CHOICE HOTELS INTERNATIONAL INC /DE
For the period ended Dec 31, 2024. Filed Apr 15, 2025.
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Dec 31, 2024 · Filed Apr 15, 2025
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Contents
Compensation Program
2024 COMPENSATION PROGRAM
Primary Components
The Company’s executive compensation program consists of four primary components: base salary; short-term cash incentives; long-term equity incentives; and perquisites and other benefits.
| Components | Purpose |
|---|---|
| Base Salary | Provides a level of fixed compensation that is commensurate with role and competitive to attract and retain highly qualified executives |
| Short-Term Cash Incentives | Drives focus and recognition for achievement of Company annual financial and strategic goals that aligns with the Company's long-range plan. |
| Long-TermEquityIncentives | A focus on performance-based equity grants, creates links to share value appreciation and alignment with shareholdersMotivates and rewards executives for sustaining long-term financial and operational performance that increases shareholder value and the value of our brands |
| Perquisites and Other Benefits | Enhance our ability to recruit and retain key executives through market competitive practices consistent with the industry and peer group |
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Base Salary
As the foundation of our compensation program, base salary establishes a competitive level of fixed compensation critical to attracting and retaining highly qualified executives.
Select NEOs received salary increases in 2024, as set forth below. Mr. Pacious's base salary adjustment reflects a market adjustment to strengthen his competitive positioning. His last base salary adjustment was in March 2022. Mr. Dragisich did not receive an increase in base compensation. Any increase was delivered through long-term incentive opportunity. Ms. Wu's and Mr. Pepper's increases were intended to strengthen their competitive positioning. Mr. Oaksmith and Mr. Ramirez received an increase reflective of their new roles.
| December 31, 2023($) | December 31, 2024($) | Increase(%) | |
|---|---|---|---|
| Patrick Pacious | $1,150,000 | $1,250,000 | 8.7% |
| Scott Oaksmith | $525,000 | $600,000 | 14.3% |
| Dominic Dragisich | $750,000 | $750,000 | —% |
| David Pepper | $592,000 | $630,000 | 6.4% |
| Simone Wu | $560,000 | $585,000 | 4.5% |
| Raul Ramirez | $450,000 | $465,000 | 3.3% |
Short-Term Incentive Compensation
The Company’s Management Incentive Plan (the “MIP”) is a short-term cash incentive program through which financial and strategic objectives are set. The targets for the MIP were set at the beginning of 2024 and for Mr. Pacious and Mr. Oaksmith were based 80% on achieving operating income goals and 20% on achieving strategic objectives. For Mr. Dragisich, his target for the MIP was based 70% on achieving operating income goals and 30% on achieving strategic objectives. For Mr. Pepper, his target for the MIP was based 40% on achieving operating income goals and 60% on achieving strategic objectives. For Ms. Wu, her target for the MIP was based 60% on achieving operating income goals and 40% on achieving strategic objectives. For Mr. Ramirez, his target for the MIP was based 75% on achieving operating income and certain brand financial goals and 25% on achieving strategic objectives.
SHORT-TERM INCENTIVE TARGET OPPORTUNITIES
Under the MIP, each NEO has a target incentive opportunity equal to a percentage of his or her base salary. There were no changes to the target percentages in 2024 for prior NEOs as compared to the 2023 target percentages.
The threshold, target and maximum incentive levels for each of the NEOs for 2024 were:
SHORT-TERM INCENTIVE AS A PERCENTAGE OF SALARY
| NEO | Threshold | Target | Maximum |
|---|---|---|---|
| Pacious | 100.0% | 200.0% | 400.0% |
| Oaksmith | 37.5% | 75.0% | 150.0% |
| Dragisich | 57.5% | 115.0% | 230.0% |
| Pepper | 37.5% | 75.0% | 150.0% |
| Wu | 30.0% | 60.0% | 120.0% |
| Ramirez | 30.0% | 60.0% | 120.0% |
| 2025 Proxy Statement | 49 |
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SHORT-TERM INCENTIVE PERFORMANCE GOALS
| Performance Metric | Why Metric is Used | How Goals are Set |
|---|---|---|
| OperatingIncome* | Heightens the focus on driving profitable operational revenue growth. The weighting of operating income varies by NEO from between 25% to 80%. | The Board approves operating income goals in February of the performance year. |
| StrategicInitiatives | Focuses the Company on long-term growth strategy through strategic pillars of brand growth, guest and franchisee value proposition, platform expansion, and talent. For each NEO other than Mr. Pepper, this percentage varies from between 20% to 40%. For Mr. Pepper, this percentage is 60%. | The Board approves the Company's strategic initiative goals in February of the performance year. |
- For Mr. Ramirez, 75% of his short-term incentive bonus is determined by financial results including operating income (25%) and certain brand direct revenue and expense performance (50%). Twenty-five percent is determined based on strategic initiative results.
