Ladies and gentlemen, thank you for standing by. Good morning, and welcome to the Choice Hotels International Third Quarter 2017 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 the conference call, certain predictive or forward-looking statements will be used to assist you in understanding the Company and its results. Actual results may differ materially from those indicated in forward-looking statements and you should consult the Company’s Form 10-K for the year ended December 31, 2016, and the Company’s other SEC filings for information about important risk factors affecting the Company that you should consider. These forward-looking statements speak as of today and we undertake no obligation to publicly update them 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 2017 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 Pat Pacious, President and Chief Executive Officer of Choice Hotels International Incorporated. Please go ahead, sir.

Thank you. Good morning, everyone. Welcome to Choice Hotels’ third quarter earnings conference call. I’m joined by Dominic Dragisich, our Chief Financial Officer. Today marks my first earnings conference call as President and Chief Executive Officer of Choice Hotels International. I am grateful for the trust and confidence that our Board of Directors has placed in me to lead this great Company and its many talented people and the responsibility to provide a great experience for a millions of guests' as well as deliver a strong return on investment for both our investors and our thousands of small business owners. Today, I'm going to talk about my view of Choice Hotels and how we are driving our strong performance. Choice has an incredible foundation and it is experiencing some of the strongest momentum in its 75 years history. Our financial performance reinforces that our strategy is working. Unit growth is accelerating. Domestic RevPAR is increasing and our domestic effective royalty rate is growing. As a result of our third quarter performance, today we are raising our adjusted diluted EPS and EBITDA guidance. Dom will provide these details in his remarks. So let me provide my view of our Company's future. Choice is in a unique position at the intersection of hospitality, franchising and technology. This differentiates us and creates opportunities both today and for years to come. As a hospitality company, Choice is dedicated to delivering a great guest experience. As a franchisor, we are focused on our franchisees profitability. And as a technology company, we continue to invest in our platform and our tools that will carry us into the future. As a hospitality company, our well known brands are expanding our footprint to provide travelers with a great experience. Choice’s position in hospitality is solid, especially our strength in leisure travel continues to be favorable which is our sweet spot. This is reinforced by the positive consumer demand outlook. Baby Boomers are beginning to retire. They are living longer and are maintaining a robust share of future demand. Leisure growth is outpacing business demand. Consumer confidence is at its highest level since December of 2000 and consumers continue to seek experiences like travel over material items. Business and residential investments are expected to drive economic growth stimulated by low unemployment rates in a positive lending environment. All of this is good news for Choice and it translates to success for our brands. In the Upscale segment, we have grown our number of hotels and we have significant runway for future growth. Our investment in Cambria Hotels is bringing the best product to the right markets faster than ever. Just last month, we celebrated the opening of the new Cambria Hotel located in the trendy Arts and Warehouse District in New Orleans. And the grand opening of our second hotel in Chicago with the Cambria Hotel Chicago Loop, which is in the heart of the city and sits above the historic Oriental Theater. Cambria is on track to have a record setting year. By the end of 2017, Cambria will have 36 open hotels in major cities like New York City, Los Angeles, Washington DC, and Pittsburgh. In total there are more than 100 Cambria Hotels open are in the pipeline focused on the top 50 U.S. RevPAR markets. We see this trajectory continuing because our corporate capital investment combined with our strategy to identify and source high demand real estate is working. Cambria is a brand that both developers and consumers love. Consumer feedback reinforces that the brand is delivering for our guests, receiving an average of nine out of 10 on our internal feedback satisfaction score. In addition, nearly one-third of the hotels are ranked number one or two in their markets on top third-party review sites. Our upscale soft brand, the Ascend Collection, has nearly 200 hotels open worldwide in key locations like Miami South Beach, San Francisco, and Maui. Choice was the first hotel company to launch a soft brand and we are the largest. Ascend is expected to open 45 hotels this year making it one of Ascend’s best growth years. In midscale, our brands continue to lead the segment with performance results that allow us to see new opportunities and stay ahead of competitors. Specifically, the Comfort brand is delivering impressive results in the upper midscale segment and generating interest from new and existing franchisees. Comfort is beating the upper midscale segment RevPAR growth year-to-date and has recorded RevPAR gains against its competitive step for 35 months out of the last 36 months. With 13 new hotels opening in third quarter, a Comfort brand is on track to open more than one hotel a week this year. Plus