CHOICE HOTELS INTERNATIONAL INC DE

Previous wording

We are primarily a hotel franchisor operating in 50 states, the District of Columbia, and 46 countries and territories. At December 31, 2023, we had 7,527 hotels with 632,986 rooms open and operating, and 1,032 hotels with 105,062 rooms under construction, awaiting conversion or approved for development, or committed to future franchise development on outstanding master development agreements (collectively, "pipeline") in our global system. Our brand names include Comfort Inn®, Comfort Suites®, Quality®, Clarion®, Clarion Pointe™, Ascend Hotel Collection®, Sleep Inn®, Econo Lodge®, Rodeway Inn®, MainStay Suites®, Suburban Studios™, WoodSpring Suites®, Everhome Suites®, and Cambria® Hotels (collectively, the "legacy Choice brands"). Additionally, through the Radisson Hotels Americas acquisition completed on August 11, 2022, our brands expanded to include Radisson Blu®, Radisson RED®, Radisson®, Park Plaza®, Country Inn & Suites® by Radisson, Radisson Inn & Suites SM, Park Inn by Radisson®, Radisson Individuals®, and Radisson Collection® (collectively, the "legacy Radisson brands"), which are located across the United States, Canada, the Caribbean and Latin America.

Current wording

We are primarily a hotel franchisor operating in 49 states, the District of Columbia, and 46 countries and territories. As of December 31, 2024, we had 7,586 hotels with 653,810 rooms open and operating, and 964 hotels with 97,325 rooms under construction, awaiting conversion or approved for development, or committed to future franchise development on outstanding master development agreements (collectively, "pipeline") in our global system. Our brand names include Radisson Blu®, Park Plaza®, Cambria® Hotels, Ascend Hotel Collection®, Radisson RED®, Radisson Individuals®, Radisson®, Radisson Collection®, Clarion®, Clarion Pointe™, Comfort Inn®, Comfort Suites®, Country Inn & Suites® by Radisson, Radisson Inn & Suites SM, Sleep Inn®, Quality®, Park Inn by Radisson®, Everhome Suites®, WoodSpring Suites®, MainStay Suites®, Suburban Studios™, Econo Lodge®, and Rodeway Inn®.

Previous wording

The hotel franchising business represents the Company's primary operations. The Company's domestic operations are conducted through direct franchising relationships, the ownership of seven Cambria and three legacy Radisson Hotels Americas open and operating hotels, and the management of 14 hotels (inclusive of four owned hotels), while its international franchise operations are conducted through a combination of direct franchising and master franchising relationships. Master franchising relationships are governed by master franchising agreements which generally provide the master franchisee with the right to use our brands and sub-license the use of our brands in a specific geographic region, usually for a fee. As a result of our master franchise relationships and international market conditions, our revenues are primarily concentrated in the United States. Therefore, our description of our business is primarily focused on the domestic operations, which encompasses the United States.

Current wording

The hotel franchising business represents the Company's primary operations. The Company's domestic operations are conducted through direct franchising relationships, the ownership of 12 open and operating hotels, and the management of 13 hotels (inclusive of four owned hotels), while its international franchise operations are conducted through a combination of direct franchising and master franchising relationships. Master franchising relationships are governed by master franchising agreements, which generally provide the master franchisee with the right to use our brands and sub-license the use of our brands in a specific geographic region, usually for a fee. As a result of our master franchise relationships and international market conditions, our revenues are primarily concentrated in the United States. Therefore, our description of our business is primarily focused on the domestic operations, which encompasses the United States.

Previous wording

We are required by our franchise agreements to use the marketing and reservation system fees we collect for system-wide marketing and reservation system activities. These expenditures, which include advertising costs and costs to maintain our central reservations systems, enhance awareness and consumer preference for our brands and deliver guests to our franchisees. Greater awareness and preference promote long-term growth in business delivery to our franchisees and increases the desirability of our brands to hotel owners and developers, which ultimately increases the franchise fees earned by the Company. Additionally, the legacy Radisson Hotels Americas management agreements include cost reimbursements, primarily related to payroll costs at managed hotels where the Company is the employer.

Current wording

Greater awareness and preference promote long-term growth in business delivery to our franchisees and increases the desirability of our brands to hotel owners and developers, which ultimately increases the franchise fees earned by the Company. Additionally, the Company's management agreements include cost reimbursements, which is primarily related to payroll costs at the managed hotels where the Company is the employer.

