Choice Hotels International Inc (CHH) 2015 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Good morning and welcome to Choice Hotels international Third Quarter 2015 earnings conference call.

(Operator Instructions)

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 constitutes 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 believes, excepts, anticipates, foresees forecasts, estimates or other words or phrases of similar import.

Such statements are subject to risk and uncertainties that can 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 31st, 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 update our forward-looking statements to reflect subsequent events or circumstances. You can find a reconciliation of our non-GAAP financial measures. You can refer to our remarks as part of our Third Quarter 2015 earnings press release, which is posted in on our website at Choicehotels.com under the investor information section.

I'd like to introduce Steve Joyce, President and Chief Executive Officer of Choice Hotels International Inc.

Welcome to the Choice Hotels earnings conference call. Joining me as always is Dave White, our CFO. This morning we are going to update you on our performance for the Third Quarter of 2015. As you 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 of the number of the hotels in our system and increase in our average effective royalty rate resulted in a 7% increase in our domestic royalties. We achieved a 10% in EBITDA from franchising activities as a result of the domestic royalty growth as just described combined, with strong development results and discipline 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 brands.

Let's talk about the upscale segment and our movement and momentum that's building. This quarter the momentum continued with a wave of reopenings and signage for our Cambria hotel and suites brand, and our Ascend Hotel Collection.

Just a few days ago we opened the brand new Cambria Hotel and Suites, Times Square. This is our second Cambria to open in Manhattan, following the successful opening of the Cambria Chelsea earlier this year. We also celebrated the grand opening of a new Cambria Hotel and 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 Cambrias in major markets including Chicago, Orlando, Irvine, Savannah, Georgia, and a 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 including conversions as part of our development strategy, will help continually drive growth for Cambria. We believe this combined 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 Ascends 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're seeing with our upscale brands, and think it will continue on into the future.

Now onto 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 meet the enhanced standards and aggressively target new construction hotels with our development efforts. Our Comfort brand strategies helped drive a nearly 40% increase of new domestic hotel contracts for the Comfort family brands, led by a 50% increase in domestic hotel contracts with 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 2 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 date ever. We have 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 centers. Choicehotels.com accounts for nearly half of choice domestic CRS revenue. On direct online channels Choicehotels.com and mobile had nine $7 million booking days in [2-3] 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're staying ahead of guest's booking needs and we are leveraging our distribution channels, to deliver an increasing number of customers to our franchise hotels.

Changing gears. I'll give you an update on the SkyTouch Technologies, a separate division that focuses on developing, marketing, and selling cutting edge cloud-based technology products to the hotel industry. SkyTouch boasts 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've 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 earning shares of $0.72, which was in line with our previously published alloc for the quarter. Our third quarter financial results continued 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 revenue and EBITDA, and with our year-over-year increase in domestic royalty revenues, which were driven by growth in all three critical levels - RevPAR, system size, and the effective royalty rate. Franchising EBITDA for the third quarter increased 10% over the same period of the prior year, and our franchising margins expanded by 230 basis points to 74.6%.

Our franchising revenue increased 6% over the prior year, driven by primarily by our domestic RevPAR performance, expansion of our effective royalty rate, franchise development results, which drove growth of initial franchise and relicensing fees, and by growth of procurement services revenues. We achieved a 6% increase in domestic RevPAR which is in line with industry-wide RevPAR results, and driven by 120 basis point increase in occupancy, and 4% increase in average daily rates.

On the supply front we were able to grow the number of hotels operating in our domestic franchises system by approximately 2/10 of 1%, compared to September 30, 2014. As we had previously mentioned our domestic supply growth numbers continue to be impacted by our rejuvenation strategy of the Comfort brand family. Excluding the impact of this strategy, our domestic system increased by over 100 units or approximately 3%.

Our Quality Inn brand has been positively impacted by our Comfort rejuvenation strategy and has increased 5% since September 30th of the prior year, and we've had success in repositioning many of the hotels previously flagged in the Comfort brand to Quality. Our efforts trend for Comfort are 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 Sands. The system size of these brands grew by 14% and 5% respectively since September 30th of the prior year, and the royalties generated from the Cambria Sands brand 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 reflect an improving franchise development environment in the overall desire ability of our brands 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 reminder of the year end, and ends in 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 were 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 [in] growth year over year, was offset primarily on account of the foreign currency impact of the stronger US dollar.

In respect to franchise development, the fundamentals that drive new hotel development and conversion opportunities continue to improve. As a result our initial and relicensing fees increased 44% in the third quarter 2015. The growth in our initial and relicensing fees were driven by a 14% increase in new franchise agreements, and 40% increase in relicensing and contract renewal agreements.

