Choice Hotels International, Inc. (CHH) Q1 2015 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by. Good morning and welcome to the Choice Hotels International First Quarter 2015 Earnings Conference Call. At this time, all lines are in a listen-only mode. Later, there will be a question-and-answer session and further instructions will be given at that time. As a reminder, today's call is being recorded. During the course of this conference call, certain predictive 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 provision of the Securities Reform Act of 1995. These forward-looking statements generally can be identified by phrases such as Choice or its management's beliefs, expects, anticipates, foresees, forecasts, estimates, or other words or phrases of similar 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 ending December 31, 2014 and other SEC filings for information about important risk factors affecting the company that you should consider. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. We caution you, do not place undue reliance on forward-looking statements, which reflect our analysis only and speak 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 first quarter 2015 earnings press release, which is posted on our website at choicehotels.com under the Investor Information section. With that being said, I would now like to introduce Steve Joyce, President and Chief Executive Officer of Choice Hotels International, Incorporated. Please go ahead, sir. Stephen P. Joyce - President, Chief Executive Officer & Director: Thank you. Good morning. Welcome to Choice Hotels' earnings conference call. Joining me, as always, is Dave White, our Chief Financial Officer. This morning we'll update you on the performance of the first quarter for 2015, including the results of our core hotel franchising business and our key strategic growth initiatives. While it's obvious I'm happy that to be able to say that we are in the midst of what is a great run for the hotel industry, and Choice is definitely making the most of it. This week, we unveiled a new Choice Hotels brand identity. The launch includes a new logo, look and feel, and an integrated advertising campaign that spans TV, radio, digital, and mobile. The campaign is designed to accelerate the growth of Choice's brand awareness and celebrate connecting people face to face via our hotels and our brands. Our redesigned choicehotels.com featuring the new brand identity will make it easier than ever to book hotel reservations from any device. You will start seeing our TV advertising this week featuring The Clash's popular song Should I Stay or Should I Go as the musical anthem. This new brand identity and integrated marketing campaign helps capture the company that we are today. When you see this campaign, coupled with the business results I'm about to share, it will become apparent that a new picture of Choice is taking shape. Moving on to our results. I'm pleased to share with you that we had a strong quarter in a number of key areas. Domestic system RevPAR increased nearly 10% in the first quarter of 2015. Occupancy and average daily rates increased 300 basis points and 3.7%, respectively. Our RevPAR results compare favorably to the 8% industry-wide RevPAR results reported by Smith Travel Research for the quarter. And when you compare our RevPAR growth rate to the industry's results for only the segments where our brands compete, we also outperformed the industry. In other words, our RevPAR growth rate for the quarter was between 100 basis points and 160 basis points better than our chain scale and total industry results. Our outperformance on the RevPAR front was the primary driver of domestic royalty growth of approximately 9% for the quarter. Talking about development, we executed 99 new domestic hotel franchise agreements for the first quarter of 2015, a 68% increase compared with the prior year's first quarter. This is a result of both strong conversion and new construction volumes. The company's domestic pipeline of hotels under construction or approved for development increased 36% and the total pipeline increased 30% this quarter compared to the prior year's first quarter. We believe our growing development pipeline positions us well for an accelerated organic net unit growth in the near term at a pace at least a couple of hundred basis points higher than current levels. Overall net unit and room growth results were flattish for the quarter. However, our belief is that unit growth will accelerate based on our review of the results by segment and consideration of the impact of our long-term brand strategies, particularly around our flagship Comfort brand. While our overall net unit growth rates are being offset as we refresh the Comfort brand and remove the properties that no longer reflect the new Comfort, we are seeing strong current unit and room growth momentum in our upscale segments and with our other moderate-tier and economy brand chains. Factoring out Comfort, our net domestic unit growth for the quarter was close to 3%, led by brand growth for the Quality system, which was at 4.5% and growth in the upscale segment with Cambria and Ascend at a combined 9%. The increase in new construction