Steve Joyce - President and CEO Dave White - CFO

Steve Kent - Goldman Sachs Shaun Kelly - Bank of America Anthony Powell - Barclays Robin Farley - UBS Joe Greff - JP Morgan Thomas Allen - Morgan Stanley

Ladies and gentlemen, thank you for standing by. Good morning and welcome to Choice Hotels International Third Quarter 2015 Earnings Conference Call. At this time, all lines are in a listen-only mode. Later, there will be a question-and-answer session and further instructions will be given at that time. As a reminder, today's call is being recorded. During the course of this conference call, certain predictive and forward-looking statements will be used to assist you in understanding the company and its results, which constitute forward-looking statements under the Safe Harbor provision of the Securities Reform Act of 1995. These forward-looking statements generally can be identified by phrases such as Choice or its management's beliefs, expects, anticipates, foresees, forecasts, estimates, or other words or phrases of similar imports. Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. Please consult the company's Form 10-K for the year ended December 31, 2014 and other SEC filings for information about important risk factors affecting the company that you should consider. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. We caution you, do not place undue reliance on forward-looking statements, which reflect our analysis only to speak only as of today's date. We undertake no obligation to publicly update our forward-looking statements to reflect subsequent events or circumstances. You can find a reconciliation of our non-GAAP financial measures referred to our remarks as part of our third quarter 2015 earnings press release, which is posted on our website at choicehotels.com under the Investor Information section. With that being said, I would like to introduce Steve Joyce, President and Chief Executive Officer of Choice Hotels International, Incorporated. Please go ahead, sir.

Thank you, good morning, and welcome to the Choice Hotels earnings conference call, joining me is always is Dave White, our CFO. This morning we're going to update you on our performance for the third quarter of 2015 and as you’ve probably read already the results this quarter are very strong. Several factors contributed to the double-digit percentage growth in EBITDA for our lodging business this quarter. Domestic system-wide RevPAR increased nearly 6% in the third quarter. Our RevPAR growth was driven by occupancy and average daily rate increase of 120 basis points and 4% respectively. Our domestic RevPAR growth combined with the growth in the number of the hotels in our system and an increase in our average effective royalty rate resulted in a 7% increase in our domestic royalties. We achieved a 10% increase in EBITDA from franchising activities as a result of the domestic royalty growth, I just described combined with strong development results and disciplined cost management. Let's talk a little bit about development. We executed 129 new domestic hotel franchise agreements for the third quarter of 2015, which is a 14% increase over the prior year. The Company's new construction pipeline of domestic hotels under construction or approved for development increased 29% and the total pipeline increased 28% this quarter compared to the prior year. These strong results are driven in a meaningful way by our momentum in the upscale segment and the refresh of our Comfort and Sleep plants. Let's talk about the upscale segment and our movement in momentum that’s building. This quarter the momentum continued with a wave of new openings and signings for our Cambria hotels & suites brand and our Ascend Hotel Collection. Just a few days ago, we opened a brand new Cambria hotels & suites at Times Square. This is our second Cambria to open in Manhattan following the successful opening of the Cambria at Chelsea earlier this year. We also celebrated the grand opening of a new Cambria hotel & suites in Rockville, Maryland right across from