Steve Joyce - Chief Executive Officer Scott Oaksmith - Senior Vice President, Finance and Chief Accounting Officer

Jared Shojaian - Wolfe Research Anthony Powell - Barclays Robin Farley - UBS Shaun Kelley - Bank of America Thomas Allen - Morgan Stanley Jeff Donnelly - Wells Fargo Securities David Katz - Telsey Group

Ladies and gentlemen, thank you for standing by. Good morning and welcome to the Choice Hotels International Third Quarter 2016 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 call conference call, certain predictive or 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 provisions of the Securities Reform Act of 1995. These forward-looking statements generally can be identified by phrases such as Choice or its management believe, expects, anticipates, foresees, forecasts, eliminates, or other words or phrases of similar import. 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, 2015 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 reflects our analysis only and 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 in our remarks as part of our third quarter 2016 earnings press release, which is posted on our website at choicehotels.com under the Investor Information section. With that being said, I would now like to introduce Steve Joyce, Chief Executive Officer of Choice Hotels International, Incorporated. Please go ahead, sir.

Good morning and thank you. Welcome to Choice Hotels' earnings conference call. Joining me, today is Scott Oaksmith, our Chief Accounting Officer. This morning, we’re going to update you on our performance for the third quarter of 2016. It was another strong quarter with development increasing more business than ever being driven to our proprietary distribution channels and our RevPar results outperforming the competition. So let’s start with RevPar performance. This quarter domestic system RevPar increased 4.5%. Our domestic RevPar performance for the third quarter exceeded total industry results by 120 basis points and also exceeded growth reported by Smith Travel Research for all the segments in which we compete by 220 basis points. This marks the sixth consecutive month and eight of the last nine quarters that Choice’s RevPar performance growth has outperformed the industry. There is a number of factors that are driving these results. First; Comfort. Our efforts to rejuvenate the Comfort brand which have included the implementation of higher standards for hotels joining the brand, require meaningful property improvement plans and targeted underperforming comfort for termination and replacement with new construction product are all working. These efforts have results in 24 consecutive months of RevPar index gains. The strong performance of our Comfort brand has not gone unnoticed by the development community and we’re pleased that over the last two years the company has executed a 162 new Comfort construction franchise agreement which is more than double the number of agreements executed in the previous two-year period. Our Comfort new construction pipeline has grown to a 180 hotels, which represents a 30% increase over the prior year and we’re confident that the improvements we have made to the existing hotels in our system and this new product will continue to fuel Comforts performance over the next several years. SmartRates another rate that is helping to improve average daily rates at our franchise hotels are the state-of-the-art tools that we have launched to help hotels set and drive the best rates. In May we launched a new tool for our hotels called SmartRates. It is a powerful pricing optimization system developed by Choice Hotels that provides hotels with daily rate recommendations. It analyses market conditions, the way hotel has set rates in the past and how a hotels competitors have set their rates. The tool using essentially artificial intelligence actually learns about the hotels demand patterns, so it can ultimately recommend the best possible rates. We launched it at just the right time, as occupancy levels peak. We knew much of the RevPar gains this year we come from making sure hotel set their rates correctly. This is driving growth and profitability for our franchisees hotels and is helping us to achieve strong RevPar growth. Choice Privileges Member Rate another area that we’re excited about the launch of our Choice Privileges Member Only Rates in which visitor to choicehotels.com and our mobile apps are able to ask access discounted member rates that can’t be found anywhere else on the internet. Both existing and new members of Choice Privileges can access these executive room rates that are 2% to 7% discount off the best available rate. This is in addition to our commitment to stand behind our pricing. If a guest finds a lower price elsewhere online, we will match that price and give that guest a $50 Visa gift card. While it’s still early on based on the initial results we are optimistic about the long-term impact that this program could have. Choice Privileges program redesign at the beginning of the year, we announced the biggest redesign of the Choice Privileges program in our company’s history. The changes our design to bring greater value to members in return drive business to Choice distribution channels and increase the number of loyalty members and it is all working. We’ve just surpassed 28 million Choice Privileges members. We’ve already signed up more members this year than in any other year in our history. All of these new members are contributing to the increasing revenue generated by our Central Reservation System and property direct loyalty program. The revenue contribution on these channels year-to-date increased to 54.7% up 230 basis points compared to the same period last year. This quarter we had our highest CRS revenue date ever on July 11 surpassing 21 million and we had four other days in the quarter that exceeded 20 million. In July, we experienced four of the top five revenue dates ever for the company. The amount of revenue delivered to our CRS continues to set new milestones and reach new all-time highs. Choicehotels.com continues to grow significantly and generate the largest share revenue of our distribution channels. Our direct online channels choicehotels.com and mobile had 17 days with over 6 million in bookings in Q3, 2016 compared to 9 million in Q3, 2015. We hit our highest day ever for choicehotels.com in mobile in July 2016 with an 8.2 million a day [ph]. All these initiatives are delivering great results and helping us drive RevPar performance over our competition. Now moving on to the rest of the results. There are a number of other very positive financial highlights and development results for the quarter. The company delivered a 17% increase in diluted earnings per share. Total revenues increased 11% for the quarter and franchising revenues and domestic royalty fees each increased 7%. Our year-to-date domestic system wide gross room revenues reached a record of approximately $5.3 billion for the company domestically. On the development front, we executed 161 new hotel franchise agreements. A 25% increase for the quarter and our relicensing and renewal transactions remained very strong. The increase in our domestic franchise agreements was driven by growth in both new construction and conversion deals and we continue to expect the number of executed domestic franchise agreements for full year 2016 to exceed the very strong year we had in 2015. Our domestic pipeline of hotels has also continued its strong growth and has increased 20% over the prior year. These strong results are driven in a meaningful way by our momentum in the upscale segment and the refresh of Comfort and Sleep brands. We believe that the growth and the size of our domestic pipeline provides a strong platform for growth in our domestic system size over the next several years. We are pleased with the momentum we’re seeing with strong trend RevPar gains, our distribution strategy driving more business to our franchise hotels and strong development growth. Now let me turn it over to Scott Oaksmith to share more detail about our financial results. Scott?