We believe the industry is still in the early stages of a supply growth portion of the cycle, which is reflected in our continued year over year growth in new construction franchise agreements. We expect the growth and the volume of our new construction franchise agreements, to accelerate over the next several years, and 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, of 2014. Our business continues to drive significant cash flows, which we strive to allocate to the items that will ultimately return the highest value to our shareholders.

During the quarter, in addition to our recurring quarterly dividend, we also completed the opportunistic and completed a repurchase of 1 million shares of common stock under our share repurchase program, at a total cost of approximately $50 million. In addition we continued to utilize our balance sheet to improve and support the growth of our Cambria brand.

Finally, we completed a [tuck in] acquisition of an enterprise that provides fast technology solutions to vacation of [middle] management companies. We expect the acquisition to be modestly creative to 2016 earnings.

Now we'll turn to our outlook for the remainder of 2015. As always, our outlook is (inaudible) assumes no additional share repurchases under the companies share repurchase program. Our outlook also assumes a slight increase to our effective tax rate for continued operations. We are now forecasting our effective tax rate to be 31% for the fourth quarter, and 32% for the full year, 2015.

Our franchising activity guidance assumes that our RevPAR will increase approximately 5.5% for 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 approximately 1%. Based on these assumptions, our guidance for full year 2015 EBITDA from franchising activities is a range between $255 million and $257 million.

With regard 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 at approximately $0.47, and our full year 2015 diluted EPS to range between $2.18 and $2.20 per share.

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 ending 2016.

Now I will return the call back over to Steve.

To sum it up our performance in third quarter shows strong growth with increases in RevPAR and domestic franchise contracts. It demonstrates that the demand for our brands is strong. We believe 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 I'll open the call up to any questions you might have.

(Operator Instructions)

Steve Kent, Goldman Sachs.

First off -- Steve, maybe you could just talk about the recent European hotel convention you had for the Choice brands within Europe -- that's been a focus area for you -- takeaways from the conference, pace of 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 are 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? Finally, I will tell you that La Quinta noted the Comfort brand refresh is having an impact on them. Can you talk about what that's doing and how much more momentum you see with that?

Sure. Let me start with the first one.

The conference we had was pretty exciting because it was a big success. 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 haven't been in yet. 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. 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. The takeaway was clearly probably the most positive conference we've ever had. There's 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 going to add to the system that we've already got. 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. That incentive capital is what is driving a number of these multi-(inaudible) deals that we expect to see.

So I think the answer is, at some point, probably in the next couple of quarters, we'll probably talk more about that and what we see in terms of pipeline size and growth. It's looking very encouraging at this point.

Let me have Dave talk about the fourth quarter numbers.

Thank you, Steve, for the question.

Just to clarify what we put out in our outlook this morning: we are not putting out a range of RevPAR for the full year, for 2015, at this point, given that we completed three-quarters of the year, given the understanding of how the first three quarters have played out. We are estimating that full-year RevPAR will be 7%. We put out our first estimates of RevPAR for the fourth quarter of 5.5%. 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 the outlook for (inaudible). To be clear, it's not a range, it's a complete estimate for the full year of 7%.

Okay, my mistake.

For Comfort brand refresh -- do you want to talk about that?

Yes, absolutely, because that's one of the most exciting things of our core brands that's going on. We just held our [chief] events, which is a number of largest Comfort developers. There were probably 40 people there. 30 of them were talking new deals. They are all -- 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'll 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's the right thing to do.

Behind those markets we have people looking to build new ones. So that's why you're seeing a 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 the end of this year or early next. We've had 11 months of positive RevPAR index every single month. If you look at what the new hotels are opening at, they are open at significantly higher levels than the brand averages. That's what's got these guys so excited.

Historically, we talked to a lot of developers, and 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, would tell you when Comfort was really at its strength it was the best return on investments in the hotel business you can make. We're getting back to those levels, and as a result, people have built them and they're very excited about where the brand's going and feel like they've got a brand they can invest in that's going to last them the next 15 to 20 years.

Okay. Thank you.

Shaun Kelley, Bank of America.

Hey, good morning, guys.

Actually, really wanted to follow up on that last question about RevPAR index and some of the brand refresh. 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 is just the average RevPAR index across the portfolio? And/or, if you can't do that, specifically on the Comfort Inn and Comfort Suites brands. I'm curious for those two brands.

Yes. So, look, the way to look at RevPAR index is on really a brand-by-brand basis. Our objective, obviously, is to improve RevPAR index for our brands over time. For Comfort, for example, look at the RevPAR mix on that brand on a local content basis: it's north of 100. Right. So we're focused on delivering services in the marketing distribution world as well as the product world that will drive that forward faster and higher to support what we're trying to do with Comfort.