Operating Income
The Committee established operating income of $495.4 million as a performance metric target for the 2024 MIP. The target is calculated to be several percentage points above the compounded annual growth rate of the Company. The recommended target excluded the impact of the Company’s marketing and reservation system activities as these activities are contractually required to break even over the long-term. The 2024 MIP was structured to fund 40% to 80% of the bonus pool at the target bonus level for each NEO upon achievement of the operating income target for the year and to pay and fund a percentage of the target incentive for operating income performance above or below the target. For purposes of our incentive compensation, operating income is calculated in accordance with GAAP, then adjusted by the Committee based on approved exceptions, as noted below. The Committee expected achievement of the operating income target to be at least as difficult as the Committee expected the achievement of the 2022 and 2023 operating income targets to be when established, and recognized the goals are in line with growth and investment strategy to drive significant long term results.
Strategic Initiatives
Mr. Pacious recommended, other than for himself, certain strategic initiatives as a performance goal for the 2024 MIP. The Board approved strategic initiatives for all NEOs as a performance goal for the 2024 MIP. The Board recommended, and the Committee approved, the strategic initiatives portion of the 2024 MIP for each NEO varying between 20 to 60% of the total bonus. Payment for this component requires a minimum operating income achievement of at least 75% of target to fund any bonus for this component. The actual percentage of the target incentive for strategic initiatives performance for the NEOs is paid based on achievement against the targeted strategic initiatives. For purposes of our incentive compensation, strategic initiatives focus on the Company's pillars: brand growth, guest and franchisee value proposition, platform expansion, and talent.
Certain Brand Results
Mr. Pacious recommended, and the Committee approved, brand financial results, including selected revenue and expenses as a performance goal for the 2024 MIP for Mr. Ramirez. For Mr. Ramirez, 75% of his short term incentive bonus is determined based on financial performance of operating income (25%) and brand results (50%). The achievement of the brand financial results target was expected to be at least as difficult as the achievement of the operating income target and the goals were in line with our growth and investment strategy to drive significant long term results.
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SHORT-TERM INCENTIVE PERFORMANCE RESULTS*
| 2024 Performance Level · MetricWeighting · Achievement % · WeightedPayout % | |||
|---|---|---|---|
| Performance Metric | Threshold | Target | Maximum |
| Operating Income, as adjusted | 137.5% | 136.4% | |
| Strategic Initiatives(1) | 115%(2) | 120% | |
| Payout Percentage | 130% | ||
(1)Funding for strategic initiatives portion of bonus pool requires minimum of 75% operating income achievement.
(2)115% overall funding, 120% for NEO achievement.
- For Mr. Ramirez, 75% of his short-term incentive bonus was determined by achievement against the financial measures of (i) operating income, weighted 25% with achievement of 137.5% and (ii) certain brand direct revenue and expense results weighted 50%, with achievement of 125%. The remaining 25% is based on achievement against strategic initiatives.
Operating Income Results
The Committee approved adjustments in calculating operating income for the purposes of the 2024 MIP. Operating income was increased related to unbudgeted restructuring / severance changes, mark to market losses on non-qualified retirement plans, M&A due diligence and transition costs in excess of budget and surplus from net reimbursable revenues from franchised and managed properties. After the adjustments discussed below, operating income for purposes of determining the payout of the 2024 MIP Plans was $514.1 million.