our corporate headquarters. We have signed 16 new Cambria franchise agreements since the beginning of the year. This quarter alone we signed nine deals to build Cambria's in major markets including Chicago, Orlando, Irvine, Savannah Georgia and our hotel just outside of Charleston South Carolina. Of important note two of these new franchise agreements are conversion deals. This is a first for Cambria and we believe that including conversions is part of our development strategy will help continue to drive growth for Cambria. We believe this combines with our traditional development efforts will help create more opportunities in major urban markets. The Ascend Hotel Collection also continues to be a strong driver for choice in the upscale space. As more owners of the exceptional independent properties in great markets see the benefits of aligning with a global company while maintaining operating independence. There are currently 144 Ascend opened and operating worldwide. The executed franchise contracts are up nearly 50% and the pipeline has expanded 70% year-over-year. We're excited about the momentum we are seeing with our upscale brands and I think it will continue long into the future. Now on to Comfort Suite, we’re seeing strong development interest in these brands as we implement the brand strategy to renovate, remove or reposition properties from the system that don't need the enhanced standards and aggressively target new construction hotels with our development efforts. Our Comfort brand strategy has helped drive a nearly 40% increase in new domestic hotel contracts for the Comfort family of brands led by a 50% increase in domestic hotel contracts Comfort Suites. Comfort’s RevPAR index has improved every month for the last 11 months. Our Sleep brand is also enjoying great results as the brand this quarter experienced a 43% increase in domestic hotel contracts, all driven by new construction interest from developers. The Sleep brand commands 122.8% RevPAR index year-to-date, growing from 117.8%, an increase of 500 basis points over the last two years. Turning to distribution, the revenue generated by our Central Reservation System continues to grow and we are breaking records on a regular basis. The revenue contributed of our Central Reservation System increased to 42% in the third quarter, up more than 400 basis points compared to the same time last year and up more than 600 basis points compared to the third quarter of 2013. We had our first ever $18 million CRS revenue day in July, our highest CRS revenue day ever. We had never previously surpassed the $16 million mark on a single day in the previous three quarters until the third quarter of 2015 when we experienced 19 days with CRS revenue over $16 million. Choicehotels.com continues to grow significantly and generates the largest share of our revenue of our distribution channel. Choicehotels.com accounts for nearly half of Choice’s domestic CRS revenue. On direct online channels, Choicehotels.com and mobile had nine $7 million booking days in Q3 2015 compared to only two last year. Bookings via our mobile applications continue to grow at a fast pace and have yielded an increase of 56% in revenue for the quarter compared to the same time last year. Our distribution strategy is delivering great results. We are staying ahead of guest booking needs and we are leveraging our distribution channels to deliver an increasing number of customers to our franchisee’s hotels. Changing gears, let me give an update on SkyTouch Technology, the separate division that focuses on developing, marketing and selling cutting edge cloud-based technology products to the hotel industry. SkyTouch hosts a large widely distributed cloud-based property management system. SkyTouch has now signed agreements with nearly 200 hotels representing more than 13,000 rooms since we had established it as a distinct business division with more than half of those agreements executed this year. Now I’m going to turn it over to Dave White to share more detail about our financial results.