pipeline was led by the Comfort brand, which increased 40% compared to the same period last year. Executed franchise contracts for the brand increased by 150%. We've received positive developer response from the multi-year brand improvement plan we have implemented for Comfort, and we believe this positive response is driving the strong increase in the Comfort pipeline. This increased pipeline will help replace the underperforming hotels that have or may in the future exit the system as part of our plan to implement and enforce higher standards for the hotels in our Comfort system. As a result of our brand improvements, Comfort Inn guest satisfaction has increased significantly and properties that have completed the property improvement plans are registering incremental growth in RevPAR, RevPAR index, and likely to recommend ratings. Comfort Inn's likelihood to recommend ratings have reached an all-time high over the past 12 months. Our Cambria hotels & suites brand is also driving development results as it continues to help fuel our expansion in the upscale segment. The growth that we are seeing for Cambria aligns with our strategic focus to open Cambria in major urban markets. Just a few weeks ago, Cambria opened a new 136-room hotel in New York City' s Chelsea neighborhood and in just a few days we're scheduled to open a new 148-room hotel right across from our headquarters just outside of Washington. We have another hotel in New York City that is expected to be completed this year in Times Square. These follow a wave of other openings in major markets like Washington, D.C., White Plains, New York, and Plano, Texas. We also have Cambria projects breaking ground soon in other major markets, including Miami, New Orleans, and Nashville. Furthering our expansion in the upscale segment, the Ascend Hotel Collection continues to be a strong growth segment, as we add exceptional upscale properties in great markets. This quarter, we expanded our strategic alliance with Bluegreen Vacations, adding six more Bluegreen locations to our Ascend Collection. There are now 28 Bluegreen properties that have joined Ascend since the launch of our relationship with them in 2013. Ascend continues to grow rapidly in key destinations. We recently announced the addition of the Trois Tilleuls Hotel & Spa in Quebec, Canada. This announcement comes just a few months after the opening of the St. James Hotel located in the heart of downtown Toronto. While originally designed to attract conversions, Ascend is now generating new construction and adaptive reuse interest as well. While we led the industry in entering this now rapidly growing segment, it is gratifying to see that independent owners of upscale hotels clearly recognize the benefits of affiliating with us, and now we're seeing Ascend generate new constructive and adaptive reuse interest as well. Ascend enables upscale owner/operators the opportunity to focus on property level details and taking care of guests, while relying on Choice to provide business delivery that helps generate RevPAR results and other benefits of our Central Reservation Systems. Turning to distribution, the revenue contribution of our Central Reservation System increased to 47.6% in the first quarter, up almost 500 basis points compared to the same time last year. We had 57 days in the first quarter that generated more than $10 million through our CRS, up from 32 last year. Choicehotels.com revenue increased more than 20% for the quarter. Furthermore in our direct online channels, choicehotels.com and mobile, we had 20 days in the first quarter that generated 5 million of bookings compared to just nine days during the same period last year. Bookings via our mobile applications continue to grow at a fast pace and have yielded an increase of 58% for the quarter compared to the same time last year. Our distribution strategy is delivering great results. We're staying ahead of guest booking needs, and we are leveraging our distribution channels to deliver an increasing number of customers to our franchisees' hotels. Changing gears, let me give you a brief update on SkyTouch technology, the separate division that focuses on developing, marketing and selling cutting-edge, cloud-based technology products to the hotel industry. SkyTouch boasts a large widely distributed cloud-based property management system. SkyTouch has now signed agreements with 135 customers since we established it as a distinct business division, and 43 new customers have signed year-to-date in 2015, representing nearly 10,000 rooms since the launch of SkyTouch. SkyTouch projects signing over 1,500 properties this year. SkyTouch is making significant progress and we are very excited about its current successes and potential impact on our future growth. Now, let me turnover to Dave White to share in more detail the financial results. David L. White - Chief Financial Officer, Treasurer & Senior VP: Thanks, Steve. Our first quarter franchising results continued to build on the momentum that we drove in 2014 highlighted by strong domestic RevPAR gains in franchise development results. As Steve mentioned, we achieved a nearly 10% increase in domestic RevPAR, which outpaced the overall industry RevPAR growth