Strategic Initiatives Results
The strategic initiatives are based on the Company's pillars: brand growth, franchisee and guest value proposition improvement, platform expansion, and talent. Specific initiatives achieved included strategic brand launches and development, deploying capital for new brand growth, focusing on guest value enhancement, focusing on franchisee profitability enhancement and defining partnership and procurement growth strategies. The entirety of the management team also focused on talent management metrics and employee engagement in 2024. Strategic initiatives results are included in the individual performance summaries below.
Individual Performance
Individual performance is evaluated within strategic initiatives. Each NEO contributed significantly to the Company's pillars: brand growth, franchise and guest value proposition improvement, platform expansion, and talent.
Mr. Pacious led Choice to achieve record financial results in 2024 with a 12% year-over-year increase in adjusted EBITDA and a 13% increase year-over-year in adjusted earnings per share, exceeding our plan, guidance, and analyst expectations, enabling reinvestment in the business and the repurchase of nearly 3 million shares of the company’s common stock. Other accomplishments include: (1) four brand relaunches: Radisson Blu and Radisson Individuals in the Upper Upscale segment, Radisson in the Upscale segment, and Park Inn by Radisson in the Premium Value brand segment, (2) achieving a 500-hotel milestone in the extended stay segment, and celebrating the 85th anniversary of Quality Inn with a record 41 openings in 2024, remaining one of the most sought-after Midscale brands in the industry, (3) expanding the international portfolio by onboarding new strategic partners which helped to deliver 16% higher corporate EBITDA than 2023, (4) redesigning and relaunching digital channels (website and mobile applications) and modernizing paid media approach to better showcase hotels and driving more direct bookings, (5) implemented significant technology initiatives, including completing data migration to the cloud, the migration of WoodSpring to choiceADVANTAGE, and a 5-year choiceADVANTAGE infrastructure upgrade, and (6) continuing to receive external recognition for being among the best companies to work for in the United States, in addition to accolades for guest experience, our loyalty program ,and human capital management programs.
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Mr. Oaksmith provided leadership, management and oversight critical to ensuring the company met and exceeded its financial objectives for the year. Under his leadership, the company delivered record financial performance as we exceeded our plan, guidance and analyst expectations with a 12% year-over-year increase in adjusted EBITDA and a 13% year-over-year increase in adjusted earnings per share. Mr. Oaksmith also effectively led the execution of our capital allocation strategy, including expansion of the company’s borrowing capacity, allowing the company to invest in the organic growth of the company enabling over a 3% growth in open rooms globally, including an over 4% increase in its domestic portfolio. In addition, to significantly investing in growth initiatives, the company returned over $435 million in capital to shareholders through its share repurchase and dividend programs.
Mr. Dragisich led Choice to exceed its plan for several operational metrics, including but not limited to, hotel openings, domestic and international net rooms growth, and new construction starts, all of which were above target. Mr. Dragisich continued to strengthen the company’s segment-specific organizational structure with a focus on customer-centricity, facilitating closer ties with both guests and franchisees while overseeing platform growth and corporate development initiatives. Mr. Dragisich’s oversight of the platform growth teams helped drive platform EBITDA 6% above its target and expanded the partnerships business with a pipeline for long-term growth. Mr. Dragisich also successfully launched and mobilized three key operational excellence initiatives, delivering all milestones on time and under budget. His teams also successfully executed the relaunch of four brands and drove growth across each of Choice’s three domestic and international segments, including a 12% increase in global upscale openings, a 10% increase in domestic extended-stay rooms system size and record openings for WoodSpring, Everhome and the overall extended stay portfolio, and a 51% increase in global midscale hotel openings.
Mr. Pepper led our in-year brand growth initiatives, supporting the relaunch of four Radisson brands (Radisson Blu, Radisson Individuals, Radisson and Park Inn by Radisson). Further, under Mr. Pepper’s leadership, our new construction pipeline was strengthened with over two-thirds of franchisees either owning or controlling land sites and he supported the enterprise in driving and exceeding our franchisee retention goals resulting in above target net unit growth.