the brand's transformation strategy has resulted in one of the strongest pipelines in its history. With 87 new franchise agreements executed thus far this year, a 36% increase compared to the same period of 2016. Another one of our iconic brands, Quality Inn is the fastest growing mid-scale brand and one of the largest brands in our system. We recently celebrated the opening of the 1,500 Quality Inn hotels and the brand has grown over 7% domestically, since September 2016. This rapid growth is set to continue with 83 domestic openings in 2017. Sleep Inn, our all new construction mid-scale has a robust global pipeline of more than 120 hotels in addition to the nearly 400 existing properties globally. In fact, year-to-date Sleep Inn had a 22% increase in new domestic franchise agreements compared to the same period of 2016. Our Sleep Inn MainStay dual brand concept is also fueling growth, with more than 70 locations in the pipeline. As you all know, loyalty is a powerful driver of demand and guest retention. Choice Privileges our award winning hotel loyalty program continues to attract new members. Before we relaunched the program last year, there were 25 million members. Today there are more than 33 million members and this year alone, we've added more than four million new members. Now I'd like to talk about our role as a franchisor. We are focused on franchisee profitability. There are thousands of small business owners who choose Choice Hotels. Choice offers them a powerful value proposition to drive more topline revenue and reduce operating costs. For example to optimally price inventory and drive RevPAR, our revenue management service and SmartRates tool have been very effective. SmartRates is currently used by more than 4,400 of our hotels and usage has doubled since the beginning of the year. As these hotels have seen it ease of use and its positive impact on our revenue for those who leverage the tool regularly. Our franchisees also benefit from our high performing business model, which considers the hotel owners needs at every stage. From hotel prototypes that are cost affected to build to procurement services that leverage our scale and reduce the franchisees cost of goods and services. Our book direct efforts are key to helping with both top and bottom line growth. As drive awareness and incremental revenue as well as lower customer acquisition costs. The Badda Book Badda Boom campaign is performing very well for us. It's board, it's very different and it's breakthrough likability is among the highest of any of our previous campaigns. The advertising has improved awareness of Choice Hotels and the Comfort brand and benefits all of our brands as it reinforces the customer value proposition of booking directly at our website. As you know choicehotels.com is the most profitable channel for our franchisees. Year-to-date Choice is delivering nearly 60% of overall revenue to our franchisees hotels through our proprietary channels, up over 400 basis points from last year. Choice’s strengthening choicehotels.com at a faster rate than other hotel companies based on recent industry reports, during the first-year of Choice’s book direct program. We grew our brand.com twice as fast as our chain scale competitors. Finally, let me speak about our role as a technology company. Choice is a platform Company that handles more than $7 billion in transactions and connects more than 200 million people to our hotels annually. Over the past several years, we have made significant investments in cloud computing, data analytics and mobile. Our future depends on it. This drive for innovation continues as we are currently in the process of implementing a new state-of-the-art global reservations platform with full completion expected in the first quarter of 2018. This will be the first new central reservation system from a major hotel company in over 30 years and we will allow Choice to be more nimble. The platform features an unprecedented design that gives us the flexibility, scale and speed the market to adapt as technology continues to evolve. We believe it is a transformative platform for Choice, our customers, and our franchisees. As a Global Travel business, we have access to a significant amount of data that we use to improve the guest experience and drive profitability at the hotel level. Our new platform enables us to more effectively and efficiently use data analytics to drive the best business decision for both audiences and leverage emerging technology such as artificial intelligence and voice-based search. Choice already has powerful distribution channels. Reservations and revenue from choicehotels.com are each up 18% in the third quarter compared to the same period last year. The Choice Hotels mobile app continues to set daily and monthly records for mobile app revenue even as the peak travel season has passed. Reservations in mobile apps are up over 50% this year, resulting in a 59% revenue growth compared to 2016. So as we set up this intersection of hospitality, franchising and technology, we remain committed to our strategy, a strategy that delivers results. We are committed to our customers to deliver great guest experiences, committed to our franchisees to provide a great return on investment, and committed to embracing the digital era to ensure our future success. With this approach in mind, our three growth strategies, the strength of our core business, our momentum in the upscale segment, and a focus on our international operations and growth continue to fuel our positive results. Now I will turn it over to our CFO, Dom Dragisich, who will share more on the strategies and the specifics of our financial results.