of 8% as reported by Smith Travel Research. Our RevPAR growth rate also outpaced the industry-wide RevPAR results for the chain scale segments in which we compete. The across the board growth in occupancy and average daily rates that we reported for the quarter demonstrates the continuing strength of lodging demand generally and for our brand specifically. Although our domestic RevPAR growth for the first quarter was slightly lower than our previous outlook, based on current trends and expected industry fundamentals, we are maintaining our full year domestic RevPAR guidance for an increase ranging between 6.5% and 8%. We attribute our slight underperformance in RevPAR for the quarter primarily due to strong winter weather, which impacted travel for several weeks during the quarter, as well as some weakness in the energy-related markets compared to our expectations. On the supply front, we were able to grow the number of hotels operating in our domestic franchise system by approximately 0.2% compared to March 31 of 2014. Our domestic supply growth numbers continued to be impacted by our rejuvenation strategy for the Comfort family brand. Excluding the impact of this strategy on the Comfort brand, unit growth for our domestic system increased by 2.6%. We are particularly pleased that our upscale brands, Cambria Suites and the Ascend Hotel Collection increased a combined 9%. Our efforts to rejuvenate the Comfort brand include the implementation of higher standards for hotels joining the Comfort brand, requiring meaningful property improvement plans at contract windows and targeting underperforming Comforts for termination and replacement with new construction product. These efforts are helping to fuel growth of our development pipeline for the Comfort brand family, which increased 25% from March 31 of last year, primarily driven by new construction projects. Although our Comfort rejuvenation strategy is impacting our short-term unit growth, we believe that this strategy will result in a stronger Comfort brand that will generate improved returns for many years to come in the largest chain scale segment in the U.S. market. We're already realizing improvements in RevPAR index for the existing Comfort brand family against its competitive set, and expect this trend to continue as the new construction hotels in our pipeline are introduced to the system. Overall, our RevPAR and unit growth performance resulted in domestic royalty revenues increasing by approximately 9% to $57.8 million. The growth in our domestic royalties for the quarter was generally in line with our prior expectation. Our non-domestic royalties declined approximately 13% from $5.4 million to $4.7 million, as the benefit of international system room growth year-over-year was offset primarily on account of the foreign currency impact of the stronger U.S. dollar. With respect to franchise development, the fundamentals that drive new hotel development and conversion opportunities continued to improve. As a result, our initial and relicensing fees increased 53% in the first quarter of this year. During the first quarter of 2015, we executed 99 new domestic franchise contracts compared to 59 last year, a 58% increase. The increase in domestic executed franchise contracts was driven by both new construction and conversion agreements, which increased 21% and 90% respectively. We are particularly pleased that we are starting to see a reduction in the level of financial incentives required to execute conversion franchise agreements. While the first quarter results offer a small sample size, we're encouraged by these trends. And we continue to expect that our 2015 franchise sales activity levels will exceed last year's levels. Our first quarter relicensing and renewal activities also reflect the improving hotel transaction environment and improved 20% over the first quarter of last year. For the trailing 12 months ended March 31 of 2015, we executed 353 domestic relicensing and renewal contracts, which represents approximately 7% of domestic system. As we have mentioned on previous calls, we are encouraged about the increased pace of relicensing and renewal activity. We're optimistic that there is additional headroom for growth of transaction volumes and the related relicensing fee stream as current volumes are still less than peak transaction levels we experienced between 2005 and 2007. During those years, the percentage of domestic franchise system that relicensed annually ranged between 8% and 10%. Franchising EBITDA for the quarter increased 5% over the same period of the prior year to $48.9 million. Our EBITDA from franchising activities reflects a $3.7 million or 16% increase in franchising SG&A, which is higher than our historical and targeted SG&A growth rate of low-to-mid-single digit increases. Franchising SG&A for the quarter reflects an increase in variable sales compensation as a result of the industrial (16:44) fee increase, as well as some non-recurring costs related to employee termination benefits and mark-to-market adjustments on employee deferred compensation arrangements held in our non-qualified investment plans. In addition, SG&A reflects costs incurred in support of our Comfort rejuvenation