Red Lion Hotels Corp. (RLHC) late Thursday announced it has acquired the intellectual property assets and all hotel franchise license agreements of GuestHouse International, a move which will more than double RLHC’s brand portfolio.
RLHC will pay US$8.5 million, plus a potential additional payment of up to US$1.5 million, to add 73 GuestHouse International and Settle Inn & Suites franchise license agreements (5,187 guest rooms). The transaction, which is expected to close April 30, will grow RLHC’s portfolio from 57 to 130 hotels in 30 states.
RLHC said it expects the vast majority of the 73 franchised hotels to continue to operate under their existing branding while converting to the brand standards and distribution systems available from RLHC.
“This acquisition is another step in our asset-light strategy to reinvest in quality growth opportunities that leverage our pioneering technology and operating programs,” said Greg Mount, RLHC president and CEO. “We plan to use our scale, network of owner relationships and digital and ecommerce platforms to improve operating performance for all GuestHouse and Settle Inn hotels.”
Mount added, “With five brands in three hotel segments, we will have a broader base to both expand with our existing franchisees, as well as attract new ones. We have an aggressive appetite for growth through franchising and are confident that this is a major step forward.”
RLHC said it expects that by introducing its guest-management system it will provide GuestHouse and Settle Inn hotel owners similar occupancy and ADR gains to those it said it has achieved with its current hotel system, and RLHC anticipates stabilized annual EBITDA contribution of US$1.5 million to US$2 million from this added portfolio.
“We expect the transaction to be immediately accretive to RLHC on an EBITDA basis, and the addition of these franchises should create even greater long-term value for our guests, our franchisees and our shareholders,” said RLHC CFO Jim Bell.
RLHC plans to use a portion of the cash proceeds from the recent sale of its Bellevue property to fund the acquisition.