Thanks Pat, and good morning, everyone. I want to start by saying it is fantastic to have you in your new position. I look forward to working with you to deliver on the Company's current business objectives and continue our rich history of innovation and growth. This morning, I am happy to share that our momentum continues. Our focus on franchisee profitability and execution of our three growth pillars enable us to deliver positive results for our investors. Today, we reported adjusted diluting earnings per share of $0.95 for the third quarter, which excludes charges associated with our CEO succession and certain leasehold impairments. Our adjusted diluted earnings per share exceeded the midpoints of our previously published range by $0.04 per share and the top end of our range by $0.03 per share. This adjusted earnings per share performance also reflects 13% increase from the same period of the prior year. Based on our third quarter performance and our outlook for the remainder of the year, we are raising both the top and bottom ends of our guidance for both adjusted diluted earnings per share and EBITDA. Our third quarter financial performance was highlighted by revenue growth of 10% over the prior year period and adjusted EBITDA for the quarter of $92.5 million, a 13% increase over the same period of the prior year. Our focus on strengthening our core brands and providing industry leading tools and services is driving incremental revenues for our franchisees and enhancing their operations. This is evident in the improvement of our franchising revenues, which increased 10% in the third quarter to nearly $125 million. We also continue to prudently manage costs and as a result we have maintained our adjusted hotel franchising margins at over 70% year-to-date. The improvement in our franchising revenues during the quarter were primarily driven by our domestic royalties which increased more than 8% over the same period of the prior year to over $98 million. The critical areas that drive our domestic royalty growth, all continue to improve in the third quarter compared to the prior year quarter. These include our domestic system-wide RevPAR which increased 2.1%; our hotel system size which increased 2.8% and our effective royalty rate which increased 19 basis points. Franchisee profitability is a cornerstone of our business and we continue to achieve success compared to our competitors. Choice’s domestic system-wide RevPAR was up 2.1% in the third quarter compared to the same period of the prior year and 10 basis points over our previously reported guidance. Additionally, we outpaced other branded hotels across the industry, excluding independent hotels, our 2.1% RevPAR growth exceeded the results recorded by branded hotels by 70 basis points, according to STR. RevPAR continues to reflect increases in both occupancy and average daily rates which is a positive indicator of continued improvement in our future RevPAR results. We experienced 70 basis point increase in occupancy and 1.2% increase in average daily rates in the third quarter. We expect the current RevPAR trend to continue into the fourth quarter and as a result we are forecasting fourth quarter RevPAR to increase between 1% and 3% versus the same period of prior year. Furthermore, we are maintaining our full-year RevPAR guidance of an increase between 2% and 3% over 2016. Growth in our royalty revenues also continues to be driven by the pricing of our franchise agreements. Our domestic effective royalty rates expanded by 19 basis points in the third quarter to 4.58% and we continue to expect the growth of our full-year domestic effective royalty rates to range between 17 and 19 basis points. As a reminder each 1 basis point increase of our effective royalty rate resulted over $700,000 in incremental domestic royalties on a full-year basis. As I mentioned, our rate revenue management and other tools are working by helping our franchisees increase profitability. These efforts have a direct correlation to our next update. The continued growth and momentum in our development pipeline. Franchisees continue to recognize our strong value proposition. For the third quarter of 2017, we executed 133 new domestic franchise agreements totaling over 11,000 rooms. Our first nine months of 2017 had been very