strategy, as well as cost to support our new corporate brand launch we recently announced. We continued to expect full-year SG&A from franchising cost for 2015 to increase in the mid-single digit percentage point area for the full year. Overall for the quarter, we achieved our diluted EPS guidance of $0.37, as well as our internal targets for franchising EBITDA. Now, I'll turn to our outlook for the remainder of this year. As always, our outlook assumes no additional share repurchases under the company's share repurchase program. Our outlook also assumes the effective tax rate for continuing operations to be 32% for the second quarter and 31% for full year 2015. Our franchising activity guidance assumes that our RevPAR will increase approximately 7% for the second quarter and range between 6.5% and 8% for full-year 2015. Our net domestic unit growth will increase by approximately 1% and our effective royalty rate will increase by 2 basis points for the full year. As the year progresses, the pace of our quarterly RevPAR growth is projected to slightly decelerate from the fourth quarter of 2014 and the first quarter of 2015, primarily due to the stronger comparable results achieved in the prior year. Based on these assumptions and despite headwinds from the strengthening of the U.S. dollar, we are maintaining guidance for full-year 2015 EBITDA from franchising activities to range between $254 million and $259 million. With regards to SkyTouch, we are projecting reductions in EBITDA for full-year 2015 to range between $15 million and $20 million compared to approximately $16 million last year. We expect our second quarter 2015 diluted EPS to be $0.58, and we are maintaining our full-year 2015 diluted EPS to range between $2.14 and $2.21 per share, and our consolidated EBITDA for full-year 2015 to range between $236 million and $241 million. These EPS and consolidated EBITDA estimates assume that we incur net reductions in EBITDA related to SkyTouch at the midpoint of the range for that investment. We are very pleased with our first quarter performance and 2015 will be another strong year for our core franchising business that will allow us to build on our track record of creating strong returns for our shareholders. And now, let me turn the call back over to Steve. Stephen P. Joyce - President, Chief Executive Officer & Director: Thanks, Dave. So, we're off to a very strong start in 2015. We believe that the lodging cycle continues to have positive momentum. We're very optimistic about our business in both the short and long-term based on our strong lodging results in the first quarter, including RevPAR gains that outpaced our competitive set and development numbers that exceeded last year's first quarter results. Our RevPAR and development results demonstrate continued strong demand for our brands by both consumers and hotel developers. So now, I'll open up the call to any questions you might have.

Thank you. And our first question comes from the line of Felicia Hendrix of Barclays. Your line is open. Please go ahead.

Hi. Good morning. Thank you. Stephen P. Joyce - President, Chief Executive Officer & Director: Good morning, Felicia.

Steve, first question is for you. Thank you for walking us through why your RevPAR fell a little bit short of your original guidance. You cited weather and weakness in the energy sector. When you're thinking about your forward guidance, which you reiterated, has that weakness in the energy sector been taken into consideration? And then, also, can you just talk a little bit about what you were seeing specifically there from the energy sector? Stephen P. Joyce - President, Chief Executive Officer & Director: Yeah. Sure. I guess one thing I just want to reemphasize is that our 9.5% – 9.6% RevPAR growth for the quarter was still I think essentially kind of one of the strongest results you've seen in the industry. So, despite that it was a little – a touch below what we were expecting, we still feel really good about it at absolute levels. And definitely, we factored in for the balance of this year within our range what we think is an appropriate reflection of the overall industry dynamics including the energy market dynamics. And basically, I would say more specific to Choice, if you think about the percentage of our domestic system, that specifically and what we deem kind of energy markets, in other words, energy producing markets, is somewhere around 5% – 5% to 6%, pretty small percentage, so in that single digit percentage range. So it's not as big of an impact to us as it is perhaps to some of the other brands that are out there. But overall, we really feel good about where the level of RevPAR came in on an absolute basis, a little below of what we thought it would be on the energy and the weather related concerns up in the Northeast, but feel good about what we've guided to for the balance of the year.

Okay. It sounds like it's probably more weather than energy? Stephen P. Joyce - President, Chief Executive Officer & Director: Yeah, kind of combination of both. And look, it's also tough to handicap the lower energy prices and the lower gas prices, how exactly that benefited us and the other 95% of markets that aren't energy markets, right.

