David Pepper
CHOICE HOTELS INTERNATIONAL INC /DEAbout David Pepper
Chief Development Officer (CDO) at Choice Hotels International (CHH). As of December 31, 2024, his base salary was $630,000 with a 75% target annual bonus; in 2024 he earned $592,856 under the Management Incentive Plan (MIP) based on operating income and strategic initiatives performance . Company performance context during his tenure includes record 2024 results with adjusted EBITDA up 12% year-over-year, adjusted EPS up 13%, global rooms +3.3%, and a pipeline with 98% of rooms in more revenue-intense brands; five-year total shareholder return (TSR) rose from 112.53 to 142.00 (2019–2024) . He ceased being a Section 16 officer on May 15, 2024 (affects Form 4 reporting) .
Past Roles
Not disclosed in the 2024–2025 proxy filings for this executive.
External Roles
Not disclosed in the 2024–2025 proxy filings for this executive.
Fixed Compensation
| Component | 2023 | 2024 |
|---|---|---|
| Base Salary ($) | $592,000 | $630,000 |
| Target Bonus (% of salary) | 75% | 75% |
| MIP Payout ($) | $547,355 | $592,856 |
| MIP Metrics/Weighting | Op. Income 60%, Strategic 40% (Pepper) | Op. Income 40%, Strategic 60% (Pepper) |
| 2024 MIP Achievement Drivers | Adjusted Op. Income $454.7M (2023 basis for design) | Adjusted Op. Income $514.1M; Strategic initiatives over-performed |
Performance Compensation
Annual Equity Grants and Structure
| Item | 2023 | 2024 |
|---|---|---|
| Target Grant Value ($) | $1,100,050 | $1,500,128 |
| Mix | 75% PVRSUs / 25% Stock Options | 75% PVRSUs / 25% Stock Options |
| PVRSU Metric & Vesting | 3-year cumulative EPS with +/-15% rTSR modifier; cliff vest at 3 years | 3-year cumulative EPS with +/-15% rTSR modifier; cliff vest at 3 years |
| Stock Options | 4-year ratable vest (25% annually); 10-yr term (2020+) | 4-year ratable vest (25% annually); 10-yr term (2020+) |
2024 Grant Sizing Details
| Detail | Value |
|---|---|
| PVRSUs granted (target) | 10,051 units (threshold 5,026; max 23,117) |
| Stock options granted | 9,653 options @ $111.94 exercise price |
Outstanding Awards and Results
| Award/Cycle | Status / Payout |
|---|---|
| 2021–2023 EPS PVRSUs (+/-15% rTSR) | Certified at 200% of target; no TSR modifier; vested March 2, 2024 |
| 2022–2024 EPS PVRSUs (+/-15% rTSR) | Certified at 200% of target; no TSR modifier; vested March 2, 2025 |
| 2022–2025 Pepper “Deal Value” PVRSU (with hotel-opening modifier) | Performance through 2024 did not meet threshold; no payout (still pending 2025 modifier window) |
| Options outstanding (selected Pepper grants) | 2/26/2021: 13,392 ex./4,466 unex. @ $104.87; 2/25/2022: 6,358 ex./6,359 unex. @ $146.68; 3/2/2023: 1,612 ex./4,838 unex. @ $123.71; 2/29/2024: 9,653 unex. @ $111.94 (all with 10-yr term; 25%/yr vest) |
2024 Vested/Exercises (realized activity)
| Activity (2024) | Shares | Value Realized ($) |
|---|---|---|
| Options exercised | 27,573 | $1,554,619 |
| Stock awards vested | 10,119 | $1,111,370 |
Equity Ownership & Alignment
| Item | Detail |
|---|---|
| Executive ownership guideline | 3x base salary for NEOs; must comply within 5 years |
| Compliance (as of 12/31/2023) | Pepper held 19.7x salary (exceeded guideline) |
| Beneficial ownership (3/17/2025) | 42,556 common shares; rights to acquire 44,256 via options; <1% of shares outstanding |
| Vested vs. unvested (12/31/2024 snapshot) | See outstanding options/PVRSUs table above; multiple tranches exercisable and unexercisable; PVRSUs unearned pending cycles |
| Hedging / pledging | Hedging prohibited for associates; pledging prohibited for associates (exceptions only for directors); dividends on PVRSUs paid only if vested |
| Clawback | Cash and equity subject to recoupment upon certain restatements per NYSE standards |
Non-Qualified/Deferred Compensation (2024)
| EDCP/Deferral Item (Pepper) | Amount ($) |
|---|---|
| EDCP – executive contributions | $93,185 |
| EDCP – company match | $29,342 |
| EDCP – aggregate earnings | $1,224,413 |
| Stock Deferral Program – contributions | $1,069,787 |
| Aggregate balances at year-end | $10,179,309 |
Employment Terms
| Provision | Key Terms |
|---|---|
| Agreement type | Non-Competition, Non-Solicitation and Severance Benefit Agreement (effective April 7, 2023) |
| Termination without cause / good reason | 70 weeks’ salary continuation; medical/dental continuation; standard executive outplacement; continued vesting of options/awards granted on/after April 7, 2023 during 70 weeks; offset if re-employed; 70-week non-compete/non-solicit |
