: The timing and amount of these cash flows are dependent on various factors including the implementation of various development and brand incentive programs, the level of franchise sales and the ability of our franchisees to complete construction or convert their hotels to one of the Company’s brands.
At December 31, 2022, the Company had commitments to extend an additional $330.4 million for these purposes provided the conditions of the payment are met by its franchisees.
−Removed: The Company’s franchise agreements require the payment of marketing and reservation system fees.
+Added: The Company’s legacy Choice franchise agreements require the payment of marketing and reservation system fees.
In accordance with the terms of our franchise agreements, the Company is obligated to use these marketing and reservation system fees to provide marketing and reservation services.
1 unchanged sentence
Conversely, to the extent expenditures incurred exceed revenues collected, the Company has the contractual enforceable right to recover such advances in future periods through additional fee assessments or reduced spending.
−Removed: During the year ended 2021, marketing and reservation system revenues exceeded expenses by $83.9 million.
−Removed: During the years ended 2020 and 2019, marketing and reservation system expenses exceeded revenues by $44.2 million and $1.7 million, respectively.
+Added: The franchised and management contracts acquired in the Radisson Hotels Americas acquisition have similar terms as those described above with the exceptions of certain contractual
+Added: elements concerning reservation fees, which are not required to breakeven over time and which are insignificant to overall operating net income.
+Added: During the years ended 2022 and 2021, other revenues from franchised and managed properties exceeded expenses by $49.7 million and $83.9 million, respectively.
+Added: During the year ended 2020, other expenses from franchised and managed properties exceeded revenues by $44.2 million.
Investing Activities
5 unchanged sentences
Cash utilized for investing activities totaled $442.4 million, $78.9 million and $24.5 million for the years ended December 31, 2022, 2021 and 2020, respectively.
−Removed: The increase in cash utilized for investing activities from 2020 to 2021 primarily reflects the following items:
+Added: The increase in cash utilized for investing activities from 2021 to 2022 primarily reflects the following:
+Added: On August 11, 2022, the Company acquired 100% of the issued and outstanding equity interest of Radisson Hotels Americas for a purchase price, net of Disclosed Leakage of approximately $673.9 million.
+Added: The purchase price, net of cash acquired, was $550.4 million.
+Added: To fund the transaction, Choice drew $175 million on the Company's existing $600 million unsecured credit facility, and funded the remainder with cash on hand.
+Added: On the transaction date, the Company acquired approximately $10.4 million in restricted cash based on provisions of an assumed mortgage on an acquired hotel property of $56.0 million.
+Added: Subsequent to the acquisition closing date, this mortgage was repaid in full using cash we acquired and, as a result, the associated cash restrictions were lifted.
+Added: Refer to Note 24 to our consolidated financial statements for further discussion.
During the years ended December 31, 2022, 2021 and 2020, capital expenditures in property and equipment totaled $90.0 million, $74.3 million, and $33.6 million, respectively.
−Removed: The increase in capital expenditures during 2021 primarily reflects costs incurred to support the continued growth of the Cambria Hotels brand, including acquisition of a land parcel in the third quarter of 2021 to develop into a Cambria hotel.
+Added: The change in capital expenditures primarily reflects increased costs incurred to support the continued growth of the Cambria Hotels and Everhome Suites brands, including ongoing construction and acquisition of land parcels for hotel development.
+Added: During the year ended December 31, 2022, the Company realized net proceeds of $166.6 million from the sale of three Cambria hotels, one parcel of land and a sale and conversion of an international direct franchising market to a master franchising market.
During the year ended December 31, 2021, the Company realized proceeds of $6.1 million from the sale of a commercial office building previously awarded to the Company pursuant to a court settlement.
−Removed: During the year ended December 31, 2019, the Company realized proceeds of $10.6 million from the sale of one parcel of land.
−Removed: The Company did not sell any land parcels during the year ended December 31, 2020.
−Removed: In September 2021, the Company reached a settlement with a borrower holding a loan classified as collateral-dependent, collateralized by an operating hotel.
−Removed: The key terms of the settlement resulted in a deed in lieu of foreclosure on the operating hotel in exchange for releasing obligations pursuant to the senior and mezzanine loans and the associated franchise agreement.
−Removed: The Company accounted for the acquisition of the hotel as an asset acquisition in the fourth quarter of 2021 and acquired net cash of $0.3 million.
−Removed: Prior to July 23, 2019, the Company held a 40% ownership interest of an affiliate that owned five Cambria Hotels recorded as an investment in affiliates of $40.0 million.
−Removed: During the year ended December 31, 2019, the Company redeemed the remaining 60% ownership interest in four of the hotels for approximately $169.0 million, net of cash acquired.
−Removed: During the year ended December 31, 2020, the Company realized proceeds of $9.2 million from the sale of state historic rehabilitation tax credits earned from the improvements made to this building, which were applied to lower the basis of the owned hotel property and equipment.
−Removed: During the year ended December 31, 2019, the Company sold the SaaS for vacation rentals reporting unit and made payments, net of sales proceeds, of $10.8 million for net costs incurred to complete the disposition.