Previous wording

Profitable Growth -Our success is dependent on improving the performance of our hotels, increasing the size of our system by selling additional hotel franchises with a focus on revenue-intense chain scales and markets, improving our effective royalty rate, expanding our qualified vendor and partnership platform programs and maintaining a disciplined cost structure. We attempt to improve our revenues and overall profitability by providing a variety of products and services designed to increase business delivery and/or reduce operating and development costs. These products and services include national marketing campaigns, a guest loyalty program, a central reservation system, property and yield management programs and systems, revenue management services, quality assurance standards, and qualified vendor relationships and partnerships with companies that provide products and services to our franchisees and guests. We believe that healthy brands, which deliver a compelling return on investment, will enable us to sell additional hotel franchises and raise royalty rates. We have multiple brands that meet the needs of many different types of guests, and can be developed at various price points and applied to both new and existing hotels. This ensures that we have brands suitable for creating growth in a variety of market conditions. Improving the performance of the hotels in our system, strategically growing the system through additional franchise sales, and improving franchise agreement pricing while maintaining a disciplined cost structure are the keys to profitable growth. The addition of the legacy Radisson brands in the Americas increased Choice's footprint in the upper midscale and upscale chain scales and established Choice's presence in the upper upscale chain scale. We believe the Radisson Hotels Americas acquisition has enabled us to strengthen our presence in the upper midscale chain scale, expand our market presence in certain geographies in the United States, and further build on our momentum in the upscale chain scale which will facilitate the continued growth of our Cambria Hotels and Ascend Hotel Collection brands and the further expansion of the Radisson portfolio.

Current wording

Profitable Growth -Our success is dependent on improving the performance of our hotels, increasing the size of our system by selling additional hotel franchises with a focus on revenue-intense chain scales and markets, improving our effective royalty rate, expanding our qualified vendor and partnership platform programs and maintaining a disciplined cost structure. We attempt to improve our revenues and overall profitability by providing a variety of products and services designed to increase business delivery and/or reduce operating and development costs. These products and services include national marketing campaigns, a guest loyalty program, a central reservation system, property and yield management programs and systems, revenue management services, quality assurance standards, and qualified vendor relationships and partnerships with companies that provide products and services to our franchisees and guests. We believe that healthy brands, which deliver a compelling return on investment, will enable us to sell additional hotel franchises and raise royalty rates. We have multiple brands that meet the needs of many different types of guests, and can be developed at various price points and applied to both new and existing hotels. This ensures that we have brands suitable for creating growth in a variety of market conditions. Improving the performance of the hotels in our system, strategically growing the system through additional franchise sales, and improving franchise agreement pricing while maintaining a disciplined cost structure are the keys to profitable growth.

Previous wording

Maximizing Financial Returns and Creating Value for Shareholders- Our capital allocation decisions, including capital structure and uses of capital, are intended to maximize our return on invested capital and create value for our shareholders. Since our business has not historically required significant reinvestment of capital, we typically utilize cash in ways that management believes provides the greatest returns to our shareholders, which include acquisitions, share repurchases and dividends. Refer to the Liquidity and Capital Resources section in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations for more information regarding our capital returns to shareholders.

Current wording

Maximizing Financial Returns and Creating Value for Shareholders- Our capital allocation decisions, including our capital structure and the uses of capital, are intended to maximize our return on invested capital and create value for our shareholders. Since our business has not historically required significant reinvestment of capital, we typically utilize cash in ways that management believes provides the greatest returns to our shareholders, which include acquisitions, share repurchases, and dividends. Refer to the Liquidity and Capital Resources section in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations for more information regarding our capital returns to shareholders.

Previous wording

In addition to our hotel franchising business, we have also developed or acquired seven Cambria and three legacy Radisson Hotels Americas open and operating hotels. We intend to continue to strategically develop hotels to increase the presence of our newly introduced brands in the United States, drive greater guest satisfaction and brand preference, and ultimately increase the number of franchise agreements awarded. When developing hotels, we seek key markets with strong growth potential that will deliver strong operating performance and improve the recognition of our brands. Our hotel development and ownership efforts currently focus on the Cambria Hotels and Everhome Suites brands. We believe our owned hotels provide us the opportunity to support and accelerate the growth of these brands. We do not anticipate owning hotels on a permanent basis and we expect to target dispositions to a franchisee encumbered with a long-term Choice franchise agreement in the future.