Ms. Wu
Ms. Wu provided essential strategic and legal support to our Board and management, and her leadership, initiative and counsel impacts across initiatives and functions. She oversaw and managed the increasingly complex legal, regulatory, public policy, and enterprise risk environment associated with Choice’s growing public footprint. She also played a proactive role in partnership with our other executives in supporting key corporate and business development activities focused on growth, operational initiatives driving company and franchisee success, and shareholder relations and outreach.
Mr. Ramirez led our Segment Organization to a successful year. Under his leadership, he drove a renewed focus on our franchisee-centric culture driving brand growth and performance as well as enhancements to our franchising value proposition. During 2024, his team relaunched four historic Radisson brands (Radisson Blu, Radisson Individuals, Radisson and Park Inn by Radisson), contributing to revenue intense net unit growth. In upscale, Cambria and Radisson brands saw a YoY RevPAR increase, and thanks to the strength of our four primary upscale brands, the organization was able to award 44 new upscale franchise agreements. In the core brands, Quality Inn had a record 41 openings in 2024 and remains one of the most sought-after midscale brands in the industry. Further, the upper midscale and midscale net unit growth was above plan and the strategic foundation was laid to differentiate our upper midscale brands through the development of new brand frameworks and brand investment models. On the Extended Stay front, Choice celebrated the opening of our 500th Extended Stay Hotel. Driven by the strength of our Extended Stay brands and value proposition, and as of October 2024 STR industry data, WoodSpring Suites now represents ~50% of all Economy Extended Stay hotels under construction and ~60% of ground breaks. Finally, under Mr. Ramirez’s leadership, the international business delivered 16% international corporate EBITDA growth, and 4.4% international net room growth, driven by onboarding of revenue intense strategic partners, cost discipline and a stronger integration with our centralized tech platforms.
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2024 SHORT-TERM INCENTIVE PAYOUTS
As the adjusted 2024 operating income of $514.1 million exceeded the target of $495.4 million, the MIP incentive portion related to operating income for Messrs. Pacious, Oaksmith, Dragisich, Pepper and Ramirez, and Ms. Wu, was funded at 137.5%. Because the Company over-performed in relation to strategic initiatives, the portion related to strategic initiatives was funded at 115%. (1)
| Target Incentive(%) | Target Incentive($) | Actual Incentive($) | Actual Incentiveas a Percentof Target(%) | |
|---|---|---|---|---|
| Patrick Pacious | 200% | $2,460,109 | $3,345,749 | 136% |
| Scott Oaksmith | 75% | $438,781 | $587,966 | 134% |
| Dominic Dragisich | 115% | $862,500 | $1,127,719 | 131% |
| David Pepper | 75% | $466,816 | $592,856 | 127% |
| Simone Wu | 60% | $348,008 | $447,191 | 129% |
| Raul Ramirez | 60% | $277,205 | $358,634 | 129% |
(1)Target and Actual Incentive based on salary earned during 2024, including any adjustments made during the year (i.e., March 2024).
| 2025 Proxy Statement | 53 |
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Long-Term Incentive Compensation
Long-term incentive compensation is the largest component of total compensation for our NEOs. Linking the greatest portion of total compensation to long-term objectives aligns executives’ interests with the interests of shareholders. The Committee believes this emphasis on the long-term, focuses executives on long-term investment decisions and proactive management of potential risks facing the business. To strengthen the tie between executive compensation and the Company’s performance, each executive’s targeted and actual pay mix may vary by position, with the positions that have a greater impact on performance / operations generally having more pay at risk in the form of long-term incentives.
ALL NEO LONG-TERM INCENTIVE MIX
In 2024, the Committee approved NEO awards of PVRSUs and stock options to the NEOs as follows:
| 75% | 25% |
| PVRSUs(cumulative 3-year EPS with +/- 15% rTSRmodifier, three-year vesting period) | Stock Options(vest in equal installments over four-year period) |
| 100% Performance-Based | |
|---|---|
The mix of 75% PVRSUs and 25% stock options drives focus on EPS and TSR performance.
PVRSUs
The Company grants PVRSUs with performance conditions based on a financial performance metric, i.e., EPS, as well as a market condition criteria based on the Company’s TSR relative to a predetermined peer group. The vesting of PVRSU awards is contingent upon the Company achieving the EPS performance target and TSR performance relative to a peer group for the performance period, and the employees’ continued employment for a service period. These performance conditions affect the number of shares that will ultimately vest.