−Removed: There were no business dispositions during the years ended December 31, 2021 and December 31, 2020.
+Added: The Company did not make sales of this nature during the year ended December 31, 2020.
+Added: In September 2021 and April 2022, the Company reached settlements with independent borrowers holding senior and mezzanine loans classified as collateral-dependent, collateralized by operating hotels.
+Added: The key terms of the settlements resulted in a deed in lieu of foreclosure on each operating hotel in exchange for releasing obligations pursuant to the senior and mezzanine loans and the associated franchise agreements, as exchanged on October 1, 2021 and April 14, 2022, respectively.
+Added: The Company accounted for the acquisition of each hotel as an asset acquisition in the fourth quarter of 2021 (acquired net cash of $0.3 million) and second quarter of 2022 (paid net cash of $0.9 million), respectively.
+Added: During the year ended December 31, 2022, the Company recognized contract termination fee revenue of $22.6 million related to the termination of 110 WoodSpring units.
+Added: The termination fee revenue represents $67.4 million in consideration received, less the $44.7 million carrying basis of the related contract intangibles initially established at the time of the WoodSpring acquisition.
The Company maintains equity method investments in affiliates related to the Company's program to offer equity support to qualified franchisees to develop and operate Cambria Hotels in strategic markets.
During the years ended December 31, 2022, 2021 and 2020, the Company invested $3.1 million, $2.8 million, and $5.5 million, respectively, to support these efforts.
−Removed: addition, during the years ended December 31, 2021, 2020 and 2019, the Company received distributions and sales proceeds from these affiliates totaling $15.6 million, $10.8 million and $19.2 million, respectively.
+Added: In addition, during the years ended December 31, 2021 and 2020, the Company received distributions and sales proceeds from these affiliates totaling $15.6 million and $10.8 million, respectively.
+Added: The Company received no distributions from affiliates for the year ended December 31, 2022.
To the extent existing unconsolidated affiliates proceed to the hotel construction phase, the Company is committed to make additional capital contributions totaling $14.1 million to support these efforts.
4 unchanged sentences
Refer to Note 23 to our consolidated financial statements for further discussion.
−Removed: The Company provides financing to franchisees primarily for hotel development efforts in the form of notes receivable.
+Added: The Company provides financing to franchisees for hotel development efforts and other purposes in the form of notes receivable.
These loans bear interest and are expected to be repaid in accordance with the terms of the loan arrangements.
−Removed: During the years ended December 31, 2021, 2020 and 2019, the Company advanced $20.1 million, $9.8 million, and $20.7 million for these purposes, respectively.
−Removed: In addition, the Company received repayments totaling $0.2 million, $6.5 million, and $14.2 million for these purposes, respectively.
+Added: During the years ended December 31, 2022, 2021 and 2020, the Company advanced $5.6 million, $20.1 million, and $9.8 million for these purposes, respectively, and received repayments totaling $1.0 million, $0.2 million, and $6.5 million for these purposes, respectively.
At December 31, 2022, the Company had commitments to extend an additional $1.8 million for these purposes provided certain conditions are met by its franchisees.
7 unchanged sentences
The Company may from time to time designate one or more wholly owned subsidiaries of the Company as additional borrowers under the Restated Credit Agreement, subject to the consent of the lenders and certain customary conditions.
−Removed: On July 2, 2019, the Company exercised a one-year extension option on the Restated Credit Agreement, extending the maturity date from August 20, 2023 to August 20, 2024.
−Removed: On August 12, 2020, the Company exercised an additional one-year extension on the Restated Credit Agreement for $525 million of the $600 million total capacity in exchange for a fee of $0.3 million.
−Removed: The extended maturity date is August 20, 2025.
−Removed: On August 11, 2021, the Company executed a one-year extension on the senior unsecured credit facility for $540 million of the $600 million total capacity in exchange for fees of $0.4 million.
−Removed: The extended maturity date is August 20, 2026.
+Added: The Company has exercised multiple one-year extension options on the Restated Credit Agreement in exchange for fees.
+Added: As a result of extensions in 2021 and 2022, the full $600 million senior unsecured credit facility matures on August 20, 2026.
There are no subsidiary guarantors under the Restated Credit Agreement.
5 unchanged sentences
The Restated Credit Agreement provides that the Company may elect to have borrowings bear interest at a rate equal to (i) LIBOR plus a margin ranging from 90 to 150 basis points or (ii) a base rate plus a margin ranging from 0 to 50 basis points, in each case, with the margin determined according to the Company’s senior unsecured long-term debt rating or under circumstances as set forth in the Restated Credit Agreement, the Company’s total leverage ratio in the event that such total leverage ratio is less than 2.5 to 1.0.
−Removed: On August 11, 2021, we amended the Restated Credit Agreement to provide customary provisions for the replacement of LIBOR with an alternative benchmark rate if it is publicly announced that the administrator of LIBOR has ceased or will cease to provide LIBOR, or if it is publicly announced by the applicable regulatory supervisor that LIBOR is no longer representative.