Thanks, Steve. As you read in this morning’s press release, we reported diluted earnings per share of $0.72, which was in line with our previously published outlook for the quarter. Our third quarter financial results continue to strengthen and build on the momentum of the first half of the year. We were particularly pleased with the double digit percentage growth in both total revenues and EBITDA and with our year-over-year increase in domestic royalty revenues, which were driven by growth in all three critical levers, RevPAR, system size and the effective royalty rate. Franchising EBITDA for the third quarter increased 10% over the same period in the prior year and our franchising margins expanded by 230 basis points to 74.6%. Our franchising revenues increased 6% over the prior year driven primarily by our domestic RevPAR performance, expansion of our effective royalty rates, franchise development results which drove growth of initial franchise and relicensing fees and by growth in procurement services revenues. We achieved a 6% increase in domestic RevPAR which was in line with industry wide RevPAR results that was driven by 120 basis point increase in occupancy and a 4% increase in average daily rates. On the supply front, we were able to grow the number of hotels operating in our domestic franchise system by approximately 0.002% compared to September 30, 2014. As we have previously mentioned, our domestic supply growth numbers continued to be impacted by our rejuvenation strategy Comfort brand family. Excluding the impact of this strategy, our domestic system increased by over 100 units or approximately 3%. Our quality and brand has been positively impacted by our Comfort rejuvenation strategy and has increased 5% since September 30 of the prior year as we've had success in repositioning many of the hotels previously flagged into the Comfort brand and quality. Our effort with Comfort is also helping to fuel growth of our development pipeline for the Comfort brand family which increased 36% from September 30, 2014 primarily driven by new construction projects. We're also pleased by the growth of our upscale brands Cambria and Ascend. The system size of these brands grew by 14% and 5%, respectively, since September 30 of the prior year and the royalties generated from the Cambria and Ascend brands for the third quarter increased 37% and 14% over the prior year, respectively. Our domestic effective royalty rates expanded by 3 basis points to 4.27% and reflecting improving franchise development environments and the overall desirability of our brand’s developers. We continue to see a reduction in the level of financial incentives required to execute conversion franchise agreements and expect our year-over-year domestic effective royalty rate to increase over the remainder of the yearend and into 2016. Overall, these factors resulted in domestic royalty revenues increasing by approximately 6.5% to $84.7 million. The growth in our domestic royalties for the quarter was essentially in line with our prior expectations. Our non-domestic royalties declined approximately 21% from $6.6 million to $5.3 million as the benefit of international system room growth year-over-year was offset primarily on account of the foreign currency impact of the stronger US dollar. With respect to franchise development, the fundamentals that drive new hotel development and conversion opportunities continued to improve. As a result, our initial and relicensing fees increased 44% in the third quarter of 2015. The growth in our initial and relicensing fees were driven by 14% increase in new franchise agreements and a 40% increase in relicensing and contract renewal agreements. We believe the industry is still in the early stages of supply growth portion of the cycle, which is reflected in our continued year-over-year growth and new construction franchise agreements. We expect a growth in the volume of our new construction franchise agreements to accelerate over the next several years and we expect our overall 2015 franchise sales activity levels to exceed last year’s results. The success of our franchise sales resulted in a 29% increase in our new construction development pipeline and an overall increase in the pipeline of 28% since September 30, 2014. Our business continues to drive significant cash flows, which we strive to allocate to those items that will ultimately return highest value to our shareholders. During the quarter, in addition to our recurring quarterly dividend, we also completed the opportunistic and accretive repurchase of 1 million shares of common stock under our share repurchase program at a total cost of approximately $50 million. In addition, we continue to utilize our balance sheet to prudently support the growth of our Cambria brand. And finally, we completed a tuck-in acquisition on an enterprise to provide SaaS technology solutions to vacation rental management companies. We expect the acquisition will be modestly accretive to 2016 earnings. Now, we’ll turn to our outlook for the remainder of 2015. As always our outlook assumes no additional share repurchases under the company's share repurchase program. Our outlook also assumes a slight increase to our effective tax rate for continuing operations. We are now forecasting our effective tax rate to be 31% for the fourth quarter and 32% for full year 2015. Our franchising activity guidance assumes that our RevPAR will increase approximately 5.5% in the fourth quarter and 7% for full year 2015. Our effective royalty rate will increase by 2 basis points for the full year and our net domestic unit growth, excluding the impact of our Comfort rejuvenation strategy will increase by approximately 4% and our unit growth for our entire domestic portfolio, including Comfort will increase supply approximately 1%. Based on these assumptions, our guidance for full year 2015 EBITDA from franchising activities is to range between $255 million and $257 million. With regards to SkyTouch, we are projecting reductions in EBITDA for full-year 2015 to be approximately $17 million compared to approximately $16 million in 2014. We expect our fourth quarter 2015 diluted EPS to be approximately $0.47 – at least $0.47 and our full-year 2015 diluted EPS to range between $2.18 and $2.20. Our consolidated EBITDA for full-year 2015 is expected to range between $237 million and $241 million. We are very pleased with our third quarter performance and we believe we are well positioned to continue our strong momentum for the remainder of this year and into 2016. And now, let me turn the call back over to Steve.