Current wording

In addition to our hotel franchising business, we have also developed or acquired 12 open and operating hotels. We intend to continue to strategically develop hotels to increase the presence of our newly introduced brands in the United States, drive greater guest satisfaction and brand preference, and ultimately increase the number of franchise agreements awarded. When developing hotels, we seek key markets with strong growth potential that will deliver strong operating performance and improve the recognition of our brands. Our hotel development and ownership efforts currently focus on the Cambria Hotels and Everhome Suites brands. We believe our owned hotels provide us the opportunity to support and accelerate the growth of these brands. We do not anticipate owning hotels on a permanent basis and we expect to target dispositions to a franchisee encumbered with a long-term Choice franchise agreement in the future.

Previous wording

Our discussion of our results of operations excludes reimbursable franchise marketing and reservation system revenues and expenses and the management agreement cost reimbursements and expenses included in the Company's other revenues from franchised and managed properties and other expenses from franchised and managed properties. The Company's franchise agreements require the payment of marketing and reservation system fees to be used by the Company for the expenses associated with providing franchise services such as national marketing, media advertising, and central reservation systems. The Company is obligated to expend the marketing and reservation system fees it collects from its franchisees in accordance with the franchise agreements. Furthermore, the franchisees are required to reimburse the Company for any deficits generated by these marketing and reservation system activities. Over time, the Company expects the cumulative revenues and expenses of reimbursable components to break even and, therefore, no income or loss will be generated from the reimbursable marketing and reservation system activities. Additionally, the legacy Radisson Hotels Americas management agreements include cost reimbursements, primarily related to payroll costs at managed hotels where the Company is the employer. As a result, the Company generally excludes the other revenues and other expenses from franchised and managed properties from the analysis of its operations.

Current wording

Our discussion of our results of operations excludes reimbursable franchise marketing and reservation system revenues and expenses and the management agreement cost reimbursements and expenses included in the Company's other revenues from franchised and managed properties and other expenses from franchised and managed properties. The Company's franchise agreements require the payment of marketing and reservation system fees to be used by the Company for the expenses associated with providing franchise services such as national marketing, media advertising, and central reservation systems. The Company is obligated to expend the marketing and reservation system fees it collects from its franchisees in accordance with the franchise agreements. Furthermore, the franchisees are required to reimburse the Company for any deficits generated by these marketing and reservation system activities. Over time, the Company expects the cumulative revenues and expenses of reimbursable components to break even and, therefore, no income or loss will be generated from the reimbursable marketing and reservation system activities. Additionally, the Company's management agreements include cost reimbursements, which is primarily related to payroll costs at the managed hotels where the Company is the employer. As a result, the Company generally excludes the other revenues and other expenses from franchised and managed properties from the analysis of its operations.

Previous wording

Due to the seasonal nature of the Company’s hotel franchising and management business and the multi-year investments required to support franchise operations, quarterly and/or annual deficits may be generated. During the years ended December 31, 2023, 2022, and 2021, other revenues from franchised and managed properties exceeded other expenses from franchised and managed properties by $1.8 million, $49.7 million, and $83.9 million, respectively.

Current wording

Due to the seasonal nature of the Company’s hotel franchising and management business and the multi-year investments required to support the franchise operations, quarterly and/or annual surpluses or deficits may be generated. During the years ended December 31, 2024, 2023, and 2022, other revenues from franchised and managed properties exceeded other expenses from franchised and managed properties by $36.1 million, $1.8 million, and $49.7 million, respectively.

Previous wording

Refer to the Operations Review section of MD&A for additional analysis of our results of operations.

Current wording

Refer to the Operations Review section in MD&A for additional analysis of our results of operations.

Previous wording

Liquidity and Capital Resources -Historically, the Company has generated significant cash flows from operations. Since our business has not historically required significant reinvestment of capital, we typically utilize cash in ways that management believes provide the greatest returns to our shareholders, which include acquisitions, share repurchases, and dividends.

Current wording

Liquidity and Capital Resources -Historically, the Company has generated significant cash flows from operations. Since our business has not historically required a significant reinvestment of capital, we typically utilize cash in ways that management believes provide the greatest returns to our shareholders, which include acquisitions, share repurchases, and dividends.

Previous wording

We believe the Company’s cash on hand, available borrowing capacity under the senior unsecured revolving credit facility, cash flows from operations, and access to additional capital in the debt markets is sufficient to meet the expected future operating, investing, and financing needs of the business. Refer to the Liquidity and Capital Resources section of MD&A for additional analysis.

Current wording

We believe the Company’s cash on hand, available borrowing capacity under the senior unsecured revolving credit facility, cash flows from operations, and access to additional capital in the debt markets is sufficient to meet the expected future operating, investing, and financing needs of the business. Refer to the Liquidity and Capital Resources section in MD&A for additional analysis.