Thanks, Steve. Our third quarter financial results continue to strengthen and build on momentum of the first half of the year. In this morning’s press release, we reported diluted earnings per share of $0.84, a 17% increase over the prior year. Our reported diluted EPS results exceeded our previous outlook for the quarter by $0.06 per share. Approximately $0.05 of this outperformance is attributable to better than expected operating results while the remaining penny was the result of lower interest cost and the lower effective income tax rate than we had previously expected. Our operating income result exceeded expectations due to a combination of better than projected hotel franchising revenue performance as well as lower than anticipated SG&A expenses. Our franchising revenues for the quarter increased 7% over the prior year driven primarily by growth in our domestic royalties and procurement services revenues. Once again during the third quarter all three of the levers that drive domestic royalty revenue increased compared to the prior year. As a reminder these three levers are RevPar, effective royalty rate and system size and the performance of these levers resulted in a 7% increase of domestic royalty revenues to nearly $91 million. A few highlights of these RevPar levers are as follows: we achieved a 4.5% increase in domestic RevPar in third quarter which exceeded our previously published outlook of 3.5% to 4% increase. Our RevPar increases were driven by 3.4% increase in average daily rates and a 70 basis point increase in occupancy. As Steve mentioned, we are particularly pleased that our RevPar results exceeded the performance of the overall industry as reported by Smith Travel Research by 120 basis points. Our outperformance of the industries RevPar results was consistent in terms of both occupancy and ADR performance. As we exceeded industry occupancy rates by 70 basis points and ADR by 10 basis points. We were also pleased that outperformed the primary chain scale segments in which we compete and have now outperformed these segments in seven off the last eight quarters. We attribute our third quarter RevPar outperformance against the overall industry and the primary chain scale segment in which we compete primarily due to the continued strength of leisure travel, the redesign of our Choice Privileges Program which has resulted in the [indiscernible] expansion of the number of loyalty program members, the rejuvenation of our Comfort brand as well as the new SmartRates inventory pricing system as Steve previously discussed. We expect to see these trends to continue and as a result we expect our fourth quarter RevPar results to increase between 4% and 5%. Our domestic effective royalty rates have also continue to expand and totalled 4.39% in the third quarter, a 12 basis point expansion. Furthermore, our year-to-date effective royalty rates have now increased 11 basis points compared to the prior year. As a result, we have revised our outlook and now expect a full year effective royalty rates to expand 10 to 11 basis points. On a supply front, we grew the number of hotels operating in our domestic franchise system by approximately 1% compared to September 30, 2015 and this growth was in line with our expectations. Our Quality brand continues its impressive growth increasing 6.2% over the prior year and now exceeds 1,400 hotels in the United States. In addition to the strong unit growth the Quality brand also reported one of the highest RevPar growth rate across our portfolio increasing 6% in the third quarter. As Steve discussed our Comfort brand rejuvenation strategy is working and it’s driving the RevPar performance of the brand as well as stimulating demands for new construction hotels. However, this strategy has had a short-term impact on our domestic supply growth number. Excluding the Comfort brand we grew the number of net units online in our domestic system by 120 units, which represents 3.5% increase. While we expect to continue to enforce our new higher standards for the Comfort brand and to require meaningful property improvement plans for existing of new entrants, the pace of targeting underperforming Comfort’s to termination [ph], is expected to decline. Furthermore, we expect the opening of new construction Comfort Hotels to accelerate over the next several years reflecting the robust Comfort domestic pipeline and sustained development activity due to the continued improvement in the brands RevPar performance. With respect to franchise development the fundamentals that drive new