The 2024 All NEO PVRSUs granted utilize a combination of cumulative EPS performance (three years), rTSR (three years) and time-based (three years) vesting. Depending upon TSR performance against certain peers over the 3-year period, the PVRSU grant may be increased in value by 15% (if relative TSR is at or above the 75% percentile) or decreased in value by 15% (if relative TSR at or below the 25th percentile).
PVRSUs AWARDED TO ALL NEOs
| Performance Metric | Weighting | Why Metric is Used | How Goals are Set |
|---|---|---|---|
| 3-Year Cumulative EPS | 100% | EPS is used because of its strong alignment with shareholder value creation. | The Committee, in conjunction with its Compensation Consultant, informed by Management's recommendation, approves the EPS goals in February of the performance year. |
| Relative TSR Percentile Rank* | 15% Modifier | The use of a relative TSR modifier reflects the relative performance of the Company against a targeted peer group. | The Committee, in conjunction with its Compensation Consultant, informed by Management's input, approves the TSR peer group in February of the performance year. |
*Peer group for rTSR modifier consists of S&P 400 Consumer Discretionary plus select companies from the “Hotels, Resorts and Cruise Lines” and “Hotel and Resort REITs” GICS sub-industries.
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LONG-TERM INCENTIVE TARGET OPPORTUNITIES
The value of the long-term incentive opportunity granted to each NEO in 2024 was determined based on a percentage of base salary or a targeted dollar value. Each NEO’s opportunity was determined based on the criticality of the role in achieving the short and long-term, financial and strategic goals of the Company and relative to the competitive market.
The following table sets forth the equity award grant value for the February 2024 grants and base salary for each NEO as of December 31, 2024:
| NEO | 12/31/2024Base Salary | Target GrantValue | 2024 AnnualEquity AwardGrant Date FairValue(1)(2) |
|---|---|---|---|
| Pacious | $1,250,000 | $3,000,000 | $3,000,144 |
| Oaksmith | $600,000 | $1,200,000 | $1,200,149 |
| Dragisich | $750,000 | $2,000,000 | $2,500,126 |
| Pepper | $630,000 | $1,100,000 | $1,500,128 |
| Wu | $585,000 | $1,000,000 | $1,000,149 |
| Ramirez | $465,000 | $581,250 | $1,081,380 |
(1)Represents annual management grants awarded February 29, 2024.
(2)For Mr. Ramirez, award value includes one time $500,036 time vested RSU.
The fair value of TSR PVRSUs are estimated using a Monte Carlo simulation method as of the date of award grant. Compensation expense is recognized ratably over the requisite service period, regardless of whether the market conditions are achieved and the awards ultimately vest.
Mr. Ramirez received a one time restricted stock unit award with the goal of strengthening both retention and internal and external market positioning of Mr. Ramirez' total direct compensation.
PVRSUs GRANTED PRIOR TO 2024
Completed PVRSU Grants
2021-2023 EPS-Based PVRSUs with TSR Modifier
The NEO 2021 PVRSU grant was based on the two-year performance period 2021 through 2022, with eligibility for a three-year TSR modifier. The cumulative EPS target was $5.78 for the performance period 2021-2022 and the threshold was $4.62. The actual two-year cumulative EPS applicable to the 2021-2023 EPS-Based PVRSUs with TSR Modifier was $9.93, reflecting 172% of target and a payout of 200% of target. The company’s relative TSR over the measurement period (2021-2023) totaled 10.8%, representing a rank of 46% compared to the peer set. As a result, there is no modifier applied to the grant vesting. These awards vested on March 2, 2024.