I think each brand has a slightly different RevPAR index and slightly different positioning. That's typically how we think about it: RevPAR index directionally -- we need to move it up, that's what makes your brands more valuable to hotel developers and also that gives you good evidence of consumers that are staying in hotels are seeing value in the brand. That's why we're focusing our resources on driving the RevPAR index higher. But I think it's probably a different conversation to get through RevPAR index on a brand-by-brand basis.

What I would add to that is, if you look at where the new Comforts are opening, they are opening at some pretty significant RevPAR index levels. So there are still hotels to be either renovated or removed from the system, which is weighting down that overall average. We fully expect Comfort to be running numbers approaching where Sleep is today. The new ones that are opening are doing that already. 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 [the new] business. If you look at the overall increase in business travels in the hotels, it's 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'd add to what Steve said in terms of brand refresh is, we have a really strong view that we know exactly what needs to be done with Comfort. We've been at it for a couple years now. We've been going around three major [problems]: removing hotels from that system that don't meet the brand standard; improving the ones that are in the market and have the right bones to be good representatives in that system; and adding new construction hotels. When you look at those levers in terms of what we're doing, (inaudible) levers, we're having really strong success and remain pretty excited about what that's going to do for the brand and for the long term [loyalty potential] from that brand.

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

Yes.

Yes. And where we're opening them -- obviously, we're replacing the hotels that we're taking out. That's a clear opportunity for us. That will be a more revenue-intensive hotel. We're also seeing a big upswing in urban and dense suburban markets, which will bring up the brand average up significantly.

That should drive the brand average mix, but it shouldn't necessarily drive RPI, right? That didn't just drive RevPAR overall.

We're driving both.

Secondary on this, La Quinta also alluded to an increased competitive environment in some of their markets. I was curious whether it was because of transient behavior that you saw during the quarter, or anything else? Did you guys change or move your promotional strategy at all? And is it related to points or WiFi, or anything from the customer's behavior? Or were you guys steady as it goes?

We are doing a number of things to drive [miduse] traffic. Maybe others are noticing. It goes from, we're revamping the Choice privilege program to be more appealing to the business and upscale traveler. We have significantly increased our sales resources and our aggressiveness both with 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. All those things are going on at the same time, as well as the improvement in the brands. So as a result, we're seeing significant increases, both mid-week and weekend as a result of stronger demand. And I think a number of the things that we're doing.

Very helpful. My last question and I'll yield the floor.

For the Comfort refresh -- could you give us a directional amount? For the owners who are choosing to stay in but to renovate, you aren't doing this under your balance sheet, but how much capital are the guys typically investing, either a percentage of their total, or a dollar amount? Any ballpark you can provide to -- I know it's going to be a different cost.

A very, very wide range. If you said, what's the midpoint, it's probably somewhere between $200,000 and $400,000. The great thing is they're 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 system that are in the high teens in terms of RevPAR increases.

Very helpful. Thanks, guys.

Anthony Powell, Barclays.

A follow up on the Comfort reach of the nation. Where are you in the hotel exit process? And when do you think the exits will slow down? And how quickly that will be slowed down over the next couple of years.

I think we're almost done. By the end of this year we go back to sort of a normal -- at any point when you've got a system, there's going to be some churn, which we also view as opportunity to upscale it. 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 the lose sight of is, while the Comfort brand has had higher terminations because of our strategy -- our other brands, if you exclude Comfort, like we said in our opening remarks, have increased by 3% year to date, and for the full year we're expecting that to be closer to 4%. A component of that is our ability to successfully transition Comforts into some of our other brands that are more appropriate for that hotel asset based on where it is in its life cycle.

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

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

It's actually a very good news 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 mid-size change signing relatively rapidly. And then we are in deep discussions, as we said, with several of the Tier 1-type opportunities, which are the larger brand companies. Those obviously have a much longer burn rate to get to close, but we are in 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'll 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. When we have five or six ways to get there, we're pursuing all five of them.

Just a follow up on that. As your acquisition that you announced today will that fit in with SkyTouch and how will that add to that process?

Actually, that's a very interesting -- it could be long term. We don't know. Right now, what that is, is the technology platform for our 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 -- and we have very strong interest in the program.

So there's three 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, with 24 million members in CP, how many of those can we move over. We're pretty confident we are going to drive a lot of business for them and that's what our beta test shows. Three: you can buy the technology platform plus our revenue distribution support, which is the one that's generating the most interest. We think all three of those are going be strong revenue opportunities for us.