Thanks, Dave. So to sum it up, our performance in the third quarter showed strong growth with increases in RevPAR and domestic franchise contracts. It demonstrates that the demand for our brands is strong. We believe that the lodging cycle continues to have positive momentum for at least the next several years and Choice is well positioned to continue to build on that success. Now, we’ll open the call up to any questions you might have.

[Operator Instructions] Our first question comes from Steve Kent of Goldman Sachs. Your line is now open. Please go ahead.

Hi, just a couple of questions. First off, Steve, maybe you could just talk about the recent European hotel convention you had for the Choice brands within Europe, have been a focus area for you, takeaways from the conference pace-up [ph] signings, expectations for 2016? That’s my first question. Second question is -- obviously lots of questions about the fourth quarter outlook, I understand, your advanced bookings aren’t really measurable – measured really in days, not in months. But if you could give us any sense why the range of 5.5% to 7%, what do you think moves it closer to the bottom or to the top. And then finally, I will tell you that, La Quinta noted the Comfort brand refresh is having an impact on them. Can you talk a little bit about what that’s doing and how much more momentum you see with that?

Sure. Well, let me start with the first one. So the conference we had was pretty exciting, because it was a big success, so attendance was up I think 40% or 50%. We signed a couple of major deals, while we were there and we’re moving into a couple of markets we hadn’t been in yet. So there will be announcements following those shortly. So the pace of growth has increased significantly, particularly the pipeline. So we've got strong interest in a number of countries that we didn't have a lot of properties and so you’ll hear things happening on those relatively soon. We think that the value proposition has been very well received. It was a very positive conference, the tone was very high. They all believed very strongly in what the system is producing for them as well as the value of the technology platform. So the takeaway was clearly probably the most positive conference we've ever had. There is a strong momentum of growth in spite of the fact that if you look at Europe, from a market standpoint, for our brands, they're slightly up in most markets, which is offset by the way for us by the currency exchange, but we're looking at what we think is a rapidly growing pipeline, it's been an add to the system that we've already got. And one of the key differentials is that we have deployed more resources over there, including the ability to use incentive capital, which we have not done before and that incentive capital is what's driving a number of these multiunit deals that we expect to see. So I think the answer is, at some point, probably the next couple of quarters, we’ll probably talk more about that and what we see in terms of pipeline size and growth, but it’s looking very encouraging at this point. Let me have Dave talk about the fourth quarter numbers.

Sure. Yeah. Thanks, Steve for the question. So just to clarify what we've put out in our outlook this morning, we're not putting out a range of RevPAR for the full year of 2015 at this point, given that we have completed recourse of the year, we have good understanding of how the first recourse has played out. We are estimating that full year RevPAR will be 7%. We've put out our first estimate of RevPAR for the fourth quarter of 5.5% and I think as I think about it, we have pretty good visibility into the first month of the fourth quarter, the fourth quarter weighting relative to the other three quarters is lighter. So we have a pretty good Comfort around that published, but to be clear, it’s not a range, it’s a point estimate for the full year of 7%.

Okay. My mistake. And then Comfort brand refresh? Do you want to talk about that?

Yeah. Absolutely. Because that’s probably one of the more exciting things of our core brand that’s going on. So we just tell our Chief of that, which is a number of our largest Comfort developers and there were probably 40 people there, 30 of them were talking new deals, they are all and a lot of them have been asking for this for a long time, very much large supporters and newly interested in building new Comforts, because they see the change in the Comfort program. And that is by the end of this year, we would have taken 600 hotels out, which is partly what, if you look at where we would have been without that, we would have had really strong growth for the year, but we absolutely believe it is the right thing to do and behind those markets, we have people looking to build new ones and so that’s why you’re seeing the growth in new construction results. Those hotels will tend to be larger and more revenue intensive and what's really encouraging is we didn't expect to see the turnaround in RevPAR index. It started last December, we didn't expect that to start until sort of the end of this year or early next and we've had 11 months of positive RevPAR index every single month and if you look at what the new hotels are opening at, they are opened at significantly higher levels than the brand averages and that's what's got these guys so excited. So, and historically, if you talk to a lot of developers, they will tell you that Comfort was their best ROI investment, almost every franchisee when I was with another brand or when I was with Choice, I will tell you, when Comfort was really at its strength, it was the best return on investment in the hotel business you can make. We’re getting back to those levels and as a result people have built them and they are very excited about where the brand is going and feel like they've got a brand that they can invest in that’s going to last in the next 15 or 20 years.

Okay thank you.

Thank you. And our next question comes from Shaun Kelly of Bank of America. Your line is now open, please go ahead.

Hey, good morning guys. Actually really wanted to follow up on that last question about RevPAR index and some of the brand refresh? So, is it possible to give us a little color on you mentioned I think it was Sleep was 122.8, could you just remind us of what’s just the average RevPAR index across the portfolio and/or if you can’t do that, specifically on the Comfort Inn Comfort Suits brand I'm curious for those two brands?