positive for our development team as we have executed 415 new franchise agreements, a 10% increase over the same period of 2016 representing over 31,000 rooms. In particular, we continue to generate exceptional year-to-date development results for Comfort and our upscale brands, Cambria and Ascend which have decreased 36% and 52% respectively over the same period of the prior year. We are optimistic that the favorable industry fundamentals will remain in place and continue to expect the total number of new franchise agreements signed for the full-year 2017 will exceed the results posted in 2016. These strong development results continue to fuel our domestic hotel pipeline. At September 30 of 2017, Choice’s domestic pipeline increased 16% over the same period of the prior year to 751 hotels representing over 58,000 rooms. The growth at our domestic pipeline is highlighted by 26% increase in new construction hotels. Based on these development results and industry-wide supply growth projections, we continue to expect growth for our domestic franchise system size and we are increasing the low end of our forecasted range. We now expect our domestic system size in 2017 to increase between 2.5% and 3% over 2016. Our robust pipeline has fueled the continued growth of our domestic franchise system. During the third quarter, we opened 60 new domestic franchised hotels compared to 49 in third quarter of 2016. In addition, we have opened 222 new hotels through the first nine months of the year, representing a 23% increase over the prior year. Overall, the number of hotels operating in our domestic franchise system at September 30 of 2017 grew by 2.8% compared to September 30 of 2016. This represents an acceleration from the 0.9% growth reported from September of 2015 to September of 2016. Excluding the impact of the Comfort brand transformation strategy, the number of net units online grew in our domestic system by nearly 190, which represents a 5% increase compared to the prior year. We are also pleased with our international rooms growth, which increased 2.3% over September 30 of 2016. In fact, year-to-date, we’ve open hotels representing nearly 6,000 rooms across 15 different countries. Additionally, we have nearly 6,300 rooms in our international pipeline and continue to sign package deals including agreements in the UK, as well as Germany, Austria and Hungary. Further evidence of our strong value proposition is highlighted by the increase in our relicensing and renewal agreements. Our brands remain highly coveted by hotel owners, resulting in continued expansion in the number of agreements executed as well as improvement any average relicensing fees per contract. In third quarter, relicensing and renewal agreements increased 6% resulting in a 9% improvement in revenue compared to the same period last year. Finally, I'd like to share our outlook for the remainder of 2017. Our outlook assumes no additional share repurchases for the remainder of the year. Additionally, it assumes an effective tax rate of approximately 33% for the fourth quarter and 32% for the full-year 2017. Guidance for the full-year 2017, adjusted EBITDA from hotel franchising activities is a range between $301 million and $305 million, which represents approximately a $2 million increase at the midpoint from our previous guidance. For our non-hotel franchising activities, we project adjusted EBITDA reductions and expect a full-year 2017 impact of approximately $7 million. As a result, our consolidated adjusted full-year 2017 EBITDA as expected to range between $294 million and $298 million representing an increase of approximately 17% at the midpoint over the prior year. We expect our fourth quarter of 2017 diluted earnings per share to range between $0.60 and $0.62 and we have increased our full-year 2017 adjusted diluted earnings per share guidance to range between $2.84 and $2.88. In summary, we're very pleased with our third quarter, and we'll continue to focus on driving results with a focus on our three key pillars, the strength of our core brands, our momentum in upscale and international growth. The Choice team remains enthusiastic about our future growth prospects and that we were finished the year strong. At this time, Pat and I would be happy to answer any questions you may have.