Great. Thank you.

Robin Farley of UBS.

A couple of questions.

First is on your unit growth for the full year. It's unchanged at 1%. I guess this quarter and the last two quarters have been coming in at below the 0.5% rate. Is that just that openings have slipped into Tier 4? Or how should we think about the unchanged full year?

I'll take that question, Robin.

Actually, throughout this year we've always contemplated that the fourth quarter would be a strong opening quarter for us. That's really what you're seeing is that the openings tend to skew (inaudible) 1% to the fourth quarter. Definitely unchanged. That's been our view throughout the year.

Okay. I mean, that wasn't the case last year in terms of the rate being different -- it's just the way that openings are falling this year?

Yes. Year in, year out, depending on your mix of conversions and new constructions. And obviously, new construction has accelerated this year relative to last year. All of that plays into the timing of when the hotels will open. Then you have got a piece (inaudible) the terminations that can vary from quarter to quarter on a year-over-year basis. [It has to do with] timing, but we are not changing any expectations around what unit growth would be in the fourth quarter based upon our guidance.

I wonder if you could give a little bit of color around Q3? The RevPAR came in below what your guidance has been. Was that certain regions? Or just any color around what you think is driving that?

It really was because August was soft. What happened was, we came in fairly strong to the quarter and then August, for some technical reasons -- there were two fewer Fridays and Labor Day -- all this was soft. The great thing is, it's from back [date] in September. That's what has given us such confidence going forward.

Okay. Great. And then, my last question is, if I'm looking at this rate, your full-year EBITDA guidance was unchanged; the tax rate is unchanged; but the EPS is down about $0.02. Anything I'm missing to get to that math?

Most of the difference between the EBITDA outlook and our EPS outlook -- which we did take down the top end of the EPS range. Most of that change is tied to the tax rate. Even though we didn't change 32%, it's still 32% when you look at the rounding; it's [50] basis points of tax rate; it translates to, call it a penny and a half per share. That's most of what's going on there with that EPS range. There's a couple of other things below the line that individually are (inaudible). Things like we had a $200,000 extinguished from a debt cost rate, which is below the line, when we refinanced our credit facility early this summer. For the most part it's the tax rate that you're seeing there.

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

Joe Greff, JPMorgan.

Good morning, all.

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

Yes. You know, look, we're still putting together our full outlook for 2016 and we'll come back to the market -- which we have, typically, either in December or January of each year. When we have all of our outlook of 2016 put together we will bring it back. Directionally, typically if you think about Comfort, excluding Comfort, we feel really positive about what you're going to see on the unit and the room growth side of things domestically.

Joe, do you have someone else?

I'm all set. Thanks, guys.

Thank you.

Thank You

(Operator Instructions)

Thomas Allen, Morgan Stanley.

Good morning. Two questions.

First, understanding that you're still in planning phases, as you think about 2016 RevPAR, any initial thoughts maybe as it would -- do you expect it to be stronger or weaker than 2015? And then, in terms of the unit growth, can you help us -- you mentioned earlier -- you're forecasting 1% unit growth for the year and you said that you expect to be up 4% if you exclude the Comfort refresh for all the other brands. But you also mentioned that you were shifting some old Comforts into Quality. Is there a way to think about it on an adjusted basis for backing out the Comfort refresh? Thank you.

Yes. Sure. So on the RevPAR front, we feel really good about the fundamentals in the industry and what we're going to see in 2016. Competitors have put out their outlook for next year in that mid single-digit percentage growth rate area. It feels like that should be a good spot to be. We continue to work through it, but we feel pretty good about positive RevPAR growth next year in that mid single-digit area.

When you think about what drives our business, there's three basic levers. It's employment is very important to us; consumer confidence is obviously very important; and economic growth, EP growth, is the other factor that we watch closely. 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. 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're thinking.

On the unit growth side of things, the 4% for full-year 2015 really reflects growth of the non-Comfort brands. I think the base is somewhere around 3,400 hotels in the non-Comfort brands. We expect that to be up about 4% this year. To add more color around what Comfort has done to that equation, there's been about 50 Comforts during 2015 in that 4% that are moving from Comfort to one of our other brands.

Okay. I'm sure I can calculate it. Thank you.

(Operator Instructions)

I would now like to turn the call over to Mr. Steve Joyce for closing remarks.

Terrific. Thank you for joining us. That concludes our call for today. Obviously, we're very pleased with the third quarter and we're ending up for the year, and we are looking for a very strong year next year and we look forward to talking to you about it next call. Thank you very much.

Ladies and gentlemen, thank you for participating in today's conference. That concludes today's program. You may all disconnect.