hotel development and commercial opportunities remain strong. During the third quarter we executed 161 new domestic hotel franchise agreements, a 25% increase over the prior year. New domestic hotel franchise agreements for new construction projects increased 13% over the prior year quarter, highlighted by our Comfort family of brands which executed 17 new agreements or an increase of nearly 90% over the prior year. Our licensing and renewal activities also continue to remain strong, as we executed 114 agreements during the third quarter of the current year compared to last year’s strong results of 119 agreements and year-to-date these transactions were up 8% over the prior year. Our SG&A from hotel operations increased $3.2 million or 13% during the quarter, however if you exclude the impact of fluctuations in the fair value of investments held in our non-qualified deferred compensation plans which amounted to approximately $2 million SG&A expenses increased approximately 5%. The increase in the SG&A related to these fluctuations in fair value is offset by investment gains recorded in other gains and losses in our consolidated statement of income. Our hotel franchising EBITDA for the third quarter increased 5% over the same period of the prior year or 8% if you exclude the fair value adjustments I just mentioned from our hotel franchising SG&A. During the third quarter, we continue to use our significant cash flows to return value to our shareholders through a combination of share repurchases, dividends and investments to our business to drive future growth. During the quarter, we completed the opportunistic and accretive repurchase of 100,000 shares of common stock under our share repurchase program at a total cost of approximately $5.6 million. In addition to these share repurchase, we also paid dividends during the third quarter at a quarterly rate of $0.205 or approximately $11 million. This represented a 5% increase over prior year levels. Finally, we continue to use our balance sheet to prudently support the growth of our Cambria brand. During the first nine months of the year, we advanced approximately $78 million in support of Cambria’s expansion. These advances were primarily in the form of joint venture investments forgivable key money loans, senior and mezzanine lending and site acquisitions. Importantly, we also recycled approximately $25 million of investments previously utilized to support the expansion of this brand during the first nine months of 2016. These funds are now available to invest new Cambria projects. We expect these advances will accelerate the pace of Cambria brands growth over the next several years. Now I’ll turn to the outlook for the remainder of 2016. As always our outlook assumes no additional share repurchases under the company share repurchase program. Our outlook also assumes our effective tax rate, 33% to the fourth quarter and 31.5% for full year 2016. Our hotel franchising activity guidance assumes that our RevPar will increase by approximately 4% to 5% for the fourth quarter and range between 3.5% and 4.25% for the full year 2016. Our full year guidance represents 25 basis point increase to the top end of our range from our previous guidance of 3.5% to 4%. As I previously mentioned, we also increased our projections for the growth in our effective royalty rates. As a result, our guidance now assumes that our effective royalty rate growth will increase between 10 and 11 basis points for the full year and our net domestic unit growth will increase by approximately 2%. Excluding the impact of our Comfort rejuvenation strategy, we expect our domestic portfolio net unit growth of our other brands to increase by approximately 4% in the aggregate. Our full year guidance for 2016 adjusted EBITDA from franchising activities is a range between $272 million and $274 million with regards to our non-hotel franchising activities including SkyTouch and vacation rental activities, we’re projecting reductions in adjusted EBITDA for full year 2016 to range between $18 million and $19 million. We expect our fourth quarter diluted EPS to be at least $0.51 and we are increasing our full year 2016 adjusted diluted EPS to range between $2.43 and $2.46. And our consolidated adjusted EBITDA for full year 2016 is expected to range between $253 million and $256 million. In summary, we are pleased with our third quarter performance and believe we are well positioned to continue our strong momentum for the remainder of the year and into 2017. Now I’m going to turn the call back over to Steve.