Thank you. [Operator Instructions] And our first question comes from the line of Thomas Allen from Morgan Stanley. Your line is open.

Hi, good morning. So is there anyway to quantify how you feel like the hurricanes and natural disasters are affecting results? Thanks.

Yes, I think the way to think about it I mean look at the two major hurricanes we had this year and then they fell in that quarter. Primarily, we had about 350 hotels between the Harvey impact area and the Irma impact area. Not all of them were definitely impacted when the storms hit. We're down to about maybe a dozen hotels that are still closed. And as you look at sort of the impact, we know net-net, it's a positive as first responders come into the market and those who are helping to rebuild come into the market, so we know we saw an uplift. We try to look at and trying tease out the specific number. There's so many puts and takes in the quarter. If you look at the holiday shift, the hurricane essentially was sort of an offset to that, the way we look at it. And so it's really hard to sort of get down that granular level and understand it. The second piece is, the hurricanes themselves tend to have a tail on them and in this case we expect the Harvey impact to have a longer tail meaning of a greater flow through on RevPAR and occupancy increases, just given the type of damage that was done in that market versus Irma. Irma was more of a wider area, but a quicker impact and so we are expecting to see the Harvey impact probably last a little bit longer into the current quarter?

Great, I think the only thing I would add there is, while the uptick was certainly there, we still would have been – well in the RevPAR guidance that we have provided even without the storms.

That’s helpful. And then just my follow-up would be then you're guiding to 1% to 3% RevPAR growth for the fourth quarter that seems conservative to me like what would get you to 1% after you adjusted 2% this quarter?

Well, I think the way I’d answer that is we are expecting that same trend that we saw in Q3 to continue into Q4 and as Pat had mentioned, there is a bit of a tail sometimes associated with these storms. We are somewhat under penetrated in Texas. So we didn't necessarily see the lift that some of our midscale competitors saw necessarily in Q3. Again, we still expect cost somewhere around that 2%. There is a little bit of noise obviously with some of these hurricanes. So we did want to guide to a slightly larger range, but again I would just say that the trend is putting some of what we're seeing in Q3.

Though we can imply that the guidance were at the higher end – to midpoint to higher end of that range?

I would just say that the trends are pretty consistent right now.

Helpful. Thank you.

No problem.

Thank you. And our next question comes from the line of Shaun Kelley from Bank of America. Your line is open.

Hey. Good morning, guys. Maybe just wanted to start briefly with the kind of a quick update on some of the non-hotel franchising operations and some of the investment style stuff that you're making? Is it $7 million drag for this year? Can you give us a sense of how that's trending a run rate as you exit this year and sort of the thought around that that line item for next year? Appreciate that may not want to applied full for guidance, but just a ballpark for next year would be helpful.

So obviously we can't really speak to 2018 guidance right now. We will provide that during the next update. At the end of the day, I think we're really happy with the progress that we're speaking specifically on the SkyTouch side. We had said that we would be nearly a breakeven for the year and we're certainly trending towards that. We actually guided $1 million lower this particular quarter than last quarter. And the primary reason for that is we're actually seeing a higher uptick in terms of some of the sales for the quarter. So as a result of that you see some higher commission, you see some other higher marketing spend associated with that. At the end of the day $1 million for the particular quarter, we don't think is very material, but you could see an added benefit obviously in the 2018 and beyond.

Great. And then returning to unit growth which is obviously you guys are doing well. It's two questions here. One is just as we look at your guidance; I know is that rooms are growing less quickly than your total hotels number account. What's striving that spread because it seems like a it’s pretty wide – it's a little bit wider than we would have expected and most of our companies talk about guidance, they usually focus on rooms, do you guys have focused a little bit more on system side. So what's driving the difference in the 21 in rooms and the 28 in number of hotels that you are seeing right now?

Yes. I think it's – currently it’s a mix issue. If you look at our numbers and you back out the Comfort Inn transformation, Comforts are generally a larger hotel. So we're seeing more unit growth coming from our roadway brands and then some of the other smaller conversion brands. That's a short-term impact right now. I think when we move the Comfort unit growth back to our normal growth path, which will be really in sort of late 2018, 2019. You're going to start to see that pick up again. So a lot of it has to do with mix in the current quarter, where we are in the lodging cycle and the types of deals we are doing today, which we are going to see on a go forward basis so as we pick up both Cambria and Comfort openings if the rooms number start to pickup.

Exactly. And I think the other brand that’s a catalyst for that is obviously, it’s done both Cambria and Ascend, and upscale as we continue to make progress there coupled with the Comfort transformation strategy, we would see some larger room counts.