Okay. Fair. Thank you. Steve, just if we could switch gears over to SkyTouch, just a few things that might be helpful to understand. First is, can you just quickly – because I'm sure this is a very much larger conversation, but if you could just quickly walk us through the decision process with prospective clients, how long does that take, and then, how long once the contract is signed does it take to implement your software? And then, the other part of the question is, on the last call, you guys talked about 2017 perhaps being a breakeven for SkyTouch; wondering if that's still intact? But my main question is, by the time, you breakeven, your company will spend just under $100 million in G&A for SkyTouch, and I was just hoping you could help us understand what's going into the roughly $20 million a year of spending there; it would be really helpful for us specifically, because most of us don't have software background, so if we could understand what that annual spending is that would be great? Thank you. Stephen P. Joyce - President, Chief Executive Officer & Director: Sure. So, time to implement, so that can vary widely. So, the independent hotels that we're signing pretty rapidly, that can happen literally in a matter of weeks. So, because this is a SaaS-based system, you're not running around installing boxes and you're not cabling. Basically, they've access to the Internet. We can turn it on almost immediately. Though the – accounts though that we're really excited about, so we talked about a 1000-room account last time that we signed initially. And so, those actually take quite a bit of time. So, that can take six months plus as you build the interfaces to their other systems. And, as a result, when you talk about the Tier-1 accounts, which we've landed a portion of 1s, and we're in dialog on several others. When you land those, the time from actual signing the deal to the time where you're actually generating revenue can be much more extended period and it could be as much as nine months to a year depending on how quickly and how many systems you're building interfaces to. And, as a result, those are sort of built into our forecast. In regards to the money that we're spending, it is a split between – there is a lot of money going into sales and marketing obviously. And so, we've got a team that's out talking to brands, and the individual hotels, and doing all the things which you'd expect a tech sales force to do. There also is a significant team of developers on staff who are not only maintaining the product, but that too is also updating the product to make it more attractive to clients. So, building the interfaces to other reservation systems and other platforms is what's really fueling a lot of the growth that we're seeing currently. So – and that team not only will also do those connections to other platforms, but we've got people on staff though that will also work when we bring on a major account to build those interfaces. So, Dave, I don't know if you have an idea of the split of those costs? David L. White - Chief Financial Officer, Treasurer & Senior VP: It's – I would call it maybe about a third to the sales and marketing, a little bit more than a third and the balance is more in the technology property support type level that you described. And then, Felicia, your other question around our perspective on the breakeven in 2017, we haven't made any changes to that assumption.

Okay. And has the sales process gotten quicker or how long is that? David L. White - Chief Financial Officer, Treasurer & Senior VP: Well, I think what we're seeing is, if you look at sales to kind of more of a – I'd call it like the Tier 2 level, more of the individual owner/operator or a small change is actually moving along very nicely, and we're pretty pleased with what we're seeing there. The Tier-1, more of the larger brand companies is, not unexpectedly and I think Steve kind of alluded to, is typically going to be a longer cycle sale. But, we're having the right dialogs with the right companies, so we feel pretty positive about the direction.

Okay. Thank you.

Thank you. And our next question comes from the line of Nikhil Bhalla of FBR. Your line is open. Please go ahead. Nikhil Bhalla - FBR Capital Markets & Co.: Yeah, hi, good morning. Good morning, Steve. Just to follow-up on the SkyTouch initiative. Do I recall correctly that I think in the last call you had mentioned signing of about 2,000 to 3,000 hotels into the system this year, and I think you just mentioned 1,500. Is that a correct number? Stephen P. Joyce - President, Chief Executive Officer & Director: Yes, kind of our target for this year was the 1,500. Nikhil Bhalla - FBR Capital Markets & Co.: Okay. But... Stephen P. Joyce - President, Chief Executive Officer & Director: I think what we've said on the call is we're expecting 2,000 to 3,000. We're pretty confident of the 1,500. It could be depending on where we end up in some of these discussions, could be higher than that. But, we're very pleased with the pace. Nikhil Bhalla - FBR Capital Markets & Co.: Got it, okay. So, 1,500 is the new number, so to speak. And just sort of as we think about 2016 and 2017, what does seem to be sort of the pace that you could expect? Do you think it will be a little bit more lumpy going forward, or do you think it will actually accelerate? Stephen P. Joyce - President, Chief Executive Officer & Director: We think it will be lumpier, because that's where we expect to land some of these larger accounts. Nikhil Bhalla - FBR Capital Markets & Co.: Okay. And just on that note, the pricing is still between $6,000 and $8,000 per hotel per year? Stephen P. Joyce - President, Chief Executive Officer & Director: That's probably a good way – that's a good way to think about it. Nikhil Bhalla - FBR Capital Markets & Co.: Okay. One final question on share buybacks. So in last quarter you did do a large share buyback. This quarter you didn't have any share buyback. Was there any specific reason for that? Stephen P. Joyce - President, Chief Executive Officer & Director: No specific reason relative to our historical practice. I mean it's always been, as you well know, kind of a very optimistic and lumpy approach on the share repurchase side of things. Nikhil Bhalla - FBR Capital Markets & Co.: Okay. That's all for me. Thank you.

