SPOKANE, Washington—Executives of Red Lion Hotels continue to seek “strategic alternative options” to maximize shareholder value, CEO Jon Eliassen said Wednesday during the company’s first-quarter earnings call.
The process of seeking alternative options is ongoing, Eliassen said. Options include a possible sale of the company or a combination with a third party.
“Concurrent with executing on our internal strategy, we remain open-minded about all options and intend to evaluate them thoughtfully and carefully,” he said.
Eliassen declined to provide additional information on the company’s process in forming a strategic alliance.
During the first quarter, Red Lion’s focus was on reducing debt and expanding its franchise program to improve the competitive position of its hotels.
The company has an outstanding debt of $100.2 million. Of that, $30.8 million was classified as current as the company’s credit facility matures in March 2013, said Julie Shiflett, the company’s executive VP and CFO.
“We plan to use proceeds from any asset sales to continue to reduce debt and invest in our hotels,” Eliassen said.
Conversations with buyers interested in Red Lion assets have been positive, he said. He said he expects the company will be able to make announcements regarding asset sales during the next quarter.
In addition to using profits from the sales to reduce the debt load, “we are continuing to work our lenders and advisers on alternative sources of funding to refinance our maturing debt,” Shiflett said.
The company also has had a number of very positive contacts and discussions in the southwest for franchising opportunities. “But we’re still … staying in the 11 states where Red Lion has operated historically,” Eliassen said.
Performance
In what is typically a slow season for the company, Red Lion was able to drive occupancy growth and maintain rate during the first quarter, Eliassen said.
The company reported occupancy of 52% during the first quarter of 2012, up from 48.4% during the same period in 2011. Average daily rate remained relatively flat at $77.29, comparable to $77.47 in 2011. The company saw a 7.7% increase in revenue per available room to $40.21, driven by the increase in occupancy.
Industry-wide forecasts note RevPAR growth is expected to be moderate over the next three quarters for the midscale segment. Red Lion is expecting its RevPAR growth during 2012 will fall in the 2% to 4% range.
Red Lion has been successful in growing its transient business so far in 2012,and remains committed to the segment with a TravelClick partnership, Eliassen said.
The companies are working on launching new property-specific websites to create more direct interaction with Red Lion guests and drive revenues at a substantially lower cost.
The development work on this project with TravelClick is proceeding as planned, he said.
“We expect this will generate an increase in reservations through our own system, which should translate into improved profitability and margins for all Red Lion hotels, including our franchised locations,” Eliassen said.