Thanks, Scott. To sum it up, again this quarter we had strong financial performance, development is up and our RevPar results outperformed the competition. These great results are due in large part because our Comfort rejuvenation has helped drive 24 consecutive months of RevPar index gains for that brand. We launched our SmartRates program at just the right time to ensure that hotels are setting rates properly. And with our Choice Privileges redesign and our Choice Privileges Member Rates., we are investing in programs designed to drive more reservations through our central channels. Improved guest loyalty and enhance the value of our brands in an effort to drive incremental business to our franchisees. Add to all of this, that leisure travel has been holding us strong which is a significant part of our business and job growth has been trending more favourably. As a result of all these factors, we are optimistic about our continued long-term growth prospects and our ability to drive excellent results for our company and our shareholders. Now with that, I’m going to open up the call to any questions you might have.

[Operator Instructions] and our first question is from the line of Jared Shojaian with Wolfe Research. Please go ahead.

I think, on the last call you were hoping to have some new positive announces on how you were going to get SkyTouch to positive EBITDA. I’m curious where you stand here and is 2017 still the EBITDA breakeven target and is that like an end of year run rate positive or how should we think about that? And then obviously how do you think you’ll get there? Thanks.

So the outlook is unchanged and that is, we do not expect to have a cost for SkyTouch for 2017, not run rate, not at all. So we will have no impact from SkyTouch and that’s because we have invested in the product to the point we need to and now we’re ready to grow that system significantly. There are two likely outcomes as we’ve discussed before, we are in discussions on both of them and I think relatively near term you’ll - near term meaning 30 to 60 days, you’ll hear from us about what our plans are for that brand, but we’re excited about the performance of it and the sales piece [ph] and also the opportunities we got as a result of that.

Okay, thank you and then. It looks like your pipeline showed some decent growth here quarter-over-quarter but the Hilton Tru pipeline is also really starting to pick up. So I’m curious what you’re hearing from developers and franchisees and is there any share shift going on from Comfort or any of the other brands over to Tru right now. And how do you think about Tru from more of a longer term perspective and even from a competitive perspective once they’re operating next year.

Yes, I think the answer is little early to tell. They’ve done an excellent job with their sales from Tru so their number is out of the gate, so pretty impressive. Whenever you launch new brand like this you get a lot of signings, you don’t necessarily get a lot of hotels, so we’ll just have to see how that all plays out. But actually we’re very pleased with the growth of our development opportunity with Comfort, partly because it had cooled somewhat with the performance of the brand and now have heated back up with the performance of the brand. So we just came from a key client event this week with most with a significant chunk of our major developers, they’re at significant chunk of the pipeline and they’re pretty bullish on doing our product and some pretty big numbers.

Okay, great and then if I could just sneak up a real quick housekeeping question and your guidance had a nice acceleration and room growth in the fourth quarter somewhere around 5%, which I guess is just related to the conclusion of the Comfort rejuvenation but is that the right level to think about future growth particularly in 2017 as well or is there anything unique about next year. Thank you.

Yes, so let me give you some color. We’re not give a number for 2017 yet, in part because I think it will be much more useful when we see how the year ends up, but the way to think about it is the way we’ve looking at it is, RevPar has gotten better as the year’s gone on and we think the fourth quarter is going to be better than the third quarter and I can also tell you, that October is very strong. We’d very strong September, we’re having a very strong October so far. So our view and that’s why we took the guidance up, our view is, at this point that 2017 will be a good year. We have yet, I think we want to wait to see where the year ends up and what our bookings look like for the following year and sort of the economic outlook as well, which seems to be shifting a little I think, everybody is waiting for the Presidential Election and kind of settle down and see what that does overall. But we’re actually we definitely think next year is going to be a very good year, the question is how good? And right now we’re pretty bullish on the RevPar results.

Okay, thank you.

And our next question is from the line of Felicia Hendrix with Barclays. Please go ahead

Hi, it’s actually Anthony Powell here for Felicia. How are you guys?

Good Anthony, how are you?