Yeah, so look the way to look at RevPAR index is on a really brand by brand basis. And our objective obviously used to improve RevPAR index for brands over time. For Comfort for example, if you look at the RevPAR mix of that brand on a local concept basis it's north of 100 right, so obviously we're focused on delivering services in the marketing distribution world as well as kind of the product world that will that forward faster and higher to support what we’re trying to do at Comfort. So, I think each brand has got slightly different RevPAR index and a slightly different positioning but that's going to be how we think about it is, RevPAR index to rationally we need to move it up that's what makes the brand more valuable to the hotel developers and also it gives you good evidence that consumers that are staying in the hotels are seeing value in the brands and that's what we are focusing our resources from driving those RevPAR index higher but think it's probably different conversation to go through RevPAR index on a brand by brand basis.

So, and I just to add to that is, if you look at sort of where the new Comforts are opening, they’re opening at some pretty significant RevPAR index levels. So there are still hotels to be either renovated or removed from system which is waiting down that overall average but we fully expect comfort to be running numbers approaching where Sleep is today and the new ones that are opening are doing that already. So, and part of that is because we're cleaning up the system and part of that is because we’re being very successful in driving midweek business. If you look at the overall increase in business travels in the hotels, it was almost 7% year-to-date and we had an incredibly strong contracting period this fall, which we think is going to drive really great results next year as well.

The other thing I’ll kind of add to what Steve said in terms of brand refreshes is, we have a really strong view that we know exactly what needs to be done with Comfort and we have been at for a couple of years now and it's really around kind of three major prongs, right, removing hotels from that system that don't meet the brand standard, improving the ones that are in the markets and have the right bones to be good representatives in that systems, and then adding new construction hotels and when you look at those levers in terms of what we're doing, the [indiscernible] levers we're having really strong success and remains really excited about what that’s going to do the brand and for the long-term royalty potential from that brand.

That's really helpful color. And you already answered part of the follow-up, which was sort of where are the new ones debuting. So just to be clear on that, they are above -- in the 120s or above something in that range?

Yes, and where we were opening them, obviously we're replacing the hotels that we are taking out so that's a clear opportunity for us and that will be a more revenue intensive hotel. But we’re also seeing a big upswing in urban and dense suburban markets, which we know will bring up the brand averages significantly.

That should drive the brand average mix but it shouldn’t necessarily drive RPI, right because that'll be --

That's right.

Okay, that’s going to just drive RevPAR overall.

We're driving both, yeah.

Okay got it. So sort of second area on this, La Quinta also alluded to sort of an increased competitive environment in some of their markets and I was curious whether it was because of transient behavior that you saw there in the quarter, anything else, did you guys change or move your promotional strategy at all as it related to points or Wi-Fi or anything from the customer's behavior or you guys study as it goes?

We are doing a number of things to drive midweek traffic. So, maybe others are noticing but it goes from we're revamping the Choice privilege program to give more appealing to the business and upscale traveler. We have significantly increased our sales resources and our aggressiveness both through the RFP process and working with corporate clients. We've always been a strong BT component for the traveler that’s on their own, paying their own way, because of the value orientation. So all those things are going on at the same time as well as the improvement in the brands. And so as a result, we're seeing significant increases both midweek and weekend as a result of stronger demand and I think the number of the things that we’re doing.

Very helpful. My last question and I will yield the floor. For the Comfort kind of refresh, could you give us a directional amount of, for the owners that are choosing to stay in, but to renovate, you guys are doing this on your balance sheet, but how much capital are those guys typically investing either as a percentage of their total or dollar amount? Just can you give any ballpark if you can provide to, I know it’s going to be different?

Obviously very, very wide range, but if you said kind of what’s the midpoint, it’s probably somewhere between $200,000 and $400,000 but the great thing is, they are seeing a very strong ROI, because as those hotels come out very similar to Sleep, they are seeing a 5% to 10% RevPAR increase over and above their normal RevPAR increase. So we’ve got a lot of Comforts that have come out of the systems that are in the high teens in terms of RevPAR increases.

Very helpful. Thanks guys.

Thank you. And our next question comes from Anthony Powell of Barclays. Your line is now open, please go ahead.