Previous wording

The summarized financial results for the years ended December 31, 2023 and 2022 are as follows:

Current wording

A summary of the financial results for the years ended December 31, 2024 and 2023 was as follows:

Previous wording

For the year ended December 31, 2023, the Company recognized income before income taxes of $337.0 million, which is a $99.8 million decrease from the year ended December 31, 2022. The decrease in income before income taxes is primarily due to a decrease in operating income.

Current wording

For the year ended December 31, 2024, the Company recognized income before income taxes of $395.6 million, which is a $58.7 million increase from the year ended December 31, 2023. The increase in income before income taxes was primarily due to an $88.7 million increase in operating income and a $9.5 million increase in the equity in net gain of affiliates, both of which were partially offset by a $23.4 million increase in interest expense, a $12.3 million decrease in other loss (gain), and a $4.7 million decrease in loss (gain) on extinguishment of debt.

Previous wording

Operating income decreased $103.4 million primarily due to a $47.9 million decrease in the net surplus generated from other revenues and other expenses from franchised and managed properties, a $22.7 million decrease in termination fees in other revenues from the exit of 110 WoodSpring units in September 2022, and a $16.2 million decrease in net gains on the sale of business and assets that were recognized during 2022. Selling, general and administrative expenses increased $48.4 million primarily due to the inclusion of the full year's cost of operations of the acquired Radisson Hotels Americas business, an increase in the Company's deferred compensation liabilities based on increases in the fair value of the underlying investments, and an increase in employee salary and benefit continuation payments due to certain restructurings. Business combination, diligence and transition costs increased $16.2 million related to the integration of the Radisson Hotels Americas business and costs associated with acquisition pursuits. Depreciation and amortization expense also increased $9.3 million due to the acquisition of three hotel properties and identifiable intangible assets in the Radisson Hotels Americas transaction. The decreases to operating income were partially offset by the growth of the legacy Choice franchising business and the inclusion of the full year's revenues from operations of the acquired Radisson Hotels Americas business.

Current wording

Operating income increased $88.7 million primarily due to a $34.4 million increase in the net surplus generated from other revenues and other expenses from franchised and managed properties, a $15.8 million increase in other revenues, and a $38.5 million decrease in business combination, diligence and transition costs.

Previous wording

Domestic royalty fees increased $14.8 million to $458.1 million for the year ended December 31, 2023 from $443.3 million for the year ended December 31, 2022. The increase in domestic royalty fees is attributable to higher royalty fees in the comparative period for the legacy Radisson brands and a system-wide 6 basis point increase in the effective royalty rate from 4.93% for the year ended December 31, 2022 to 4.99% for the year ended December 31, 2023, and a 0.1% domestic system-wide RevPAR increase due to a 1.9% increase in average daily rates, partially offset by a 100 basis point decrease in occupancy.

Current wording

Domestic royalty fees decreased $3.4 million to $454.7 million for the year ended December 31, 2024 from $458.1 million for the year ended December 31, 2023. The decrease in domestic royalty fees was primarily due to a 1.2% domestic system-wide RevPAR decrease as a result of a 0.3% decrease in average daily rates and a 50 basis points decrease in occupancy, all of which were partially offset by a 3.0% increase in open and operating domestic hotel rooms and a system-wide 7 basis points increase in the effective royalty rate from 4.99% for the year ended December 31, 2023 to 5.06% for the year ended December 31, 2024.

Previous wording

A summary of the operating performance for the Company's domestic franchised hotels, organized by chain scale, is as follows:

Current wording

A summary of the operating performance for the Company's domestic franchised hotels, organized by chain scale, was as follows:

Previous wording

(1) Includes Ascend Hotel Collection, Cambria, Radisson, Radisson Blu, Radisson Individuals, and Radisson RED brands.

Current wording

(1) Includes Ascend Hotel Collection, Cambria, Park Plaza, Radisson, Radisson Blu, Radisson Individuals, and Radisson RED brands.

Previous wording

(2) Includes Clarion, Comfort Inn, Country Inn & Suites, Park Inn, Park Plaza, Quality, and Sleep Inn brands.

Current wording

(2) Includes Clarion, Comfort Inn, Comfort Suites, Country Inn & Suites, Park Inn, Quality Inn, and Sleep Inn brands.

Previous wording

(3)Includes the Clarion family of brand extensions, including Clarion and Clarion Pointe.

