Red Lion settles in, plans brand change
 
Red Lion settles in, plans brand change
22 OCTOBER 2015 6:02 AM
Growing its footprint east of the Mississippi River and transforming the recently acquired Settle Inn brand into an extended-stay offering are atop the priority list for Red Lion Hotels Corporation executives.
PHOENIX—Five months after acquiring the Guesthouse and Settle Inn brands from Guesthouse International, Red Lion Hotels Corporation is in the final stages of melding 73 franchised hotels from the acquisition into its back-of-house systems while launching its move east primarily through a conversion program.
 
The two-pronged approach to expanding Red Lion’s footprint east of the Mississippi River is in full swing, according to President and CEO Greg Mount. The company has grown to 135 hotels in 31 states—up from 54 hotels a year ago.
 
“We have a good suite of brands that allow us to work vertically,” Mount said during a break at the recent Lodging Conference.
 
In addition to the Guesthouse and Settle Inn additions, Red Lion has added two Red Lion hotels, two Hotel RL properties and one Red Lion Inn & Suites property east of the Mississippi.
 
Mount said adding hotels in areas east of the Mississippi River—in places such as Brooklyn, New York; Washington, D.C.; Baltimore; and Harrisburg, Pennsylvania—means that the company is meeting the objectives it set forth even before he became the company’s leader 20 months ago.
 
“You’re starting to see that goal come to fruition,” Mount said.
 
Bill Linehan, executive VP and chief marketing officer, believes the company’s approach is working. The fact that it has had two consecutive quarters of double-digit revenue-per-available-room growth and 10 consecutive quarters of earnings and earnings-before-interest-taxes,-depreciation-and amortization growth backs up that claim.
 
The catalysts for that growth have been the systems put in place to capture more customers as well as cost-containment programs and the smarter use of the company’s systems and programs, Linehan said.
 
Most of Red Lion’s core-brand growth has come through conversions, but it did have one new-build property—the Red Lion Ridgewater Inn & Suites in Polson, Montana—open this year.
 
The company has announced plans for several other new-construction properties, and Red Lion officials expect to add eight more hotels via conversion by the end of the year, according to Linehan.
 
“We will continue to focus on being a conversion brand,” Mount said. “It’s the space we want to be in and work hard to be exceptional in.”
 
The CEO added that the company’s flat fee structure has attracted owners who are looking to exit large franchising companies that have oversaturated their markets and constrained average daily rates.
 
“We’re giving them contribution on both sides—unconstraining their ability to raise rates and reduce costs with flat fees,” Mount said.
 
The company’s growth focus is on building a franchising platform with some management contracts and joint-venture partnerships, Mount said.
 
“Ultimately, the platform we’re creating is a franchising organization,” Mount said. “We will not own 100% of anything, but we will JV if we see the right asset in the right location.”
 
The company has an equity stake in 20 of its hotels after adopting an asset-light strategy several years ago. Those stakes give Red Lion some ideal perspective when it comes to management contracts, according to Mount.
 
“If you’re not operating your own hotels you don’t have the same sensibilities. …. You have to understand what it takes to be an owner in this day and age,” he said.
 
Settling in extended stay
One of the ways Red Lion will accelerate its growth is to transform its Settle Inn brand into an extended-stay offering, Mount said. There are five Settle Inn properties in the portfolio, according to the company’s website.
 
RLHC hasn’t set a date for the Settle Inn transformation, but it is high on the priority list, Mount said.
 
“We acquired it with the knowledge that we would reposition it as extended stay,” Mount said. “We really like the name.”
 
Linehan said the transition will be in full swing by the second quarter of 2016.
 
“There’s an extremely clear opportunity for marketing firepower,” Linehan said. “We want to position the brand to be a brand of preference in that segment.”
 
Red Lion is not looking to add more brands to its portfolio as it wants to focus on expanding its current lineup, Mount said.  However, it wouldn’t hesitate to pounce if a 4-star brand becomes available.
 
Loyalty marketing is the key
Red Lion’s approach to rewarding customer loyalty is a fundamental reason for its growing presence in the hotel space, according to Mount. He said the company’s revenue management approach allows it to generate demand in a meaningful way without having a big, robust and expensive loyalty program.
 
“You don’t sell a hotel along the roadside with a billboard anymore,” Mount said. “The way a customer chooses and purchases a hotel room today is different than even six months ago. The amount of business booked online is dynamically growing at a fast pace.”
 
Digitally targeting customers via email and geomarketing are two foundations of Red Lion’s selling approach, Linehan said.
 
“We’re taking the retail approach to selling rooms,” Mount said. “We’re delivering demand digitally in a much more retail-oriented manner.”
 
The company is utilizing a perpetual merchandising approach that recognizes different consumer behaviors at different times, Linehan said.
 
“We want to always have something to offer to the consumer that’s shopping,” Linehan said.
 
Red Lion’s Hello Rewards loyalty program provides guests with a free night after seven paid stays. It also provides them with unique unpublished perks via email—perks that often serve as a partner marketing engine for the brand, Linehan said.
 
“We’re trying to build true loyalty,” Mount said. “If we can deliver a program that creates true loyalty and one that people will respond to, that will gain momentum as we gain our presence across the U.S.”
 
The focus since the acquisition has been to optimize the company’s proprietary Revpak technology systems in place to deliver measurable improvements in results and create the platform for consumer messaging, Linehan said.



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