| Change-in-Control (double trigger) | 200% of base salary + 200% of target annual bonus lump-sum; immediate vesting of post-agreement equity awards |
| Excise tax gross-up | None |
| 12/31/2024 Illustrative Payouts | Termination w/o cause/good reason: $1,036,831 total; Termination following CoC: $3,922,017 total; Disability: $4,722,963; Death: $3,909,463 (includes option/PVRSU treatments per plan) |
| Section 16 status | Ceased being a Section 16 Officer on May 15, 2024 |
Performance & Track Record
| Company Metric | 2023 | 2024 |
|---|---|---|
| Revenues ($) | $1.5B (record) | “New record” revenue over $1.5B and strong growth noted (proxy narrative) |
| Adjusted EBITDA YoY | +13% | +12% |
| Adjusted EPS YoY | +16% | +13% |
| Global rooms growth | +2.4% domestic rooms (legacy) | +3.3% global rooms |
| 5-Year TSR (index value) | 164.20 (2018–2023) | 142.00 (2019–2024) |
Pepper’s 2024 performance summary: led in-year brand growth initiatives, supported relaunch of four Radisson brands, strengthened new-construction pipeline (two-thirds of franchisees owning/controlling land sites), and exceeded franchisee retention goals resulting in above-target net unit growth .
Compensation Structure Analysis
- Pay-for-performance emphasis: 2024 short-term payout driven by adjusted operating income (company-level) and strategic initiatives; all-NXO PVRSUs based on 3-year EPS with rTSR modifier; stock options require price appreciation to deliver value .
- Equity mix shifts: Since 2023, long-term design is 75% PVRSUs / 25% options (100% performance-based), increasing EPS/TSR linkage vs. prior cycles .
- Realized outcomes: 2021–2023 and 2022–2024 EPS PVRSUs certified at 200% (no rTSR adjustment), signaling strong EPS attainment; Pepper’s 2024 option exercise activity realized $1.55M of spread value .
- Governance mitigants: Clawback policy, no excise tax gross-ups, no option repricing, no pledging/hedging (non-directors), no single-trigger CoC vesting .
Risk Indicators & Red Flags
- Section 16 status change: Pepper ceased to be a Section 16 Officer on May 15, 2024, reducing ongoing Form 4 transparency (not a violation, but lowers visibility into trading) .
- Special PVRSU grant risk: Pepper’s 2022–2025 “deal value” PVRSU remained below threshold through 2024 (no payout), indicating execution risk tied to specific development targets .
- Related party, investigations, repricing: No executive-specific related party transactions, SEC investigations, or option repricing disclosed for Pepper; company-wide policies prohibit repricing and restrict related-party deals .
Equity Ownership & Pledging
- Ownership: 42,556 shares owned; rights to acquire 44,256 via options; less than 1% of outstanding shares .
- Pledging/hedging: Prohibited for associates (exceptions only for directors); no indication of any pledging by Pepper .
Say-on-Pay & Shareholder Feedback
- Say-on-Pay approval: 99% support in 2024 and again highlighted in 2025 proxy, reflecting strong investor alignment on compensation program structure and outcomes .
- Program design feedback incorporated: Continued emphasis on performance-based equity and EPS/rTSR metrics after shareholder outreach in prior year .
Investment Implications
- Alignment and retention: Pepper’s high ownership multiple (19.7x salary as of 12/31/2023) and ongoing PVRSU/option exposure create strong alignment; severance and double-trigger CoC terms are competitive but not excessive (no tax gross-up), supporting retention during strategic initiatives and industry consolidation cycles .
- Performance visibility: Two consecutive EPS PVRSU cycles (2021–2023 and 2022–2024) paid at 200% with no rTSR adjustment, evidencing consistent EPS outperformance; however, the deal-value PSU shortfall through 2024 highlights execution risk in development-driven awards .
- Trading signals: 2024 option exercises ($1.55M realized spread) and vesting reflect scheduled maturities and share price appreciation; the loss of Section 16 status in May 2024 reduces forward-looking Form 4 visibility, warranting monitoring via proxy ownership tables and option award schedules for potential selling pressure around vesting dates .
- Macro linkage: His incentives (EPS PVRSUs and options) tie outcomes to the company’s continued execution on rooms growth, mix shift to revenue-intense brands, and EPS delivery; management guidance and transcripts emphasize conversion velocity, extended-stay strength, and partnership fee growth as non-RevPAR revenue levers that underpin pay-performance continuity .
Source documents: Choice Hotels 2025 and 2024 DEF 14A; Q1’25 earnings call transcript. All data and statements cited accordingly.