Current wording

(2)Includes the Clarion family of brand extensions, including Clarion and Clarion Pointe.

Previous wording

(4)Includes the Radisson, Radisson Blu, Radisson Individuals, and Radisson Red brands.

Current wording

(3)Includes the Radisson, Radisson Blu, Radisson Individuals, and Radisson RED brands.

Previous wording

International royalty fees increased to $28.9 million for the year ended December 31, 2023 from $20.0 million for the year ended December 31, 2022. The increase in international royalty fees is attributable to higher royalty fees for the legacy Radisson brands, improvements in RevPAR performance, and an increase in the international franchise system size by 31 hotels (from 1,191 hotels as of December 31, 2022 to 1,222 hotels as of December 31, 2023), and an increase of 2,626 rooms (from 133,395 rooms as of December 31, 2022 to 136,021 rooms as of December 31, 2023).

Current wording

International royalty fees increased $0.9 million to $29.8 million for the year ended December 31, 2024 from $28.9 million for the year ended December 31, 2023. The increase in international royalty fees was primarily due to an increase in the international franchise system size by 36 hotels (from 1,222 hotels as of December 31, 2023 to 1,258 hotels as of December 31, 2024) and 6,050 rooms (from 136,021 rooms as of December 31, 2023 to 142,071 rooms as of December 31, 2024), and an increase in international RevPAR.

Previous wording

Initial franchise fees are generally paid to the Company when a franchisee executes a franchise agreement for a new property entering the franchise system, or an existing franchised property at the time of an ownership change (referred to as a relicensing), or a franchise agreement renewal; however, the recognition of revenue is deferred until the hotel associated with the franchise agreement is open or the franchise agreement is terminated. Upon hotel opening, revenue is recognized ratably as the services are provided over the enforceable period of the franchise agreement. Upon the termination of a franchise agreement, the previously deferred initial franchise fees are recognized as revenue immediately in the period the franchise agreement is terminated.

Current wording

Initial franchise fees are generally paid to the Company when a franchisee executes a franchise agreement for a new property entering the franchise system, or an existing franchised property at the time of an ownership change (referred to as a relicensing), or a franchise agreement renewal; however, the recognition of revenue is deferred until the hotel associated with the franchise agreement is open or the franchise agreement is terminated. Once the hotel opens, revenue is recognized ratably as the services are provided over the enforceable period of the franchise agreement. If a franchise agreement is terminated, then the previously deferred initial franchise fees are recognized as revenue immediately in the period the franchise agreement is terminated.

Previous wording

Initial franchise fees revenue decreased $0.3 million from $28.1 million to $27.8 million for the years ended December 31, 2022 and 2023, respectively. The decrease is primarily attributable to the lower number of domestic franchise agreement terminations in the current year as compared to the prior year.

Current wording

Initial franchise fees revenue decreased $2.2 million to $25.6 million for the year ended December 31, 2024 from $27.8 million for the year ended December 31, 2023. The decrease was primarily due to a lower number of domestic franchise agreement terminations in the current year as compared to the prior year.

Previous wording

At December 31, 2023, the Company had 1,032 hotels with 105,062 rooms in its global pipeline. Approximately 88% of our pipeline is located in the United States and approximately 72% of the domestic pipeline is new construction. After the execution of a franchise agreement, new construction hotels typically average 18 to 36 months to open, while conversion hotels typically average three to six months to open.

Current wording

As of December 31, 2024, the Company had 964 hotels with 97,325 rooms in its pipeline. Approximately 88% of our pipeline is located in the United States and approximately 71% of the domestic pipeline is new construction. After the execution of a franchise agreement, new construction hotels typically average 18 to 36 months to open, while conversion hotels typically average three to six months to open.

Previous wording

Fluctuations in the Company’s pipeline are primarily due to the timing of hotel openings and the timing of awarding new franchise agreements. While the Company’s pipeline provides a strong platform for growth, a hotel in the pipeline does not always result in an open and operating hotel due to various macroeconomic factors, including access to liquidity, availability of construction labor, and local governmental approvals and entitlements.

Current wording

Fluctuations in its pipeline are primarily due to the timing of hotel openings and the timing of awarding new franchise agreements. While the pipeline provides a strong platform for growth, a hotel in the pipeline does not always result in an open and operating hotel due to various macroeconomic factors, including access to liquidity, availability of construction labor and materials, and local governmental approvals and entitlements.