Thank you. And our next question comes from the line of Thomas Allen of Morgan Stanley. Your line is open. Please go ahead. Thomas G. Allen - Morgan Stanley & Co. LLC: Hey, good morning, guys. Stephen P. Joyce - President, Chief Executive Officer & Director: Good morning. Thomas G. Allen - Morgan Stanley & Co. LLC: You gave us some interesting stats just on the number – the percentage of revenue coming through your Central Reservation System and then business coming through choice.com. But can you just talk a little bit about OTAs, what's that mix today versus in the past and how do you view both the consolidation and the new entrants in that space? Thanks. Stephen P. Joyce - President, Chief Executive Officer & Director: Yeah, thanks for the question. So the answer is, the OTA business is continuing to expand as it is for everybody else in the industry. Our approach has been to separate and divide out our business among several providers and that is working, because what's resulting in is a price reduction in the cost of those channels. And so you've seen that we were the first one to sign up with TripAdvisor. We view that as an outstanding channel that's reasonably priced and so you're going to see us pushing a lot to connect with them. The consolidation, so obviously works the other way, because we want to diversify our channels amongst very others, amongst many of them. But if you look at where we focused our efforts, TripAdvisor is the recent addition which we think is going to be very positive, because the price points are – that are there are coming down as a result of that competition. And at the same time, we are continuing to grow our relationship with Booking.com, which we established a couple of years ago. That's working very well at the same time to spread out that business. And then, there's some new entrants that we're in conversation with. Amazon joining the fray is an interesting opportunity. We're in conversation with them. And so we're assuming they're going to be a valid channel. And so we're looking forward to potentially striking a deal with them and doing business with them as well. And in the end, our model is the same. We want to be and be available and easy to book on whatever channel or whatever device the consumer wants, and so we're going to continue to do that. But at the same time, the very encouraging fact is the price of those channels is coming down as a result of competition, and we view that as very positive. David L. White - Chief Financial Officer, Treasurer & Senior VP: Yeah. And then the other thing to add is, outside of the Central Reservation System stats that Steve referenced, there's still a substantial amount of the business that goes to the property direct that is actually – and a good portion of that is Choice Privileges loyalty program driven. So I think that's an important factor to consider when you're thinking about the distribution environment, along with – and I'd just say, it's very critical, if you're asking me about franchisees is the pricing of the business. So it's not just about the volume of the business, it's about what the average daily rate is that it comes through the channels. So that's an area where if you look at our direct proprietary channels, we're in a real strong position relative to the third-party sources of revenue in terms of rate. Stephen P. Joyce - President, Chief Executive Officer & Director: But relatively the OTA business is still a small portion of our business. It's in the 12%-plus (31:40) category. Thomas G. Allen - Morgan Stanley & Co. LLC: Very helpful. And then just on international business and customers in general. So for your domestic business, what percentage of your businesses are international customers, and are you seeing any change in their habits? And can you give us international RevPAR? Yeah, thanks. Stephen P. Joyce - President, Chief Executive Officer & Director: Well, we will put out a number of the international travelers domestically. I don't want to guess. I would assume it's sort of in the 15% range, but let us get that number for you, but there are some very interesting developments going on. So, obviously, the strong dollar is affecting travel here from several markets from Europe. But at the same time, we're seeing a significant expansion in Chinese travelers, which we're pretty excited about. So we are out actively selling domestic U.S. properties in China and working with tour travel groups and others because that Chinese market, one, it's huge; two, their number one desired destination is the U.S.; and three, they want multiple occupancy and a $75 room rate. So that plays very well into our system. So we are preparing our hotels in the markets that we think we're going to see him in to be ready to greet those Chinese guests, provide them with the services and amenities they want, what they want to eat for breakfast, so congee is going to be big on our breakfast menu. And also, though, we are working to create connections between those – bringing those Chinese travelers to the U.S. and ourselves and are working on not only the direct relationships and the selling, but also the technology platform to make sure that we're presenting it to them in a way that makes it easy for them to book, but we're viewing that as a big upside opportunity for us. And, in general, the international travel picture is exploding. It's over a – there were over 1.2 billion in terms of international travelers over the last year and those travelers are increasingly interested in the United States. Historically, after 9/11, we didn't make it easy for people to get here; that is changing, so visas are easier to come by and quicker to get. And we are working with, obviously, the law enforcement officials and the TSA about a friendlier greeting when they get here and that is a work-in-progress. So there's a lot of very positive things from that standpoint. And we think, at Choice, we stand front and center to receive a lot of that business because while they come here to spend their money on goods, they are very price conscious on the hotel side and that feeds right into our value proposition. David L. White - Chief Financial Officer, Treasurer & Senior VP: And on the international RevPAR front, we don't give country by country RevPAR results. I mean, just to give you a little color there, I guess, in most of the regions in the countries where we operate in virtually all of them, we saw occupancy gains during the first quarter of 2015, which is positive, I think from the demand side of things. We certainly saw offset, obviously, on the currency side of things, but we don't give detailed country by country level RevPAR results. Thomas G. Allen - Morgan Stanley & Co. LLC: Helpful. Thank you.