Great. And last question for me is just on we certainly hear some people in the development community talk a little bit about construction lending and getting harder to build new properties. Your pipeline statistic and it sounds like your conversations are actually pretty positive. So just kind of curious can you just give us an update on how you are thinking about the development community right now and when would you see or do you think we have yet seen any signs that the U.S. at least is going to hit peak supply? I think some people are starting to talk about that being 2019. Do you really think that's what you're seeing right now from the franchisees and developers you are talking to?

Yes. I think on the development front, we're still seeing developers are able to get financing, a lot of our developers build much more sort of local banks, regional banks for financing and friends and family to get their deals done. So the lending environment and the ability to get hotels financed still continued to be pretty positive. As far as industry supply goes you kind of look at where that normal sort of north of 2% is sort of where historically the lodging cycle has began to peak. We're still below that at this point and trying to predict when that number is going to crest that 2% is a little bit difficult, but we don't see anything really in the next sort of 12 months to 18 months that would tell us that we're reaching that point.

Yes. I think the two best indicators really we’re continuing to see that growth in occupancy. I think the other is when you take a look at new construction pipeline; we're actually up 26% year-to-date, which shows there's really not much of a slowdown in terms of our pipeline. The good news is regardless of where the markets heading, we historically have been able to capitalize on the conversion side of the house as well, so under any environment, we feel like we're in a very good place.

Thank you very much.

Thank you.

Thank you. And our next question comes from the line of Jared Shojaian from Wolfe Research. Your line is open.

Hey. Good morning, everybody. Thanks for taking my question.

Hi, Jared.

So can you just help me think about your use of cash going forward and are you nearing an end to the key money investments or is there still ways to go there and when can we expect the buyback to pick up again?

So like anything I would say that in terms without the buybacks, we're always going to look at the three or four levers that we have. And frankly, with where we're seeing the Cambria investments, we think that we have the ability to invest in our brand with outsized returns for our shareholders, returning money to the shareholders is always a top priority. I said in the past, I think in terms of the Cambria investment, we expect somewhere in that magnitude of $40 million to $50 million per year in terms of continuing to invest in that brand. And I think the great news, this particular quarter as you saw nearly $30 million of recycling. So we are starting to prove out the hypothesis that we had a couple quarters back in terms of recycling that cash in a five-year period. And so we are seeing some of those hotels opening, obviously getting the cash back and you start to see royalties in the magnitude of call it three times with that of the Comfort et cetera. Now we’re always – we're looking at some deleveraging right now obviously, which is what you're seeing, but I don't think deleveraging is necessarily a bad thing, it gives us a lot of opportunity to return cash to shareholders to obviously continue to invest in the brands and consider other activity.

Okay. Thanks. And then just to go back to your RevPAR guidance for the fourth quarter. I think historically you've given about 100 basis point range now you're giving about 200 basis point range. I appreciate your comments that things are trending favorably and consistent with what you've seen in the third quarter, but can you just talk a little bit about what went into that thought to give such a bigger range? What's different about now versus prior quarters?

Again, I think it really has to do with a lot of the puts and takes at the end of the day when you take a look at the tails of these hurricanes; we’re fairly over penetrated in the south, where we are under penetrated in the Texas market. So there could be some noise associated with that and we just thought it was prudent to do 200 basis point range.

Okay. Thanks. And if I could just ask one last clarification. You talked about SkyTouch being at breakeven, but a $7 million loss on the non-franchising piece. Is that just rounding or are there other pieces in the non-franchising that are actually losing money right now?

So you have a couple areas to focus on, year-to-date SykTouch is about $2 million drag on EBITDA. We do expect to maintain, call that near breakeven and obviously we have the vacation run through activities as well sitting in that non-franchising. And I would say the way to think about it it's more of kind of your research and development for new and innovative ideas.

Okay. Thank you very much.

Thank you.

Thank you. And our next question comes from the line of Anthony Powell from Barclays. Your line is open.

Hi. Good morning, guys. Following up on the last question, you did paydown some debt in the quarter, what is your targeted leverage ratio right now?

So we've always said that our target leverage ratio is somewhere in that three to four ballpark that were sitting at the low end of that range right now.