The Restated Credit Agreement requires the Company to pay a fee on the total commitments, calculated on the basis of the actual daily amount of the commitments (regardless of usage) times a percentage per annum ranging from 0.075% to 0.25% (depending on the Company’s senior unsecured long-term debt rating or under circumstances as set forth in the Restated Credit Agreement, the Company’s total leverage ratio in the event that such total leverage ratio is less than 2.5 to 1.0).
5 unchanged sentences
At December 31, 2022, the Company maintained a total leverage ratio of 2.13x and was in compliance with all financial covenants under the Restated Credit Agreement.
−Removed: In the third quarter of 2020, the Company utilized excess cash on hand to pay down the senior unsecured revolving credit facility balance in full;
−Removed: the facility remains undrawn as of December 31, 2020 and December 31, 2021.
+Added: In the third quarter of 2020, the Company utilized excess cash on hand to pay down the senior unsecured revolving credit facility balance in full and remained undrawn as of December 31, 2020 and 2021.
+Added: On August 11, 2022, to fund the Radisson Hotels Americas acquisition, the Company drew $175 million on the senior unsecured revolving credit facility and funded the remainder with cash on hand.
+Added: At December 31, 2022, there is approximately $360 million outstanding on the senior unsecured revolving credit facility.
+Added: On February 14, 2023, the Company entered into a Third Amendment to the Amended and Restated Senior Unsecured Credit Agreement.
+Added: The Amendment provides, among other things, for (i) an increase in the aggregate amount of commitments under the Revolver by $250 million (the “Increased Commitments”) to an aggregate amount of $850 million and (ii) the replacement of the interest reference rate for U.S.
+Added: dollar-denominated borrowings under the Revolver from LIBOR to an adjusted Secured Overnight Financing Rate.
+Added: The pricing and other terms applicable to the Increased Commitments are the same as those applicable to the existing revolving loan commitments that were in effect prior to the Amendment.
+Added: Except as amended by the Amendment, the remaining terms of the unsecured credit facility remain in full force and effect.
Debt issuance costs incurred in connection with the Restated Credit Agreement are amortized on a straight-line basis, which is not materially different than the effective interest method, through maturity.
5 unchanged sentences
The proceeds of the Term Loan were utilized to reduce borrowings on the Company’s senior unsecured revolving credit facility.
−Removed: The Term Loan was subsequently paid off in full in July 2020 utilizing the proceeds of the 2020 Senior Notes described
+Added: The Term Loan was subsequently paid off in full in July 2020 utilizing the proceeds of the 2020 Senior Notes described below.
In combination with the Tender Offer, the Company recorded a loss on extinguishment of debt of $16.0 million in the third quarter of 2020.
Senior Unsecured Notes Due 2031
−Removed: On July 23, 2020, the Company issued unsecured senior notes in the principal amount of $450 million (the "2020 Senior Notes") bearing a coupon of 3.70% with an effective rate of 3.86%.
+Added: On July 23, 2020, the Company issued unsecured senior notes in the principal amount of $450 million (the "2020 Senior Notes") bearing a coupon of 3.70%.
The 2020 Senior Notes will mature on January 15, 2031, with interest to be paid semi-annually on January 15th and July 15th beginning January 15, 2021.
−Removed: The Company used the net proceeds of the 2020 Senior Notes, after deducting underwriting discounts, commissions and other offering expenses, to repay the Term Loan in full and fund the purchase price of the 2012 Senior Notes tendered and accepted by the Company for purchase pursuant to the tender offer (discussed below under "Senior Unsecured Notes due 2022").
+Added: The Company used the net proceeds of the 2020 Senior Notes, after deducting underwriting discounts, commissions and other offering expenses, to repay in full the $250 million Term Loan entered in April 2020 and fund the purchase price of the 2012 Senior Notes tendered and accepted by the Company for purchase pursuant to the tender offer (discussed below under "Senior Unsecured Notes due 2022").
Interest on the 2020 Senior Notes is payable semi-annually on January 15th and July 15th of each year, commencing on January 15, 2021.
14 unchanged sentences
On June 27, 2012 the Company issued unsecured senior notes with a principal amount of $400 million (the "2012 Senior Notes") at par, bearing a coupon of 5.75% with an effective rate of 6.00%.
−Removed: The 2012 Senior Notes will mature on July 1, 2022, with interest to be paid semi-annually on January 1 st and July 1 st .
The Company utilized the net proceeds of this offering, after deducting underwriting discounts, commissions and other offering expenses, together with borrowings under the Company's senior unsecured senior credit facility, to pay a special cash dividend to stockholders totaling approximately $600.7 million paid on August 23, 2012.
−Removed: The Company may redeem the 2012 Senior Notes at its option at a redemption price equal to the greater of (a) 100% of the principal amount of the notes to be redeemed and (b) the sum of the present values of the remaining scheduled principal and interest payments from the redemption date to the date of maturity discounted to the redemption date on a semi-annual basis at the Treasury Rate, plus 50 basis points.
−Removed: Additionally, at the option of the holders of the 2012 Senior Notes, the Company may be required to repurchase all or a portion of the 2012 Senior Notes of a holder upon the occurrence of a change of control event at a price equal to 101% of their aggregate principal amount, plus accrued and unpaid interest, to the date of repurchase.