Previous wording

The Company's revenues, net of operating expenses, from the owned hotels increased $4.1 million from $22.0 million for the year ended December 31, 2022 to $26.1 million for the year ended December 31, 2023. The increase reflects improved operating performance at our owned hotels and the net addition of one owned hotel during the year ended December 31, 2023 relative to the comparative period.

Current wording

The Company's revenues, net of operating expenses, from the owned hotels increased $4.1 million to $30.3 million for the year ended December 31, 2024 from $26.1 million for the year ended December 31, 2023. The increase was primarily due to the improved operating performance at our owned hotels and the addition of two owned hotels during the year ended December 31, 2024 as compared to the prior year.

Previous wording

Selling, general and administrative expenses, which includes the cost to operate the business, increased $48.4 million from $167.7 million for the year ended December 31, 2022 to $216.1 million for the year ended December 31, 2023.

Current wording

Selling, general and administrative expenses, which includes the cost to operate the business, increased $3.8 million to $219.9 million for the year ended December 31, 2024 from $216.1 million for the year ended December 31, 2023. The increase in selling, general and administrative expenses reflects general increases to operate the franchising business.

Previous wording

Impairment of long-lived assets of $3.7 million for the year ended December 31, 2023 was primarily related to a sublease agreement that was signed for the legacy Radisson corporate office space in Minneapolis, Minnesota. The long-lived asset group associated with the office space was determined to be impaired due to the carrying value exceeding its fair value, which resulted in the recognition of a $3.4 million impairment loss.

Current wording

Impairment of long-lived assets decreased $3.7 million to zero for the year ended December 31, 2024 from $3.7 million for the year ended December 31, 2023. The decrease was primarily related to a sublease agreement that was signed for the legacy Radisson corporate office space in Minneapolis, Minnesota. The long-lived asset group associated with the office space was determined to be impaired due to the carrying value exceeding its fair value, which resulted in the recognition of a $3.4 million impairment loss in 2023. The Company did not recognize any impairments of long-lived assets during the year ended December 31, 2024.

Previous wording

The Company recognized $63.8 million of interest expense for the year ended December 31, 2023, which was an increase of $20.0 million from the comparable period in 2022. The increase in interest expense was due to an increase in borrowings and higher interest rates on the Company's revolving credit facility. Refer to the discussion in the Liquidity and Capital Resources section of MD&A.

Current wording

Interest expense increased $23.4 million to $87.1 million for the year ended December 31, 2024 from $63.8 million for the year ended December 31, 2023. The increase in interest expense was due to increased borrowings and higher interest rates on the Company's outstanding borrowings. Refer to the discussion in the Liquidity and Capital Resources section in MD&A for more information.

Previous wording

Gain on extinguishment of debt was $4.4 million for the year ended December 31, 2023. The Company derecognized certain economic development loans from the consolidated balance sheets due to satisfying the relevant performance conditions in the loan agreements.

Current wording

Loss (gain) on extinguishment of debt decreased $4.7 million to a loss on extinguishment of debt of $0.3 million for the year ended December 31, 2024 from a gain on extinguishment of debt of $4.4 million for the year ended December 31, 2023. In 2024, the Company recognized a loss on extinguishment of debt due to the repayment of the 2023 Term Loan. In 2023, the Company derecognized certain economic development loans from the consolidated balance sheets due to satisfying the relevant performance conditions in the loan agreement, resulting in a gain on extinguishment of debt.

Previous wording

The Company recognized other net gains of $10.6 million and other net losses of $7.0 million for the years ended December 31, 2023 and 2022, respectively. For the year ended December 31, 2023, the net gain was primarily due to a $6.6 million increase in the Company's deferred compensation assets based on increases in the fair value of the underlying investments and a $4.0 million unrealized gain on investments in equity securities. For the year ended December 31, 2022, the net loss was primarily due to a decrease in the Company's deferred compensation assets based on decreases in the fair value of the underlying investments.

Current wording

Other loss (gain) decreased $12.3 million to other losses of $1.6 million for the year ended December 31, 2024 from other gains of $10.6 million for the year ended December 31, 2023. The decrease was primarily due to a net loss of $8.3 million on the sales of equity securities related to the pursuit of the Wyndham acquisition in 2024 and a $4.0 million unrealized gain on investments in equity securities in 2023, both of which were partially offset by dividend income of $1.5 million and a $0.6 million increase in the Company's deferred compensation and employee benefit plans assets based on increases in the fair value of the underlying investments.

Previous wording

The Company's effective income tax rates were 23.3% and 24.0% for the years ended December 31, 2023 and 2022, respectively. The effective income tax rates for the years ended December 31, 2023 and 2022 were higher than the U.S. federal income tax rate of 21.0% primarily due to state income taxes and tax expense related to compensation, partially offset by federal income tax credits.