Good. Just kind of on the RevPar topic. Obviously you’ve outperformed recently relative to the industry. In your experience how long can that kind of divergence last where leisure and your type of chain scales outperform the higher price corporate leverage chain scale?

So clearly, if you just look at the Smith Travel results. The upper end particularly the business driven hotels have had a more moderating effect in their RevPar than on the leisure side but our view is I think, we’re going to outperform for quite some time in part because the leisure component and that’s going to hold up better than the business travel world because it always does and so as a result, we think that gives us an advantage going in but more importantly, we’re taking share. So the things that we’re doing are moving customers out of other hotels and into our hotels and we don’t expect that to stop at any point that’s our plan for the foreseeable future. So I think, when we look at our RevPar for next year, our RevPar is based on two things, what’s the industry is going to do and how much are we going to outperform the industry and that’s the way we’re looking at it.

All right, thanks and I guess moving onto SmartRates, I thought that was interesting and what type of markets or environments is that initiative doing the best and can SmartRates be integrated into SkyTouch or is that for your [indiscernible] systems.

Yes, it’s two things. One is, the system itself obviously is more valuable in high demand markets because you got more business to yield but quite frankly we’ve seen it effective across the broad, we have as almost 4,000 hotels at this point and it will be in all the hotel shortly and we’re seeing on average 2% to 5% bumps as a result of that. And along with your question though and obviously in the higher demand markets it is more valuable but one of the things why it’s so important to our system is look, we have a number of very sophisticated franchisees and owners that have significant revenue management programs and this will help them some because it’s a very good tool, but where it’s really is going to help is our ranking file franchise who doesn’t necessarily have the same revenue management resources. And so this tool replaces a lot of the need for human skill sets that are harder for them to afford at their size and it allows for a very sophisticated recommendations of pricing and positioning that doesn’t require a very sophisticated knowledge of revenue management.

And given that we rolled it out earlier this year and we only have 4,000 of our hotels went [ph] today. We would expect this to continue to improve as our franchisees get more comfortable using the product in its we’ll roll out to all of our hotels.

Great, that’s it from me. Thank you.

And our next question is from Robin Farley with UBS. Please go ahead.

Couple of questions. One is, you’re raising the guidance for the royalty rate for the full year what’s driving is that sort of brand mix that’s shifting driving a higher royalty rate, just a little color behind that.

Mostly it’s a success of our development effort. So our royalty rate has been increasing based on two things, one is we do, do ramp ups of our royalty rates on our initial contracts so as those burn off we get back to our rack rates to royalty and then, we’ve had more success in this development environment selling the initial contract and higher royalty rates than in previous periods.

Okay, great and then also your unit growth for the year you’re guiding down a little bit or not guiding down just less of increase I guess 2% sort of 2% to 3% and I know I think you mentioned something about Cambria, is that just Cambria the difference between the 2% and 2% to 3% for the full year is it just the Cambria brand or there are other factors in there.

It’s really about just timing of when hotels are going to open we constantly are looking at our pipeline and projected opening dates and when we have the 2% to 3% we just there’s a fair number of hotels that’ll move into the first quarter of next year, so it’s more about timing in some of our conversion and new construction openings, it’s a Cambria store, it’s just the general portfolio of brands.

And as we mentioned it’s a little bit more about the fact that [indiscernible] cleaning up the Comfort system and that has been depressing the unit growth number for quite some time with good results, I’ll say. On the other hand, we over the last couple of years we probably without the Comfort program would average more like 4% to 5% in unit growth but it’s obviously clearly the right decision that we made and it’s going to set the company up in a really good position for the next decade.

Okay great and then last question is just, you mentioned the strengthen and the quarter from leisure travel and I wonder if you have any comments on the oil regions because in previous quarters you guys have talked about how the oil and gas issue may have impacted you more because of the type of hotels that you have but given the strength are you seeing less softness in those markets or just curious what your observations there are?

Yes, we had some fairly significant exposure to the oil markets and obviously some of them are doing better than others depending on the price of oil in the markets, but what we’re finding is we no longer getting the impact of those rates falling and that business falling, that business is sort of levelled off, so as result our RevPar increases aren’t being depressed by declining RevPar in those markets now, we also haven’t seen it swing up significantly either. But our view is, you know the worst is kind of through, it’s going to work its way and where you’re going to be marketwise and then it’s a question of how you view the oil price markets moving as to whether or not that begins to pick back up. There were some pretty frenzied activity in the mix of all those people were renting our hotels for the entire for their crews. I don’t think we’re going to see that back again, but clearly those markets are long-term markets based on where you see most long-term forecast for oil. We haven’t seen really any significant uptick yet but we’re not getting the declines and our sense is overtime it will gradually rebuild based on the price of oil.