−Removed: On July 9, 2020, the Company commenced the tender offer (the "Tender Offer") to purchase up to $160.0 million aggregate principal amount of the Company’s 2012 Senior Notes subject to increase or decrease.
+Added: On July 9, 2020, the Company commenced the tender offer (the "Tender Offer") to purchase up to $160.0 million aggregate principal amount of the 2012 Senior Notes subject to increase or decrease.
The Tender Offer was subsequently upsized to $180.0 million aggregate principal amount of the 2012 Notes.
2 unchanged sentences
In combination with the early pay off of the Term Loan, the Company recorded a loss on extinguishment of debt of $16.0 million in the third quarter of 2020.
−Removed: The Company's 2012 Senior Notes mature on July 1, 2022 with a principal maturity, net of unamortized deferred issuance costs, of $216.4 million.
+Added: The 2012 Senior Notes matured on July 1, 2022.
+Added: The outstanding principal of $216.6 million was repaid at maturity.
Construction Loan
15 unchanged sentences
If the Company fails to meet an annual performance condition, the Company may be required to repay a portion or all of the advances including accrued interest by April 30 th following the measurement date.
−Removed: Any outstanding advances at the expiration in 2023 of the Company's current ten year corporate headquarters lease in 2023 will be forgiven in full.
−Removed: The advances will be included in long-term debt in the Company's consolidated balance sheets until the Company determines that the future performance conditions will be met over the entire term of the agreement and the Company will not be required to repay the advances.
+Added: Any outstanding advances at the expiration in 2023 of the Company's current ten year corporate headquarters lease will be forgiven in full.
+Added: The advances will be included in debt in the Company's consolidated balance sheets until the Company determines that the future performance conditions will be met over the entire term of the agreement and the Company will not be required to repay the advances.
The Company accrues interest on the portion of the advances that it expects to repay.
The Company was in compliance with all applicable current performance conditions as of December 31, 2022.
−Removed: Transfer of Interest
−Removed: In a prior year, the Company transferred $24.4 million of a $50.1 million outstanding note receivable with a maturity date of November 30, 2019 to a third party.
−Removed: In February 2019, the Company mutually agreed with the counter party to repurchase the $24.4 million previously transferred prior to the maturity date.
−Removed: At both December 31, 2021 and 2020, there were no remaining balances on the consolidated balance sheets pursuant to this transfer.
+Added: Acquired Debt and Swap Derivative Asset
+Added: On August 11, 2022, in connection with the Radisson Hotels Americas acquisition, the Company also acquired three owned hotel properties, one of which had an encumbered mortgage loan with a mortgage principal in the amount of $53.5 million with an original maturity date of August 7, 2024.
+Added: In addition, the mortgage had an associated interest rate cap agreement (“Interest Swap”) with an effective date of July 30,2021 through August 6, 2024.
+Added: On August 12, 2022, at Choice’s election, cash on hand was wired to pay off the outstanding loan principal, outstanding interest, and certain prepayment, exit and related fees in the amount of $56.0 million.
+Added: At the same time, several of the loan related escrows were released in the amount of $10.4 million.
+Added: On August 16, 2022, the Interest Swap derivative was terminated, which resulted in a payment to Choice in the amount of $1.9 million.
In April 2020, in light of uncertainty resulting from the COVID-19 pandemic, we suspended future, undeclared dividends.
−Removed: Given our strong liquidity and credit profile, on May 7, 2021 the Company's board of directors declared a quarterly cash dividend of $0.225 per share of common stock and approved resumption of the share repurchase program.
−Removed: On September 9, 2021, the Company's board of directors declared a quarterly cash dividend of $0.225 per share of common stock.
−Removed: Additionally, on December 6, 2021, the Company's board of directors approved a 6% increase in the quarterly cash dividend and declared a quarterly cash dividend of $0.2375 per share of common stock, which was paid in January 2022.
−Removed: The declaration of future dividends is subject to the discretion of our board of directors.
−Removed: During the year ended December 31, 2021, the Company paid $25.0 million in cash dividends.
+Added: Given our strong liquidity and credit profile, in May 2021, the Company resumed the payment of quarterly dividends and declared a quarterly cash dividend of $0.225 per share of common stock, subject to future declarations by our Board of Directors.
+Added: On December 6, 2021,the Company's Board of Directors approved a 6% increase in the quarterly cash dividend and declared a quarterly cash dividend of $0.2375 per share of common stock.
+Added: During the year ended December 31, 2022, the Company declared cash dividends at a quarterly rate of $0.2375 per share of common stock, and paid $52.5 million in cash dividends.
We expect that cash dividends will continue to be paid in the future, subject to declaration by our Board of Directors, future business performance, economic conditions, changes in tax regulations and other matters.
1 unchanged sentence
The Company may not declare or make any payment if there is an existing event of default under the Restated Credit Agreement or if the payment would create an event of default.
−Removed: Share Repurchases
−Removed: In 1998, we instituted a share repurchase program which has generated substantial value for our shareholders.