Current wording

The Company's effective income tax rates were 24.3% and 23.3% for the years ended December 31, 2024 and 2023, respectively. The effective income tax rates for the years ended December 31, 2024 and 2023 were higher than the U.S. federal income tax rate of 21.0% primarily due to the impact of state income taxes and tax expense related to compensation, partially offset by federal income tax credits.

Previous wording

As of December 31, 2023, the Company's primary sources of liquidity consisted of $648.3 million in cash and cash equivalents and available borrowing capacity under the senior unsecured revolving credit facility. As of December 31, 2023, the Company was in compliance with all of its financial covenants under its credit agreements and the Company expects to remain in such compliance. The Company believes that its cash on hand, available borrowing capacity under the senior unsecured revolving credit facility, cash flows from operations, and access to additional capital in the debt markets will provide sufficient liquidity to meet the expected future operating, investing, and financing needs of the business.

Current wording

As of December 31, 2024, the Company's primary sources of liquidity consisted of $699.5 million in cash and cash equivalents and available borrowing capacity under the senior unsecured revolving credit facility. As of December 31, 2024, the Company was in compliance with all of its financial covenants under its credit agreements and the Company expects to remain in such compliance. The Company believes that its cash on hand, available borrowing capacity under the senior unsecured revolving credit facility, cash flows from operations, and access to additional capital in the debt markets will provide sufficient liquidity to meet the expected future operating, investing, and financing needs of the business.

Previous wording

Our board of directors authorized a program which permits us to offer financing, investment, and guaranty support to qualified franchisees, and allows us to acquire or develop and resell hotels to incentivize franchise development of our brands in strategic markets. We are currently engaged in these financial support activities to encourage acceleration of the growth of our Cambria Hotels and Everhome Suites brands. With respect to these activities, the Company had approximately $467.8 million in financial support of the Cambria Hotels and Everhome Suites brands reflected in the consolidated balance sheet as of December 31, 2023. The Company is generally targeting to recycle these investments within a five year period, and expects our outstanding investments to not exceed $1.2 billion at any point in time based on the current board of directors' authorization. The deployment and annual pace of future financial support activities will depend upon market and other conditions, including among others, our franchise sales results, the environment for new construction hotel development, and the hotel lending environment.

Current wording

Our board of directors authorized a program which permits us to offer financing, investment, and guaranty support to qualified franchisees, and to acquire or develop and then resell hotels to incentivize franchise development of our brands in strategic markets. We primarily engage in these financial support activities to encourage acceleration of the growth of our Cambria Hotels and Everhome Suites brands. With respect to these activities, the Company had approximately $605.4 million in financial support of the Cambria Hotels and Everhome Suites brands reflected in the consolidated balance sheet as of December 31, 2024. The Company is generally targeting to recycle these investments within a five year period, and expects our outstanding investments to not exceed $1.2 billion at any point in time based on the current board of directors' authorization. The deployment and annual pace of future financial support activities will depend upon market and other conditions, including among others, our franchise sales results, the environment for new construction hotel development, and the hotel lending environment.

Previous wording

The Company has historically generated cash flows from operating activities that are in excess of the capital needed to invest in growth opportunities and to service debt obligations. As a result, the Company maintains a share repurchase program and typically pays a quarterly dividend. As of December 31, 2023, the Company had 1.8 million shares remaining under the current share repurchase authorization. The 2023 annual dividend rate was $1.15 per share or approximately $56.5 million in aggregate dividend payments.

Current wording

The Company has historically generated cash flows from operating activities that are in excess of the capital needed to invest in growth opportunities and to service debt obligations. As a result, the Company maintains a share repurchase program and typically pays a quarterly dividend. On March 11, 2024, the Company's board of directors approved an increase of 5 million shares in the number of shares authorized to be repurchased under its share repurchase program. As of December 31, 2024, the

Previous wording

During the years ended December 31, 2023, 2022, and 2021, the net cash provided by operating activities was $296.6 million, $367.1 million, and $383.7 million, respectively. Our operating cash flows decreased $70.5 million primarily due to a decrease in the net surplus generated from our other franchised and managed properties activities, an increase in franchise agreement acquisition cost payments, an increase in business combination, diligence and transition costs associated with the integration of the Radisson Hotels Americas business and acquisition pursuits, an increase in selling, general and administrative expenses, and an increase in borrowing costs, all of which were partially offset by the timing of working capital items.