So I think just to add a little more color to that just to you and is it, did impact our Q3 performance so we would have estimated that our RevPar would have been about 130 basis points higher if you exclude the oil markets but that has gotten sequentially better each quarter.

Okay, great. Thank you.

And our next question is from the line of Shaun Kelley with Bank of America. Please go ahead.

Just wanted to touch on the drag that you’re seeing from the Comfort removal program this year and then you mentioned that is expected to lessen going forward. So it looks like the drag this year is about 200 basis points in a difference between 2% and kind of ex-Comfort 4% so what’s, so how much of a drag would you quantify next year maybe moving into 2018.

[Indiscernible] we’re not giving a guidance specifically for 2017 but we would start seeing our unit growth overtime to get back to that historical 4% to 5%. So I would expect our overall unit growth to be better next year than it is this year. One of the slight delays as we, even though we stop kicking out or terminating as many Comfort Inn’s, we’re filling our pipeline with more new construction so there is 18 month to 36 month depending on the market lag when the new construction hotels will open. So we’ll see the pace of terminations decline in next year and then a lot of those openings coming in late 2017 and 2018.

But either way I think one way to look at it is, obviously over the last couple of years we’ve [indiscernible] to system, we expect the system to stop shrinking next year and after that we expect it to grow.

Okay, great understood and then my follow-up is on the Smart Rate program. I know you already answered that a little bit with respect to in earlier question but I guess just to be very specific or very clear. Does this complement an existing revenue management program that you already have at your hotels or did you not have any revenue management in place for these hotels and this is a new program, just trying to kind of understand what exactly is incremental or new about this feature.

Yes, so the answer is we’ve got several things that we provide to the franchisees mostly technology based to help them with their rates and they’ve been introduced over the last couple of years. SmartRates to the least the most recent and most sophisticated tool that we’ve offered them, that we’ve developed in house and we also offer, but we offer for example revenue management where we have franchisees can pay relatively low fee and receive high quality professional revenue management from folks on our team and that’s been very well received. There is I think.

600-700.

600-700 people on it and it’s growing pretty rapidly, actually one of our problems is finding enough revenue managers to do the work. But franchisees are beginning to really see the value in being better at pricing optimization. And so a lot of them are signing up for not only they’re all using SmartRates and as Scott mentioned we want to increase the relative use and employment of that tool. It actually has an automatic feature on it which if you set that to go, it will set your rates for them and so that is an improvement over some of the folks as revenue management practices where they don’t really have the sophistication, but for the most part our franchisees are really starting to see the value of revenue management impart because of the increases and occupancy we’ve driven over the last several years and the value that comes from yielding when you’re in a better occupancy position. So this is one of several tools that we’ve introduced. This is one of our strengths. We view ourselves as a hotel and a technology company and we’re able to provide really valuable tools for our franchisees at relatively inexpensive cost, that significantly increase the performance of their hotels.

That’s great and just lastly would be the, how’s the tool actually been rolled out to 100% of the system or where do we sit in terms of the rollout?

We’re about 4,000 and obviously what we want is 6,200.

And is that on decision on their side, do they have to pay something or use something to gain access or how does that sort of, how is that decision made?

No it’s just the pace of the rollout.

Just the pace of roll - okay, great. Thank you very much.

And our next question is from the line of Thomas Allen with Morgan Stanley. Please go ahead.

What are you hearing in terms of the lending environment for your franchisees? Thank you.

Good question. So we just obviously had a lot of discussions with the folks there and bigger folks are not really seeing much at this point the general view is, the lenders are still lending but they have lowered the levels somewhat and so, I think on average if I were going to characterize what people have said to me and a lot of it’s also came out of the Lodging Conference in Phoenix, I think where people were lending fairly regularly for the right sponsorship and the right product and the right franchise, kind of in the low to mid 70s, it sort of looks now like that has moved more to low to mid 60s. Now I will tell you, I was talking to several of our franchisees doing lot of projects and some of them it hasn’t changed at all. A lot of is about the banking relationships you have and so - but the regional lenders are still lending and the local lenders are still lending. They are, it looks like there has been a general sort of easing of the leverage levels that they’re doing but it’s not slowing our franchisees down in terms of development because quite frankly most of our franchisees don’t leverage that much anyway, they actually like a lot of equity in their deals because they like the idea of not worrying about what happens in the downturn. So if you looked at our system, it probably has an overall lower leverage than almost any other system out there. So while there is a softening in leverage levels, we’re not seeing impact development yet.