Hi, good morning. A follow-up on the Comfort rejuvenation. Where are you in the – I guess the hotel exit process and when do you think exits will slow down and how quickly will we slow down over the next couple of years?

Yeah, I think we are almost done. So by the end of this year if we go back to sort of a normal at any point when you got systems, there is going to be some churn which we also view as opportunity to upscale, but the bulk of the terminations will be done by the end of this year.

And really I think an important thing that you don’t want to lose sight of is while the Comfort brand has had higher terminations because of our strategy, I mean our other brands, if you exclude Comfort, like we said in our opening remarks have increased the system size by 3% year-to-date and for the full year we are expecting that to be closer to 4% and a component of that is our ability to successfully transition Comforts into sort of our other brands that are more appropriate for that hotel asset based on where it is in its lifecycle.

Interesting enough, the one thing that we didn't expect in the refresh was we had expected a cure rate when we notified people that we weren’t happy with the way they were representing themselves. We expected a much larger number of hotels being terminated. And in fact what happened was we had a much higher level of owners who stepped up and put significant resources and investments into their products to maintain the Comfort flag which is good because otherwise we would have had more terminations than we had. But we've been through the system and we are getting at the tail end of the termination process and then expect everything else to continue to grow on top of each other over the next couple of years.

Got it. And moving to SkyTouch, it seems like the revenues there may have increased a bit, 1.5 million in the quarter. Could you give some details on the revenue growth that you saw in the quarter?

It’s actually a very good new story. We definitely got acceleration in the signings. The acceleration in the independent hotel property is very brisk. We have several tier 2 properties that look like we're going to see some about midsized chains signing relatively rapidly. And then we are in deep discussions as we said with several of the tier 1 type opportunities which are larger brand companies. Those obviously have a much longer burn rate to get to close, but we are in deep, deep discussions with a number of them. So we still remain very confident that we are going to start reaching the levels we need to reach to begin turning this into a positive investment that we've been making. And so we will have to see over the next year, but as we've said before, we are going to ensure that in 2017 that SkyTouch is not a negative to EBITDA. And so when we’ve got five or six ways to get there, we are pursuing all five of them.

Got it. And just a follow-up on that. As your acquisition that you announced today, will that fit in within SkyTouch and how can that add to that process?

Well, actually that’s a very interesting acquisition – it could be long-term, we don’t know, but right now, what that is the technology platform for all vacation rental business, which I think we mentioned before, we launched in full force this year. We are in deep discussions with a number of vacation rental management companies, which we had very strong interest in the program. So three are different types of opportunities: one, we can just sell in the technology program; two, we can just sell them the revenue generation opportunity of joining the Choice vacation rental brand; and with 24 million members in CP, how many of those can we move over. We are pretty confident we are going to drive a lot of business for them and that’s what our beta test show. For the three, you can buy the technology platform plus our revenue distribution support, which is the one that’s generating most interest, but we think all three of those are going to be strong revenue opportunities for us.

All right. Great, thank you.

Thank you. And our next question comes from Robin Farley of UBS. Your line is now open, please go ahead.

Great, couple of questions. First is on your unit growth for the full year, it’s unchanged at 1%, and I guess this quarter and the last two quarters have been coming in at kind of below the 0.5% rate. So is that just that openings have kind of returned to Q4 or how should we think about the unchanged full year?

Thanks for that question, Robin. Actually it’s throughout this year, we’ve always contemplated that the fourth quarter would be a strong openings quarter for us, so that’s really what you’re seeing as that the openings in the SKU, I mean 1% for the fourth quarter. That’s really unchanged. That’s kind of been our view throughout the year.

Okay. I mean, that wasn’t the case last year in terms of the rate being different just the way the openings are falling this year, any specific –?

Yeah, absolutely, year-in, year-out, depending upon your mix of conversions and new constructions, and obviously new construction has accelerated this year relative to last year, all that kind of plays into the timing of when the hotels will open and then you got piece [ph] right of determinations, which can vary from quarter-to-quarter on a year-over-year basis, that’s really just the day to day timing, but it’s – we are not changing any expectations around what unit growth would be in the fourth quarter based upon our guidance.