+Added: Share Repurchases & Redemptions
+Added: In 1998, we instituted a share repurchase program.
+Added: The Company may purchase stock under the share repurchase program to return excess capital to its shareholders.
+Added: Treasury stock activity is recorded at cost in the consolidated balance sheets.
In April 2020 in light of uncertainty resulting from the COVID-19 pandemic, we suspended activity under our share repurchase program.
−Removed: On May 7, 2021, the Company's board of directors approved resumption of the share repurchase program.
−Removed: During the year ended December 31, 2021, the Company repurchased 57,754 shares of its common stock under the share repurchase program at a total cost of $7.3 million.
+Added: In May 2021, the Company's Board of Directors approved resumption of the share repurchase program.
+Added: During the year ended December 31, 2022, the Company repurchased 3.7 million shares of its common stock under the share repurchase program at a total cost of $429.4 million.
In total through December 31, 2022, the Company repurchased 55.4 million shares of its common stock (including 33.0 million prior to the two-for-one stock split effected in October 2005) under the program at a total cost of $1.9 billion.
Considering the effect of the two-for-one stock split, the Company has repurchased 88.4 million shares at an average price of $21.76 per share.
+Added: On September 14, 2022, the Board of Directors approved an increase in the number of shares authorized under its share repurchase program by five million shares.
As of December 31, 2022, the Company had 4.7 million shares remaining under the current share repurchase authorization.
−Removed: During the year ended December 31, 2021, the Company redeemed 54,441 shares of common stock at a total cost of $6.0 million from employees to satisfy the option exercise price and statutory minimum tax-withholding requirements related to the exercising of stock options and vesting of PVRSUs and restricted stock grants.
+Added: During the year ended December 31, 2022, the Company redeemed 36.1 thousand shares of common stock at a total cost of $5.4 million from employees to satisfy the option exercise price and statutory minimum tax-withholding requirements related to the exercising of stock options and vesting of PVRSUs and restricted stock grants.
These redemptions were outside the share repurchase program.
11 unchanged sentences
(1) Commitments for leases not yet commenced represents future fixed payments, excluding anticipated tenant allowances, under leases that are not included in the consolidated balance sheet.
−Removed: For future lease payments related to leases that have commenced and are included in the consolidated balance sheet, refer to Note 19 in our consolidated financial statements.
+Added: For future lease payments related to leases that have commenced and are included in the consolidated balance sheet, refer to Note 19 to our consolidated financial statements.
The total amount of unrecognized tax positions and the related interest and penalties totaled $12.2 million at December 31, 2022.
6 unchanged sentences
Revenue Recognition
+Added: Franchise agreements
Revenues are primarily derived from franchise agreements with third-party hotel owners.
3 unchanged sentences
These fees are billed and collected monthly and revenues are recognized in the same period that the underlying gross room revenues are earned by the Company’s franchisees.
−Removed: • Initial franchise and relicensing fees .
−Removed: Initial and relicensing fees are charged when (i) new hotels enter the franchise system;
+Added: Royalty fees are recognized within royalty, licensing and management fees revenue in the consolidated statements of income.
+Added: • Initial franchise fees .
+Added: Initial franchise fees are charged when (i) new hotels enter the franchise system;
(ii) there is a change of ownership;
2 unchanged sentences
The enforceable period is the period from hotel opening to the first point the franchisee or the Company can terminate the franchise agreement without incurring a significant penalty.
−Removed: Deferred revenues from initial and relicensing fees will typically be recognized over a five to ten-year period, unless the franchise agreement is terminated and the hotel exits the franchise system whereby remaining deferred amounts will be recognized to revenue in the period of termination.
+Added: Deferred revenues from initial and relicensing fees are typically recognized over a five to ten-year period, unless the franchise agreement is terminated and the hotel exits the franchise system whereby remaining deferred amounts will be recognized to revenue in the period of termination.
• Other revenue.
3 unchanged sentences
The Company is obligated to use these marketing and reservation system fees to provide marketing and reservation services such as advertising, providing a centralized reservation and property management system, providing reservation and revenue management services, and performing certain franchise services to support the operation of the overall franchise system.
+Added: The marketing and reservation system revenues are recognized within other revenues from franchised and managed properties in the consolidated statements of income.
These services are comprised of multiple fees including the following:
5 unchanged sentences
Marketing and reservation system expenses are those expenses incurred to facilitate the delivery of marketing and reservation system services, including direct expenses and an allocation of costs for certain administrative activities required to carry out marketing and reservation services.
−Removed: Marketing and reservation system expenses are recognized as services are incurred or goods are received, and as such may not equal marketing and reservation system revenues in a specific period but are expected to equal revenues earned from franchisees over time.
+Added: Marketing and reservation system expenses are recognized as services are incurred or goods are received within other expenses from franchised and managed properties in the consolidated statements of income, and as such may not equal marketing and reservation system revenues in a specific period but are expected to equal revenues earned from franchisees over time.
The Company’s franchise agreements provide the Company the right to advance monies to the franchise system when the needs of the system surpass the balances currently available and recover such advances in future periods through additional fee assessments or reduced spending.