That’s helpful, thank you. And then, just in terms of your franchise business I just want to understand the outlook a little bit better. You raised the high end of RevPar guidance, you raised the royalty rate but you didn’t raise the high end of the EBITDA guidance. Can we just walk through that?

Sure, so - as you know we did take down our unit growth slightly from the high end 2%, 3% to 2% so that kind of mitigates some of those increases, so we feel kind of where we’re seeing the numbers we’re going to be somewhere in that range.

Okay, so as long as you’re going [indiscernible]. Okay that makes sense. Thank you.

And our next question is from the line of Jeff Donnelly with Wells Fargo Securities. Please go ahead.

Steve, you mentioned earlier about taking share have you seen your mix shift maybe towards more corporate like you’re picking up the cost conscious business traveller or is it that mix remains fairly steady for you guys?

We’re seeing a lot more activity on the corporate side. Our request for proposals through the season is up significantly, business traveller in general is pretty moderate the growth of it even for us. And yes we do think we’re taking a little share but we also think that pie is getting little smaller and so as we look at it, I think the bulk of our increases are probably more on the leisure side and what’s happened is, we’ve increased a lot of our business mid-week and so when you look at the mid-week business in lot of cases you can say that is more BT related. I think ours is a mixture, so I think we’re driving more business mid-week and chunk of its BT, but I also think a chunk of it is leisure.

And just maybe a question for Scott. I think you had mentioned before about some of the drag that was on your RevPar this quarter because of exposure to the oil patch markets. What percentage of your rooms do you feel fall into those types of markets?

Yes, I think we’re somewhere around 7% to 8% of our rooms are in those markets.

Okay and I guess maybe to turn it around, where did you guys see regional strength in your portfolio was it by sort of just regions of the country or do you kind of see it more in like locations like road side versus urban, I’m just curious have you guys have any insight fare.

It’s a combination we’ll give you - it’s obviously it’s various regional differences. There is a lot of market difference though as well within those regions. Where you know everybody is talking about supply increase. We actually, supply is increasing but it’s increasing to historic levels something about 2%, the issue is it, not evenly distributed so you’re seeing some markets that are getting a lot of inventory and are obviously going to have to digest that inventory but we’re also seeing a number of markets that are still strong, which is where we’re in a lot of our development efforts there and then on the regional basis, it does very similar.

Yes, we definitely saw strength in the Middle Atlantic area as well as East South Central on the Pacific region and then certainly the small metro town resort location, airport location, had strong RevPar performance for us.

So just maybe one last question, as you think about use of those capital in 2017 your comments in SkyTouch were helpful. Do you see any drag on EBITDA next year may be related to the timeshare business you guys are looking at or do you think that’s just kind remind a small?

It’s pretty small. I mean we’re actually very excited about the rate of pace on talking to these vacation rental management company and we’ve got a significant pipeline, but we’re doing that with a relatively small team. So our view is, there is some cost to it but it’s not very significant.

Yes, thanks guys.

And our next question is from the line of David Katz with Telsey Group. Please go ahead.

So two questions, if I may? First, that you’re having obviously a terrific impact the repositioning or the rejuvenation of the Comfort brand and I think it’s obviously a very sensible strategic given the crowds of brands at that end of the spectrum. Are there any other brands that you might turn to next that are in need of a revisit for example quality which is obviously a pretty large system or Econo Lodge or any of those, is this is going to be an ongoing process. And I wondered how you much you have spent today and you know actual capital out the door on the Comfort repositioning so far.