Okay, great. And then I wonder if you could give a little bit of color around Q3, the RevPAR came below what your guidance has been. So was that certain regions or certain – I mean, just kind of any color around what you think is driving that?

Yeah, it really was because August was soft. So what happened was we came in fairly strong to the quarter, and then August for some technical reasons, there are two fewer Fridays and where Labor Day – August was soft. But the great thing was its formed back big in September. So that’s what’s given us such confidence going forward.

Okay, great. And then my last question is, if I am looking at the tray, your full year EBITDA guidance is unchanged, the tax rate is unchanged, but the EPS, I think is down about $0.02. Is there anything that I am missing to get to that math?

Yeah, most of the difference between the EBITDA outlook and our EPS outlook, which we did take down to top-end of the EPS range, is most of that change is tied to the tax rate, even though we didn’t change 32%, still 32% kind of when you look at the rounding, 50 basis points of tax rate translates to call it, $0.015 [ph] per share, so that’s most of what’s going on there with that EPS range. There is a couple of other things kind of below the line that individually are the anonymous things like we had $200,000 extinguishment of debt cost rate that’s kind of below the line when we refinanced our credit facility earlier this summer, but for the most part, it’s the tax rate that you’re seeing there.

Okay. That’s helpful. Thank you very much.

Thank you. And our next question comes from Joe Greff of JP Morgan. Your line is now open, please go ahead.

Good morning, all. Given your comments in one of the earlier questions here about falling terminations, would you expect net rooms growth to be positive next year? Thank you.

Yeah, you know, look we are still putting together our full outlook for 2016 and we will come back to the market, which we have typically either in December or January each year. So when we have all of our outlook for 2016 put together, we will bring it back. But directionally, particularly if you think about Comfort, excluding Comfort we feel really positive about what you are going to see in kind of the unit room growth side of things domestically.

I’m all set. Thanks guys.

Thank you. [Operator Instructions] And our next question comes from Thomas Allen of Morgan Stanley. Your line is now open. Please go ahead.

Hi, good morning. So two questions, first, understanding that you’re still in the planning phases, but just as you think about 2016 RevPAR, any initial thoughts, maybe, do you expect to be stronger or weaker than 2015? And then in terms of the unit growth, can you help us, you mentioned earlier that I mean, you’re forecasting 1% unit growth for the year, you said that it would have been up, you expect it to be up 4% if you exclude the Comfort refresh for all the other brands, but you also mentioned I think you were shifting some old Comforts into quality. So is there kind of a way to think about it on an adjusted basis for backing out the Comfort refresh. Thank you.

Yeah. Sure. So on the RevPAR front, I think we feel really good about the fundamentals in the industry and what we’re going to see in 2016. Obviously, a number of our competitors have put out their outlook for next year in that mid-single digit percentage growth rate area. It seems like that should be a good spot to be. We’re continuing to work through it, but we feel pretty good about positive RevPAR growth next year in that mid-single digit area. On the unit growth, so when you think about what drives our business, there are three basic levers. It’s -- employment is very important to us, consumer confidence is obviously very important and economic growth, growth is the other factor that we watch closely. If you look at those three factors, all of which are positive, and it’s hard to see anything else other than a pretty strong year next year and so while we’re not going to give guidance, we think where some of the other brand companies have come out is very similar to the way we think.

And on the unit growth side of things, the 4% for full year 2015 really reflects growth of the non-Comfort brands, so I think the base is somewhere around 3400 hotels in the non-Comfort brands, we expect that to be up about 4% this year and then to kind of add a little more color around what Comfort has done to that equation, there has been about 50 Comforts here in 2015 in that 4% that we’re moving from Comfort to one of our other brands.

Okay. I’m sure I can calculate that. Thank you.

[Operator Instructions] And I’m showing no further questions at this time. I would now like to turn the call over to Mr. Steve Joyce for closing remarks.

Well, terrific. Thank you for joining us. That concludes our call for today. Obviously, we’re pleased with the third quarter and where we’re going to end up for the year and we’re looking for a very strong year, next year. And we’ll look forward to talking to you about it next call. Thanks very much.

Ladies and gentlemen, thank you for participating in today’s conference. That concludes today’s program. You may all disconnect. Everyone, have a great day.