−Removed: During the years ended December 31, 2021, marketing and reservation system revenues exceeded expenses by $83.9 million.
−Removed: The surplus generated during the year ended December 31, 2021 is a result of increased marketing and reservation fees generated and disciplined management of discretionary expenditures.
Sales commissions earned by Company personnel upon execution of a franchise agreement (“franchise sales commissions”) meet the requirement to be capitalized as an incremental cost of obtaining a contract with a customer.
−Removed: Capitalized franchise sales commission are amortized on a straight-line basis over the estimated benefit period of the
−Removed: arrangement, unless the franchise agreement is terminated and the hotel exits the system whereby remaining capitalized amounts will be expensed in the period of termination.
+Added: Capitalized franchise sales commission are amortized on a straight-line basis over the estimated benefit period of the arrangement, unless the franchise agreement is terminated and the hotel exits the system whereby remaining capitalized amounts will be expensed in the period of termination, and are recorded within SG&A expenses.
We make certain payments to customers as an incentive to enter into new franchise agreements (“franchise agreement acquisition cost”).
We capitalize such payments as intangible assets.
−Removed: These intangibles are amortized on a straight-line basis over the estimated benefit period of the arrangement as an offset to royalty fees and marketing and reservation system fees.
−Removed: Impairments from adverse franchise agreement activity, including terminations and significant delinquencies in construction or invoice payments, are recorded within the SG&A expenses and marketing and reservation system expenses.
+Added: These intangibles are amortized on a straight-line basis over the estimated benefit period of the arrangement as an offset to royalty, licensing and management fees and other revenues from franchised and managed properties.
+Added: Impairments from adverse franchise agreement activity, including terminations and significant delinquencies in construction or invoice payments, are recorded within the SG&A expenses and other expenses from franchised and managed properties.
The Company also earns revenues on contracts incidental to the support of operations for franchised hotels, including purchasing operations:
5 unchanged sentences
Variable consideration is recognized in the period when sales to franchisees or guests from vendors are known or cash payment has been remitted.
−Removed: Qualified vendor revenues are recognized within Procurement services revenue.
−Removed: The Company owned six hotels at December 31, 2021 and five hotels at December 31, 2020, from which the Company derives revenues.
+Added: Qualified vendor revenues are recognized within procurement services revenue in the consolidated statements of income.
+Added: Managed Hotels
+Added: The Company manages 13 legacy Radisson Hotels Americas hotels (inclusive of the three Radisson branded owned hotels).
+Added: The management agreements provide for use of the Company's marks and hotel management services, include providing day-to-day management services in the operation of the hotels for the hotel owners.
+Added: Fees generated from management agrees are recognized to revenue over time as hotel owners pay for access to these services for the duration of the management agreement, and include base and incentive management fees.
+Added: Base management fees are generally based on a percentage of the hotel's monthly gross revenue and invoiced and collected monthly.
+Added: Incentive management fees are generally based on a percentage of the hotel's operating profits as measured and invoiced on an annual basis.
+Added: Base and incentive management fee revenues are recognized within royalties, licensing and management fees in the consolidated statements of income.
+Added: Refer to Note 23 regarding discussion of management agreement guarantees.
+Added: The Company's management agreements include contemplation of amounts that are contractually reimbursed to us by property owners, either directly or indirectly, relating to certain costs and expenses paid by us in support of the operations of these properties.
+Added: These reimbursements include payroll and related costs and certain other operating costs of the managed properties' operations, which are reimbursed to us by the property owners as expenses are incurred.
+Added: Revenue related to these direct reimbursements is recognized based on the amount of expenses incurred by the Company, which are presented as other expenses from managed and franchised properties in our consolidated statements of operations, that are then reimbursed to us by the property owner typically on a monthly basis, which results in no net effect on operating income or net income.
+Added: Revenues related to marketing and reservations are recognized over time and are intended to reimburse us, indirectly, for expenses incurred in the execution of marketing and reservation services.
+Added: These managed revenues are presented within other revenues from managed and franchised properties in our consolidated statements of operations.
+Added: The Company owned nine hotels at December 31, 2022 and six hotels at December 31, 2021, from which the Company derives revenues.
As a hotel owner, the Company has performance obligations to provide accommodations to hotel guests and in return the Company earns a nightly fee for an agreed upon period that is generally payable at the time the hotel guest checks out of the hotel.
2 unchanged sentences
These primarily consist of food and beverage, incidentals and parking fees.
−Removed: Choice Privileges Loyalty Program
−Removed: Choice Privileges is the Company’s frequent guest loyalty program, which enables members to earn points based on their spending levels with the Company’s franchisees.
+Added: Guest Loyalty Programs
+Added: Choice Privileges and Radisson Rewards Americas are the Company’s frequent guest loyalty programs, which enable members to earn points based on their spending levels with the Company’s franchisees.
The points, which the Company accumulates and tracks on the members’ behalf, may be redeemed for free accommodations or other benefits (e.g., gift cards to participating retailers).
6 unchanged sentences
The estimated value of future redemptions is reflected in current and non-current liability for guest loyalty program in our consolidated balance sheets.