I think it’s pretty safe to say that, the two things that we wanted to accomplish were the Comfort and the Sleep rejuvenation which have both been quite frankly pretty spectacular in their results. So we don’t have there is not a need to run any other major programs. The interest thing about quality is even with that remarkable growth the guest scores are going up. So we’ve never been as a company at a higher intent to return level as we’re at this point and that includes the brands we worked on, but also our existing brands. So yes, we don’t really see the need for any kind of major programs that we’ve done in the kind of impact that you saw particularly on the Comfort side but also on the Sleep. And so what you’ll see from us going forward. Is we’re very focused on making sure our brands represent us well to the consumer. So you will see us working to tighten the consistency of a number of the brands, but it won’t be, it’s going to be a much less sort of major program that has been the Comfort and Sleep programs have been and then in terms of the money, we spent on Comfort, we announced $40 million incentive, we probably used.

$25 million to $30 million of it so far.

Yes and one more question if I may and it’s obligatory and I’m thrilled that everyone left it for me. But we continue to read and hear and discuss quite a bit about the shared economy, opportunity in Airbnb and intuitively and invite you to correct me. The price focused leisure customer seems as though that is the target for that business. What have you thought seeing and done about it, today and how you were thinking about it going forward?

Okay, so first answer is we like that model and we’re emulating in a way that we think makes more sense for us. So we actually like the idea of having new product introduced into our system that our customers can use in our points in that’s why we launched the vacation rental business. I won’t say, I’m not going to say there’s no impact to us from Airbnb but we can’t detect it and the reason being is, Airbnb focus is on major markets where there’s lots of demand and so the impact, the urban markets, they impact the resort market. We’re not heavily populated there, I don’t want to suggest that we haven’t lost any rooms to Airbnb, sure we have but we have detected really no impact in our overall results and I think it’s impart because our inventories differently placed than a lot of the other hotel companies.

All right and if I can ask one more question, please. Out of some of the M&A that’s going on may go on in the future, there may be some brands that become available. Do you think about any spaces in your line up that might be appropriate to fill or areas of opportunity that you think would, is not fit for Choice at of all that in. you know the essence of the question is, should we consider the notion that you might go out and buy brand and put some capital out for it at this point?

So let’s start with, our intent is to continue to be a complete portfolio set of offerings to the consumer, our upscale strategy is obviously coming to play and is working in a big way between Ascend which is the largest soft branding brand by lot and the one that’s going to grow the fastest. As a matter of fact it’s going to grow faster than the next several competitors added together. So we started at 13 or 14 hotels, we’re now over 200. I think we’re 208 or 209 and that’s going to grow 40 hotels this year. So that has been a runaway success. Cambria has taken off in a big way. We’ve got 13 under construction. I think we’ll get 18 in the next couple of months. We’re going to open call it four this year. We’ll open 16 to 20 next year. And we think we’re going to ramp to 40 to 50 unit pace within a couple of years depending on financing environment obviously and, so as we look at that we think that’s really a significant chunk of what we wanted to accomplish. But you know I’ve made no secret to the fact that I think, an appropriate upper upscale brand that is relevant for the future. Is something that we should be looking at and looking for opportunities probably more of a purchase option if something becomes available than a development option because I’m not as young as I used to be. So we have looked at several opportunities and because we don’t have to do anything because of this company’s story and this company is going to grow significantly for the next several years, without doing anything. So we’re very disciplined buyer. The nice thing is, even the investment bankers come in, when they sit and talk to us. They go, you know here’s the hard part you actually don’t have to do anything. You’re in a really good shape where you are and so you’re going to see us continue to look for opportunities. We’ve talked a lot about Europe, we’ve looked at several things there. Haven’t landed anything yet, but we could and we would like to have a strong entry into the upper upscale market because I think that really completes our portfolio. I don’t think you’re going to see us in luxury. So kind of been there and done that. So I’m - but I do think, I think a full service upper upscale adapted for what makes sense in today’s environment which is different than the lot of the products that’s out there, but a strategy that sort of gets you into that place, so what the next full service upper upscale offering to the consumer actually is going to be like, that I think is an interesting opportunity for us and we’ll see whether or not we get it.

All right. Can I just ask you to clarify what you meant by today’s, you know that’s adapted for today’s environment? What did you mean by that?

I think that the 300 room suburban 10,000 square-foot full service hotel is a Dinosaur.

Okay, thanks very much.

And ladies and gentlemen, this concludes our Q&A session for today. I would like to turn the call to management for any final remarks.

Okay, so thanks obviously for joining us always. We appreciate your interest in Choice Hotels. That concludes our call for today, we’ll talk to you in February.

Ladies and gentlemen, thank you for participating in today’s conference. This concludes the program and you may all disconnect. Have a wonderful day.