2022-2024 EPS-Based PVRSUs with TSR Modifier
The NEO 2022 PVRSU grant was based on the two-year performance period 2022 through 2024, with eligibility for a three-year TSR modifier. The cumulative EPS target was $14.91 for the performance period 2022-2024 and the threshold was $11.93. The actual three-year cumulative EPS applicable to the 2022-2024 EPS-Based PVRSUs with TSR Modifier was $18.76, reflecting 125.8% of target and a payout of 200% of target. The company’s relative TSR over the measurement period (2022-2024) totaled -0.1%, representing a rank of 49% compared to the peer set. As a result, there is no modifier applied to the grant vesting. These awards vested on March 2, 2025.
| 2025 Proxy Statement | 55 |
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Outstanding PVRSU Grants(1)(2)(3)
| 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | 2027 | 2028 | Status |
| 2020-2024 PVRSUsMr. PaciousRelative TSR - Tranches lock and vest at end of 2022, 2023, 2024(1)(2)(4) | Tranche 1 certified and vested on March 2, 2023 | Tranche 2 certified and vested on March 2, 2024 | Tranche 3 certified and vested on March 2, 2025 | Certified: Tranche 1: 266.7%Tranche 2: 76% Tranche 3: 186.0%Final Payout: 176.2% | |||||
| 2021-2023NEOs2021-2022 EPS, with three year +/- 15% relative TSR modifier(2)(5) | Vested on March 2, 2024 | Certified at 200%No TSR modifier | |||||||
| 2021-2025Mr. PaciousMr. Dragisich Relative TSRTranches locks and vests at end of 2023, 2024, 2025(2)(4) | Tranche 1 certified and vested on March 2, 2024 | Tranche 2 certified and vested on March 2, 2025 | Tranche 3 certifies and vests on March 2, 2026 (if earned) | Certified: Tranche 1: 0% Tranche 2: 76% | |||||
| 2022 to 2026Mr. Pacious Mr. Dragisich Relative TSR(2)(4)5-year vesting (certifies and vests at 3-year, 4-year, 5-year) first tranche certifies 10%, second 20%, third 70% | Tranche 1 certified and 10% vested on March 2, 2025 | Tranche 2 certifies and 20% vests on March 2, 2026 (if earned) | Tranche 3 certifies and 70% vests on March 2, 2027 (if earned) | Certified: Tranche 1: 50% | |||||
| 2022 - 2024 All NEOs Cumulative EPS w 15% modifier(2)(5) | Vested on March 2. 2025 | Certified at 200%No TSR modifier | |||||||
| 2022 - 2025PepperDeal Value with Hotel Opening Modifier(2)(6) | Vests on March 2, 2026 (if earned) | Certified:Performance through 2024 did not meet threshold. No payout | |||||||
| 2023 - 2025NEOsCumulative EPS w 15% TSR modifier(2)(5) | Vests on March 2, 2026 (if earned) | Period not yet complete | |||||||
| 2024 - 2026NEOsCumulative EPS w 15% TSR modifier(2)(5) | Vests on March 2, 2027, (if earned) | Period not yet complete | |||||||
PVRSU Graphic Notes:
(1)Performance achievement levels relative to threshold, target and maximum are established at the beginning of the performance period, as well as the corresponding percentage of the target grant that will be earned at each achievement level. As a result, the number of PVRSUs that vest during any performance period may range from 0% to 300% of the initial grant.
(2)PVRSU targets tied to strategic and financial goals are set after considering the Company’s business plan and anticipated market performance. Due to competitive reasons, goals will be disclosed after the fact. When granted, we expected the achievement of the targets related to the 2020-2024, 2021-2023, 2021-2025, 2022-2026, 2022-2024, 2022-2025, 2023-2025 and 2024-2026 PVRSU grants to be at least as difficult as we expected the achievement of the 2022 to 2024 performance period EPS target to be when granted.
(3)Certain PVRSUs based on relative TSR require performance at the 65th percentile to pay out at target.
(4)rTSR peer group consists of select companies from the “Hotels, Resorts and Cruise Lines” and “Hotel and Resort REITs” GICS sub-industries.
(5)rTSR peer group consists of S&P 400 Consumer Discretionary plus select companies from the “Hotels, Resorts and Cruise Lines” and “Hotel and Resort REITs” GICS sub-industries.
(6)PVRSU target reflects deal value calculation through 2024 with a modifier for hotel openings through 2025. As performance through 2024 did not pay out, modifier on performance through 2025 can not pay out.
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