−Removed: The liability for guest loyalty program is developed based on an estimate of the eventual redemption rates, including the on-going impacts anticipated from the COVID-19 pandemic on future redemption behavior, and point values using various actuarial methods.
+Added: The liability for guest loyalty programs is developed based on an estimate of the eventual redemption rates and point values using various actuarial methods.
These significant judgments determine the required point liability attributable to outstanding points, which is relieved as redemption costs are processed.
1 unchanged sentence
The anticipated redemption pattern of the points is the basis for current and non-current designation of each liability.
−Removed: Loyalty program point redemption revenues are recognized within marketing and reservation system revenue in the consolidated statements of income.
+Added: Loyalty program point redemption revenues are recognized within other revenues from franchised and managed properties in the consolidated statements of income.
Changes in the estimates used in developing the breakage rate or other expected future program operations could result in material changes to the liability for guest loyalty program and deferred revenues.
5 unchanged sentences
Allocation of fixed and variable consideration to the performance obligations is based on standalone selling price as estimated based on market and income methods, which represent significant judgments.
−Removed: The amounts allocated to brand intellectual property are recognized on a gross basis over time using the output measure of time elapsed, primarily within Procurement services revenue.
−Removed: The amounts allocated to material rights for free or discounted goods or services to hotel guests are recognized to revenue as points are redeemed including an estimate of breakage, primarily within Marketing and reservation system revenue.
+Added: The amounts allocated to brand intellectual property are recognized on a gross basis over time using the output measure of time elapsed, primarily within royalty, licensing and management fees and procurement services revenue.
+Added: The amounts allocated to material rights for free or discounted goods or services to hotel guests are recognized to revenue as points are redeemed including an estimate of breakage, primarily within other revenues from franchised and managed properties.
Valuation of Long-Lived Assets, Intangibles, and Goodwill
7 unchanged sentences
The Company did not identify any indicators of impairment of long-lived assets from the Hotel Franchising reporting unit during the years ended December 31, 2022, 2021 and 2020, other than impairments on franchise sales commission assets and franchise agreement acquisition cost intangibles primarily resulting from terminations of franchisees from the Choice system or significant delinquencies in construction or invoice payments.
−Removed: During 2019, the Company recognized impairments of long-lived assets attributable to the SaaS for vacation rentals reporting unit, as discussed further below.
During 2020, the Company recognized impairments attributable to the long-lived assets of a commercial office building and a real estate parcel.
• On December 30, 2014, a court awarded the Company title to a commercial office building as settlement of a portion of an outstanding loan receivable for which the building was pledged as collateral.
−Removed: At the time of settlement, a single tenant fully occupied the building.
−Removed: The initial lease term expiration was in December 2020 and the tenant had extension options for up to 30 years.
−Removed: Prior to initial lease term expiration, the tenant provided notice that the lease renewal options would not be exercised.
+Added: Prior to initial lease term expiration of the building's single tenant, the tenant provided notice that the lease renewal options would not be exercised.
Management identified this as a triggering event requiring the interim reevaluation of the commercial office building's long-lived assets.
−Removed: The long-lived asset group had a carrying value prior to recoverability evaluation of $11.1 million in property and equipment and $0.2 million in intangible assets as of September 30, 2020.
During the third quarter of 2020, recoverability of the long-lived asset group was assessed based on undiscounted expected cash flows of the asset group aligned with management’s present long-term strategy for the building, and management concluded the undiscounted expected cash flows were less than the carrying amount of the asset group.
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The real estate parcel represents a long-lived asset group with a carrying value prior to recoverability evaluation of $29.5 million in other assets as of December 31, 2020.
−Removed: Based on the impact of the COVID-19 pandemic, the Company’s assessment of the highest and best use of the real estate parcel changed and therefore, the recoverability of the long-lived asset group was re-assessed based on undiscounted
−Removed: expected cash flows of the asset group from a sale, which were less than the carrying value of the asset group.
+Added: Based on the impact of the COVID-19 pandemic, the Company’s assessment of the highest and best use of the real estate parcel changed and therefore, the recoverability of the long-lived asset group was re-assessed based on undiscounted expected cash flows of the asset group from a sale, which were less than the carrying value of the asset group.
An impairment charge was recorded for the excess of the carrying value over the fair value of the asset group.
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As such, no impairment was recorded and a quantitative test was not required.
−Removed: Historically, goodwill was partially allocated to the SaaS for vacation rentals reporting unit.
−Removed: The Company performed the quantitative test for the SaaS for vacation rentals reporting unit during prior periods, including the first quarter of 2019, determining that the carrying value of the reporting unit exceeded the fair value.
−Removed: As a result, the Company recognized a goodwill impairment of $3.1 million in the first quarter of 2019.
−Removed: In addition, during the first quarter of 2019, the Company recognized a long-lived asset group impairment charge for the full amount of SaaS for vacation rentals long-lived assets of $7.3 million.
−Removed: To estimate the fair value of the SaaS for vacation rentals long-lived asset group, the Company utilized a combination of income and market approach valuation methods via performance of a discounted cash flow analysis and quoted market prices.