Got it. Thanks. And in terms of, I guess, Ascend seem to be doing well recently. Some of the competitors in a space were launching collection brand is hardening the upscale space, how do you see those competitors impacting your growth in that space?

So on the soft brand side of the house, we haven't seen any impact. As you can see by the numbers as Ascend continues to be a great value proposition for developers. We're seeing a lot of new construction coming into the Ascend brand, which is really interesting in addition to conversion of existing, lifestyle, boutique, upscale hotels and we're expecting to open 45 of those this year. The growth trajectory on Ascend both domestically and internationally is very positive and we're just not seeing. We're looking forward to see if we’re being impacted by some of these other soft brand launches, but we're just not seeing it in the development community at this point.

Got it, and maybe one more for me, you have international unit growth, which was a highlight, rooms growth is actually pretty good. Given some of the RevPAR growth that we’ve seen in Europe, do you expect that to accelerate over the next few quarters?

Yes, what we've been doing internationally with sort of repositioning the portfolio. So the reason while you're seeing the rooms growth as we've been exiting smaller hotels that are in tertiary markets and looking to sell more city center and then secondary market hotels with larger room count. And as Europe has had a pretty significant sort of rebound if you will, we would expect to see RevPAR continued to perform positively on that market.

Okay, great. Thank you. That's it for me.

Thank you.

Thank you. And our next question comes from the line Robin Farley from UBS. Your line is open.

Thanks. You talked about the franchise agreement, the increased year-to-date. It looks like maybe in Q3 that it declined, I wonder if you could just give a little bit of color around why maybe it was a timing issue?

Yes, we had a really fantastic first half of the year and we still believe we're going to exceed what we did last year on number of franchise agreement. I think we – because we did so many deals on the first half. We had a bit of a low relative to year-over-year. The other impact was when you do have these hurricanes in Florida and Texas that probably had a week or two delay on some people's ability to get their agreements kind of through the process. But from a development perspective, we still feel like we're on track to exceed our previous year’s number of agreements on that front.

Okay, great. Thanks. And then I'm also just looking at the RevPAR, compared to the chain scales. I know in your comments you mentioned kind of your data out performance, but in Q3 maybe it wasn't either – is that just Texas for you mentioned you're under represented and not benefiting from the hurricane activity or were there other regions?

It was. So when you actually peel the onion back a little bit, we outperformed in terms of the upper midscale, we outperformed in terms of the economy really was that midscale, where we’re under-penetrated in Texas specifically.

Okay, great. And then I wonder if you could also just give a little more color on the – you mentioned the reservation system completion in Q1, 2018. What was that do for you that that isn't being done now?

Yes, I think it's really leaving behind a legacy platform that was built 30 years ago and has had a lot of things build-in onto it and in that timeframe. Now you can think about it, not too different from the country's infrastructure, crumbling bridges and those types of things that cost a lot of money to maintain old systems. So what we wanted to do is move to a cloud-based platform that's more flexible and extensible and what it's going to help us do is really reduce the amount of cost every time we introduce a new capability and also reduce the amount of time it takes to get that capability in the hands of our customers and then hands of our franchisees. The second aspect of it is this data analytics part form which will really leave our old enterprise data warehouse, our legacy system in the past, and allow us in just a significant amount of data, which is really what the way the world is going. I mentioned in my remarks that data – we have a lot of access to our customers data and our franchisee data, and we use that data to make business decisions on how to price our hotels? Where to put our next hotel? And in order to compete in that world, data will have to move with significant volumes, significant velocity, and significant veracity meaning that's got to be correct. The new platform is going to give us that capability. So you move into a world where artificial intelligence and voice-based search are going to really requires systems to move a lot faster and in just a lot of data and turn it quickly, we needed to be ahead of the game on that front. So that's really when I look at the investment world is going to lead us in the future. It's really in investment I think will payoff for the shareholders and our franchisees, and guest over the next 10 years to 20 years.