Current wording

During the years ended December 31, 2024, 2023, and 2022, the net cash provided by operating activities was $319.4 million, $296.6 million, and $367.1 million, respectively. Our operating cash flows increased $22.8 million primarily due to the timing of working capital items and a decrease in business combination, diligence and transition costs associated with the timing of the termination of the Wyndham acquisition pursuit during the first quarter of 2024 and the due diligence and transition costs related to the integration of the Radisson Hotels Americas business in 2023, all of which were partially offset by an increase in franchise agreement acquisition cost payments, an increase in borrowing costs, and an increase in deferred income taxes.

Previous wording

In conjunction with brand and development programs, we strategically make certain franchise agreement acquisition cost payments to franchisees as an incentive to enter into new franchise agreements or perform-designated improvements to properties under existing franchise agreements. If the franchisee remains in the franchise system in good standing over the term specified in the incentive agreement, the Company forgives the incentive ratably. If the franchisee exits our franchise system or is not operating their franchise in accordance with our quality or credit standards and is terminated, then the franchisee must repay the unamortized franchise agreement acquisition cost payment plus interest to the Company. During the years ended December 31, 2023, 2022, and 2021, the Company's net franchise agreement acquisition costs were $98.3 million, $54.5 million, and $38.2 million, respectively.

Current wording

In conjunction with brand and development programs, we strategically make certain franchise agreement acquisition cost payments to franchisees as an incentive to enter into new franchise agreements or perform-designated improvements to properties under existing franchise agreements. If the franchisee remains in the franchise system in good standing over the term specified in the incentive agreement, then the Company forgives the incentive ratably. If the franchisee exits our franchise system or is not operating their franchise in accordance with our quality or credit standards and is terminated, then the franchisee must repay the unamortized franchise agreement acquisition cost payment plus interest to the Company. During the years ended December 31, 2024, 2023, and 2022, the Company's net franchise agreement acquisition costs were $112.2 million, $98.3 million, and $54.5 million, respectively.

Previous wording

The Company's franchise agreements require the payment of marketing and reservation system fees to be used by the Company for the expenses associated with providing franchise services such as national marketing, media advertising, and central reservation systems. Additionally, the legacy Radisson Hotels Americas management agreements include cost reimbursements, primarily related to payroll costs at managed hotels where the Company is the employer. These activities are reflected in other revenues from franchised and managed properties and other expenses from franchised and managed properties. During the years ended December 31, 2023, 2022, and 2021, the activity from other revenues from franchised and managed properties exceeded the activity of other expenses from franchised and managed properties by $1.8 million, $49.7 million, and $83.9 million, respectively.

Current wording

The Company's franchise agreements require the payment of marketing and reservation system fees to be used by the Company for the expenses associated with providing franchise services such as national marketing, media advertising, and central reservation systems. Additionally, the Company's management agreements include cost reimbursements, primarily related to the payroll costs at the managed hotels where the Company is the employer. These activities are reflected in other revenues from franchised and managed properties and other expenses from franchised and managed properties. During the years ended December 31, 2024, 2023, and 2022, the activity from other revenues from franchised and managed properties exceeded the activity of other expenses from franchised and managed properties by $36.1 million, $1.8 million, and $49.7 million, respectively.

Previous wording

The net cash used in investing activities was $265.6 million, $442.4 million, and 78.9 million for the years ended December 31, 2023, 2022, and 2021, respectively.

Current wording

The net cash used in investing activities was $84.6 million, $265.6 million, and $442.4 million for the years ended December 31, 2024, 2023, and 2022, respectively.

Previous wording

During the years ended December 31, 2023, 2022, and 2021, capital expenditures for property and equipment totaled $116.3 million, $90.0 million, and $74.3 million, respectively. These capital expenditures primarily reflect the costs incurred to support the continued growth of the Cambria Hotels and Everhome Suites brands and the ongoing hotel development efforts, as well as leasehold improvements in the Company's new corporate headquarters office in North Bethesda, Maryland.

Current wording

During the years ended December 31, 2024, 2023, and 2022, investments in owned hotel properties totaled $106.8 million, $68.6 million, and $65.8 million, respectively. These investments related to the ongoing hotel development efforts to support the continued growth of the Cambria Hotels and Everhome Suites brands. During the years ended December 31, 2024, 2023, and 2022, investments in other property and equipment totaled $39.1 million, $47.7 million, and $24.1 million, respectively. These investments primarily related to leasehold improvements, office equipment, and capitalized software.