−Removed: In performing the quantitative tests in the first quarter of 2019, the Company determined the fair value of the SaaS for vacation rentals reporting unit utilizing a combination of market and income approach valuation methods via performance of a DCF analysis and quoted market prices.
−Removed: There were significant judgments and assumptions used in the DCF and market-based models including the amount and timing of expected future cash flows, long-term growth rates, discount rate, and our selection of guideline company revenue multiples.
−Removed: The cash flows employed in the DCF analysis for the SaaS for vacation rentals reporting unit reflect expectations based upon recent operating performance and projected future performance.
−Removed: Discount rate assumptions were based on an assessment of the risk inherent in the future cash flows of the respective reporting unit and market conditions.
−Removed: The SaaS for vacation rentals reporting unit was sold during the second quarter of 2019, resulting in the write-off of the remaining goodwill and recognition of a loss on sale.
−Removed: Other than the SaaS for vacation rentals reporting unit, the Company did not record any impairment of goodwill or intangible assets with indefinite lives during the years ended December 31, 2021, 2020 and 2019.
Valuation of Investments in Affiliates
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Fair value is based upon internally-developed discounted cash flow models, third-party appraisals, and if appropriate, current estimated net sales proceeds from pending offers.
+Added: There are judgments and assumptions in each of these fair value determinations, including our selection of comparable market transactions, the amount and timing of expected future cash flows, long-term growth rates, and sales capitalization rates.
+Added: These nonrecurring fair value measurements are classified as level three of the fair value measurement hierarchy, as the Company utilized unobservable inputs which are significant to the overall fair value.
If the estimated fair value is less than carrying value, management uses its judgment to determine if the decline in value is other-than-temporary.
−Removed: In determining this, the Company considers factors including, but not limited to, the length of time and extent of the decline, loss of values as a percentage of the cost, financial condition and near-term financial projections, the Company's intent and ability to recover the lost value, and current economic conditions.
−Removed: in value that are deemed other-than-temporary, impairments are charged to earnings.
+Added: determining this, the Company considers factors including, but not limited to, the length of time and extent of the decline, loss of values as a percentage of the cost, financial condition and near-term financial projections, the Company's intent and ability to recover the lost value, and current economic conditions.
+Added: For declines in value that are deemed other-than-temporary, impairment charges are recorded to earnings.
During the years ended December 31, 2022 and 2021, the Company recognized impairment charges of $0.2 million and $19.3 million, respectively, related to multiple investments in affiliates accounted for under the equity method.
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The Company records provisions for credit losses on accounts receivable in SG&A expenses and marketing and reservation system expenses in the accompanying consolidated statements of income.
−Removed: When the Company determines that an account is not collectible, the account is written-off to the associated allowance for credit losses.
+Added: When the Company determines that a trade or note receivable is not collectible, the account is written-off to the associated allowance for credit losses.
Historically, the Company has considered its credit risk associated with accounts receivables to be partially mitigated due to the dispersion of these receivables across a large number of geographically diverse franchisees.
−Removed: During the year ended December 31, 2020, the Company recorded provisions for credit losses on accounts receivable of $15.6 million in SG&A expenses and $26.0 million in marketing and reservation system expenses, in consideration of the economic and credit conditions resulting from the COVID-19 pandemic and estimates of other expected credit losses.
−Removed: During the year ended December 31, 2021, the Company recorded reversals of provisions for credit losses on accounts receivable of $4.4 million in SG&A expenses and $7.3 million in marketing and reservation system expenses, after experiencing improved collections and economic and credit conditions.
+Added: During the year ended December 31, 2022, the Company recorded provisions for credit losses on accounts receivable of $0.4 million in SG&A expenses and $1.4 million in marketing and reservation system expenses.
+Added: During the year ended December 31, 2021, the Company recorded reversals of provisions for credit losses on accounts receivable of $4.4 million in SG&A expenses and $7.3 million in marketing and reservation system expenses, after considering improved collection patterns and economic and credit conditions.
Income taxes are recorded using the asset and liability method of accounting for income taxes.
Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
−Removed: A valuation allowance is provided for deferred tax assets if it is more likely than not such assets will be unrealized.
−Removed: Historically, deferred United States income taxes have not been recorded for temporary
−Removed: differences related to investments in certain foreign subsidiaries and corporate affiliates.
+Added: A valuation allowance is provided for deferred tax assets if it is more likely than
+Added: not such assets will be unrealized.
+Added: Historically, deferred United States income taxes have not been recorded for temporary differences related to investments in certain foreign subsidiaries and corporate affiliates.
The temporary differences consisted primarily of undistributed earnings that are considered permanently reinvested in operations outside the United States.
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Nonetheless, the Company will continue to assert that any other outside basis difference of the foreign subsidiaries will be permanently (or indefinitely) reinvested outside of the U.S.
−Removed: Consequently, the Company has not recorded any additional deferred taxes for this item in 2021.
+Added: Consequently, the Company will not record any additional deferred taxes for this item in 2022.
With respect to uncertain income tax positions, a tax liability is recorded in full when management determines that the position does not meet the more likely than not threshold of being sustained on examination.
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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.