Thank you. And we have a question from the line of Steven Kent of Goldman Sachs. Your line is open. Please go ahead. Steven E. Kent - Goldman Sachs & Co.: Hi. Good morning, Steve and David. Just two questions. When you lay out your forecast for the balance of the year, what consumer drivers are you looking at given the short booking window generally for your properties? And then secondarily, you do note a pretty big pickup in construction franchise and domestic franchise growth. Are you taking share of existing operators, and also have you started to see cannibalization of either your brands or other brands? Steven E. Kent - Goldman Sachs & Co.: So on that first comment around the consumer broadly, I think look, what we typically look at as we're looking out into the future from a RevPAR perspective because you're right, our booking windows tend to be shorter than any of the other brands out there is kind of an overall view on GDP. We take a look at kind of what the prognosticators in travel see for this year, are projecting. If you look out this quarter versus last quarter, it's bit of a mixed bag. I mean, there're some things that are more positive, some things that are less positive. Corporate profits seem to be trending the right way. Again, employment rates seem to be kind of hanging in there. Obviously, energy prices hurt in the energy markets to a degree, but the other 90-plus% of hotels that are not in those energy markets we think are getting a benefit from the consumers effectively getting essentially the equivalent of tax cut. So there's a lot of different factors that we kind of take into effect in addition to what we're actually seeing, right, currently. So we're a month and a few days into the second quarter, so we've obviously got a trend for the past month-and-a-half that we factor in when we think about our outlook on the RevPAR side of things. In terms of the commentary on the new construction side, I would say I don't believe we don't – we're not cannibalizing our brands. I think that if you look at our performance on the new construction side in that upper moderate space, we feel pretty good about the direction our development results are taking us in terms of share gains. We're not where we wanted to be but, hey, we're setting our aspirations high to outperform, but we think it's moving in the right direction in terms of stealing share from the other upper moderate tier brands out there. So one way to think about it is, on the conversion side, we are the premier conversion company. There's no one that does more and there's no one that provides more value. And so we lead that category by a lot. So on the new construction side, as typical in the cycle, the more established upscale brands tend to lead with new construction because they tend to be easier to finance from banking relationships because they're tending to be in dense suburban or more urban-like environments. But now what you're seeing and the pickup we're seeing is that that has now flowed to secondary and tertiary markets. So our franchisees are getting financing opportunities for projects they have been working on but now are able to begin construction, and that's why they're signing the agreements. And so this part of the cycle really for our core business really becomes the sweet spot for us. And so that's why you're seeing those new construction numbers swing up. Comfort is a prime example of that. And, in addition, there's a lot of excitement about the brand because of the success we're having with it. And then, on the upscale side, while we are primarily pushing in urban, dense suburban development strategy because we have so much unmet demand in those markets. That is accelerating as well. And so we are out aggressively incenting people to do our brands. We don't have the lion's share of the new construction in the upscale space, but we are actively trying to capture a bigger and bigger piece of that pie and are having some good success. Steven E. Kent - Goldman Sachs & Co.: Okay. Thanks.

Thank you. At this time, I'm showing no further questions. I'd like to turn the call back over to Steve Joyce for any closing remarks. Stephen P. Joyce - President, Chief Executive Officer & Director: Well, thank you for joining us. Obviously, we're very enthusiastic about the results from the first quarter and where we stand for the rest of the year. That concludes our call today.