1 E Wholesalers & Lowest Rate Guarantee

2 E Wholesalers u 675+ Choice Hotels participating u Manual process, heavily discounted rates u Room allocations, direct bill (30 to 60 days) u Training retail customers to buy discount u Using “scare tactics” to drive rates down u Established large price-sensitive customer base u Opportunity to sell discount “when needed”

3 E Wholesaler Strategies u Communication to Choice Hotels & Staff F Education on E Wholesale model F Limit inventory, limit discount to 20% F Avoid long term contracts, add black out dates F Add clause to increase rates during peak times F Get paid on time F Frequency points are not required

4 E Wholesaler Strategies u Implementing strategies to minimize threats and capitalize opportunities. Using Choice leverage: F Negotiating with major e wholesalers to limit discounts, mark-ups, terms F Automating process, building interfaces between e wholesalers and Choice CRS F Allow hotels to maintain consistent pricing, reduce costs, yield manage, payment upfront, measure F Beta testing begun with Lodging.com, Travelocity, and TravelWeb F Driving traffic to Choicehotels.com

5 Lowest Rate Guarantee u Best Rate Guarantee – not “lowest.” Two main objectives: F Improve Choice’s ability to build customer loyalty Y Drive customers from 3 rd party sites to Choice brand sites F Generate repeat bookings on Choicehotels.com Y Reduce franchisee costs and reliance on e wholesalers and weaken e wholesalers market opportunity

6 Lowest Rate Guarantee u LRG implemented by Six Continents, Cendant, Hilton, Starwood F Proposing Choice program similar terms and conditions F Exception - no penalty fee to hotels F BRG promises if customers find lower rate “online” hotel will match lower rate plus 10% discount

7 Best Rate Guarantee Dist. Channel Guest’s Rate Hotel’s Yield E-wholesaler $65 (30% mark-up)$50.00 (sold at $50) Match e-whlsrs. rate Choicehotels.com $65.00 $65.00 Customer requests $58.50 $58.50 Best Rate Guarantee

8 u Choice Proposed BRG Terms & Conditions: F Choicehotels.com guarantees to have lowest publicly available rate on Internet (Neg. rates, group, etc., not included). F Guarantee applicable to all 8 brands, domestic only Y Phase II to include international hotels F Competing rate must be lower than rate booked on Choicehotels.com, must be publicly available, viewable and bookable on another web site for same hotel, room type, dates and number of guests

9 Best Rate Guarantee u Choice Proposed BRG Terms & Conditions: F Does not include rates found on Opaque sites, I.e., Priceline and hotwire F Guest must first book on Choicehotels.com, have confirmed reservation F Guest must inform Choice of lower rate within 24 hours by completing online redemption form

10 Best Rate Guarantee u Choice Proposed BRG Terms & Conditions: F If confirmed, Choice will honor lower rate, plus give an additional 10% discount F Hotels/franchisees will be required to honor lower rate, plus the additional 10% discount, no additional penalty F Hotels to manage Internet User Rate on Choicehotels.com F Offer subject to change F For participating hotels only (exploring legal ramifications)

11 Best Rate Guarantee u Choice Proposed BRG Advantages: F Potential of completing more transactions on Choicehotels.com – lowest cost F Increased franchisee profitability, ADR’s F Improvement of reservation measurement F Builds customer/brand loyalty F Staying competitive F Reducing E wholesaler threats

12 Best Rate Guarantee u Choice Proposed BRG Disadvantages: F Cost (increase corporate cost to administer) F Franchisees train staff on how it works F Est. avg. hotels handling non-compliance of BRG’s to be less than 5 per year F Franchisee administration of some guest confusion or non-compliance with program

13 Best Rate Guarantee u Choice Proposed BRG Timeline : F Approvals F Program implementation, touch point education and communication plan, 60 days F FSD’s and NSD’s refrain from soliciting hotels Y Until automated interface, negotiations, etc., completed.

14 Best Rate Guarantee u Proposed Recommendation : F Recommend Choice Hotels International pursue proposed Best Rate Guarantee for all US Hotels as outlined at the November 2002 Meeting.