Ron Burgett of Red Lion explains the reorganization of the company into three distinct brands.
LOS ANGELES—Taking a page directly from the competitors’ playbook, Spokane, Washington-based Red Lion Hotels Corporation has answered shareholders’ and franchisees’ calls for a more focused direction by splitting into three defined brand segments—Red Lion Hotels, Red Lion Inn & Suites and the Leo Hotel Collection.
Announced during the Americas Lodging Investment Summit, the reorganization will include new logos for all three segments and the company’s foray into what has become known in the industry as a “soft brand” collection of hotels.
Red Lion Hotels will remain the core growth engine; Red Lion Inn & Suites will differentiate the larger, more full-service assets; and the Leo Collection will allow independent hotels to keep their name and uniqueness but become part of a larger distribution, and sales and marketing arm, said executives Jon Eliassen and Ron Burgett.
Burgett, who joined the company seven months ago as executive VP of brand development after stints with Choice Hotels International and Northcott Hospitality, said Best Western International paved the way for all-encompassing brands to divide into different segments.
“We’ve realized we clearly had three separate guests coming to our hotels,” Burgett told HotelNewsNow.com. “Before, it was a Red Lion Hotel whether it was limited service or full service. So brand segmentation was a natural thing. It was natural for us to look at the market and see what our guest was looking for.”
The move follows a tumultuous two years for Red Lion during which the company received criticism from many of its major shareholders for not properly looking for ways to unlock shareholder value, particularly a sale of the company. Red Lion executives subsequently embarked on an “exploration of strategic alternatives” and throughout 2012 began marketing a number of non-core assets, eventually selling three and using $17.7 million of the proceeds to pay down debt.
“In the last 18 months we’ve made great strides in strengthening the balance sheet and reducing the debt,” Eliassen, the company’s CEO, said Wednesday. “We’re much more stringent financially today than we were 18 months or two years ago. That said, we’re still a small company.”
Burgett said Red Lion’s ideal goal is to own 50% of its assets and franchise the other 50%. To accomplish that goal it may need to sell an additional handful of properties or—a more popular objective—add a number of franchised properties to the portfolio. As of year-end 2012, there were 48 Red Lion hotels.
“We hope to add 10 or so (franchised hotels) by the end of the year,” he said.
Having three distinct segments within the brand should accelerate that goal, Eliassen said. While Red Lion Hotels will remain the main driver of growth, it will look to add Red Lion Inn & Suites product by way of conversion in large, city-center markets.
The company is in the final stages of certifying the Leo Collection and will begin to sell the brand within 30 days. Initial talks are in development, Burgett said, and within the next week or two he hopes to have the first deal signed.
“We’re focused on major markets; destination-type areas,” he said. “We think this brand will be fit for a larger hotel, so markets we feel really strongly about are Seattle, San Diego and Las Vegas is a no-brainer for us. We are looking at Las Vegas heavily.”
Leo hotels will fall in the $80 to $130 rate range, Burgett said. Independents who join the collection will gain the power-in-numbers that coincides with aligning with a brand, such as revenue-management tools, a wider distribution system and negotiated rates with a greater number of online travel agencies.
“You’re seeing Marriott (International) and a number of other hotel companies doing it,” Eliassen said. “It makes sense for us, especially in the West because we’ve had a number of hoteliers contact us and say they really like what we do from a revenue-management and sales support (standpoint).”