Okay, great. Now that’s helpful. Thank you. Maybe just one last quick one, you mentioned the book direct effort, how much that’s increase? What's coming through proprietary channels 400 basis point? Can you tell us where your OTA percentage is right now versus a year-ago? I'm just curious if that’s – is it coming out of OTAs or if it's coming from other booking channels?

Yes, we don't disclose the exact percentage mix, but it is a shifting share we talked about that in the past, but we are educating the consumer that the lowest price can be found on our proprietary channels. And so it is coming from a share shift from both OTA and property direct.

Okay, great. Thank you.

Thanks.

Thank you. And our next question comes from the line of Joe Greff from JPMorgan. Your line is open.

Good morning, everybody. Just back on the reservation system topic, what's the all-in investment and how much incremental investment is there to spend on this?

So again we have really talked about it. You can call it in the tens of millions of dollars spread over a couple years and that spend is sitting in our system fund, which is where that that investment has always been through the history of the Company. So within our franchise agreements, we have a fee that fees are marking a reservation system spend and that's where the investment dollars are.

And do you think the incremental benefit of this [reband] central reservation system is an incremental RevPAR growth, wins growth or royalty rate and how do you sort of measurable? What you think the incremental return would be once it’s up and running?

Well I think it goes back to really the franchisee value proposition right. At the end of the day, this type of system is going to ultimately improve our franchisees possibility. So you could see a virtuous cycle in terms of each of the three key levers, right in terms of obviously effective royalty rate growth in terms of unit growth et cetera. And then RevPAR is obviously market dependent and obviously some of the things that we do internally we're able to really push a lot of our new innovative tools through cloud based systems both on the property management side of the house as well as the central reservation side of the house.

Thank you.

Thank you.

Thank you. And our next question comes from the line of Carlo Santarelli from Deutsche Bank. Your line is open.

Hey. Thanks guys, and good morning. I know acknowledging you guys aren't necessarily prepared to provide 2018 guidance or color at this point. Would you be able to maybe breakdown just in terms of SG&A and thinking about kind of the leverage you get from SG&A on a go forward basis? Clearly over the last few years, there's been some noise in there, so just trying to think a little bit more about how you are positioned as we head into next year from a core SG&A run rate?

Yes, I would say it's pretty consistent with what you're seeing this year. I think the best way to look at it when you take a look at the franchise specific SG&A and revenue growth. So call it mid single-digits in terms of SG&A growth in 2018. We’re going to continue to see the similar revenue growth that you saw this year. Obviously, we can't speak to specific guidance in the 2018, but I would just think about it in terms of trending up into 2018.

Great. And then just one quick follow-up. When I think about kind of Cambria and Ascend brand specifically and think out to 2018 with respect to fees for those brands and as they're growing faster, is there a way to kind of conceptually think about kind of the outperformance you would get overall portfolio wide from maybe those brands and the RevPAR more or less kicker that they provide just given the overall higher RevPAR dollar amount?

Yes, I guess from an internal metric, we look at our average Cambria of the contract. It is valued at about five times. What the average contract in the rest of our system is, so that's as you think about adding 25 Cambria contracts was like adding 125 contracts on the average, on the system side. So there are definitely much more revenue intensive particularly in the markets where the Cambria’s are opening, which is the top 50 U.S. domestic RevPAR markets, so you can expect to see that. And the same thing is true with Ascend. I mentioned some of the markets were opening in then San Francisco, Maui. There are high RevPAR markets, which are going to again drive sort of outsized performance financially from the broader system.

Great. Thanks so much.

Thank you. End of Q&A

Thank you. This concludes today's Q&A session. I’d now like to turn the call back over to Pat Pacious, President and Chief Executive Officer for closing remarks.

Thank you all for joining us today. As you can see, we have a lot to be excited about this quarter and through the end of the year. We are aggressively expanding and reaching new markets with our strong core brands and momentum in upscale. We're outperforming our competition in key metrics with proven tools in place and we are in a unique position as a hospitality, franchising, and technology company as our positive financial performance indicates our approach is working. We are focused on getting stronger and continuing to drive exceptional results for our Company and our shareholders. Thank you for joining us today.

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program and you may all disconnect. Everyone have a great day.