Choice Hotels Reports First Quarter 2009 Diluted EPS of $0.27, Domestic Unit Growth of 5.7%

Franchising revenues declined 14%

Choice Hotels International, Inc., (NYSE:CHH) today reported the following highlights for first quarter 2009:

* Diluted earnings per share (“EPS”) for first quarter 2009 were $0.27, compared to $0.29 for the same period of the prior year.

* Earnings before interest, taxes and depreciation (“EBITDA”) were $29.9 million for the three months ended March 31, 2009, compared to $36.1 million for the same period of 2008. Operating income for the three months ended March 31, 2009 was $27.8 million compared to $34.1 million for the same period of 2008.

* Domestic unit and room growth increased 5.7 percent and 5.6 percent, respectively, from March 31, 2008.

* Domestic system-wide revenue per available room (“RevPAR”) declined 10.3% for the first quarter of 2009 compared to the same period of 2008.

* The effective royalty rate increased 8 basis points to 4.26% for the three months ended March 31, 2009 compared to 4.18% for the same period of the prior year.

* Franchising revenues declined 14% from $59.4 million for the three months ended March 31, 2008 compared to $51.0 million for the same period of 2009. Total revenues for the three months ended March 31, 2009 declined 11% compared to the same period of 2008.

* New domestic hotel franchise contracts for the three months ended March 31, 2009 declined to 60 compared to 133 contracts executed in the same period of the prior year.

* The number of domestic hotels under construction, awaiting conversion or approved for development declined 9% from March 31, 2008 to 896 hotels representing 70,381 rooms, the worldwide pipeline declined 7% from March 31, 2008 to 1,007 hotels representing 79,495 rooms.

“While we remain in the midst of an incredibly difficult environment, we once again were able to achieve significant domestic system growth on account of our range of value-oriented brands that appeal to both developers and consumers,” said Stephen P. Joyce, president and chief executive officer. “However, RevPAR continues to deteriorate and the credit markets remain challenging. These macro-level factors have impacted our domestic franchise development efforts and our relicensing transactions. In this current downturn, we are working closely with our franchisees and providing them a wealth of tools and resources to enhance their operations. We are also aggressively and intelligently investing in marketing and reservations delivery efforts to drive guests to Choice-brand hotels.”

Outlook for 2009

The uncertainty around the current economic environment and credit market conditions and their impact on travel patterns and hotel development activities makes it difficult to predict future results, particularly as it relates to underlying assumptions for RevPAR, new hotel franchise and relicensing sales and interest and investment income and expense.

The company’s second quarter 2009 diluted EPS is expected to be $0.41. The company expects full-year of 2009 diluted EPS of $1.68. EBITDA for the full-year of 2009 are expected to be approximately $175.5 million. These estimates include the following assumptions:

* The company expects net domestic unit growth of approximately 3.0% in 2009,

* RevPAR is expected to decline approximately 16% for the second quarter of 2009 and decline approximately 11% for the full-year of 2009,

* The effective royalty rate is expected to increase 3 basis points for the full-year of 2009,

* All figures assume the existing share count and an effective tax rate of 36.3% for the second quarter and full-year of 2009.

Use of Free Cash Flow

The company has consistently used its free cash flow (cash flow from operations less capital expenditures) to return value to shareholders, primarily through share repurchases and dividends.

For the three months ended March 31, 2009 the company paid $11.2 million of cash dividends to shareholders. The current quarterly dividend rate per common share is $0.185, subject to declaration by our board of directors.

For the three months ended March 31, 2009, the company purchased approximately 0.7 million shares of its common stock at an average price of $26.82 for a total cost of $18.0 million under the share repurchase program and has authorization to purchase up to an additional 5.3 million shares under this program. We expect to continue making repurchases in the open market and through privately negotiated transactions, subject to market and other conditions. No minimum number of share repurchases has been fixed. Since Choice announced its stock repurchase program on June 25, 1998, the company has repurchased 41.5 million shares of its common stock for a total cost of $968.6 million through March 31, 2009. Considering the effect of a two-for-one stock split in October 2005, the company has repurchased 74.4 million shares under the share repurchase program at an average price of $13.01 per share.

Our Board has authorized us to enter into programs which permit us to offer financing, investment and guaranty support to qualified franchisees to incent multi-unit franchise development in top markets. We expect to opportunistically deploy this capital over the next several years. Our annual investment in these programs is dependent on market and other conditions. Notwithstanding these programs, the company expects to continue to return value to its shareholders through a combination of share repurchases and dividends, subject to market and other conditions.

Impact of the Adoption of New Accounting Pronouncements on Earnings Per Share

In June 2008, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position Emerging Issues Task Force No. 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities” (“FSP EITF 03-6-1”). FSP EITF 03-6-1 clarified that all share-based payment awards that contain rights to non-forfeitable dividends participate in undistributed earnings with common shareholders. Therefore, awards of this nature are considered participating securities and the two-class method of computing basic and diluted earnings per share must be applied rather than the treasury stock method. FSP EITF 03-6-1 is effective for fiscal years beginning after December 15, 2008. In addition, once effective, all prior period earnings per share data presented must be adjusted retrospectively to conform to the provisions of FSP EITF 03-6-1.

The Company’s outstanding unvested restricted stock awards contain rights to non-forfeitable dividends and as a result, the Company applied this guidance in the first quarter of 2009. The two-class method of calculating earnings per share is more dilutive to both basic and diluted shares outstanding than the previously utilized treasury stock method. In accordance with FSP EITF 03-6-1, the Company has also retrospectively adjusted its basic and diluted shares outstanding for the three months ended March 31, 2008 under the two-class method which resulted in a reduction of the Company’s diluted earnings per share from $0.30 to $0.29 per share.