Red Lion Hotels Corporation (RLHC) reported in its first quarter 2017 results that the company executed 34 franchise agreements and opened 21 new franchised hotels in the first quarter of 2017, increasing its franchise segment revenues to $10.9 million, up from $3.3 million the same time last year. The company is undergoing strategic transformation to a franchise-fee-dominated business model after its September 2016 acquisition of Vantage Hospitality.
Other highlights from the companies’ Q1 performance include:
- Reduced net loss to $3.6 million from a net loss of $4.8 million in the first quarter of 2016
- Adjusted EBITDA increased to $1.5 million from a loss of $0.7 million in 2016
- Achieved system-wide comparable RevPAR growth of 2.4% in the first quarter of 2017
- Improved franchise segment operating margin to 21.8% (15.2% excluding the impact of the recent acquisition) compared to break-even in 2016
Greg Mount, RLHC president and CEO, commented: “The significant improvements realized in the first quarter demonstrate the fundamental changes that we have executed the past few years toward a higher-margin franchise fee business model while also achieving a less capital intensive future. This is RLHC executing on its growth platform and working to achieve consistent profitability. We are driving increased demand for our portfolio of franchise brands and are confident in our ability to generate consistent unit growth. The unit growth will be achieved across many geographic areas that represent significant long-term unit growth potential for the broad and diverse RLHC brand portfolio. We are focused on achieving the substantial RevPAR benefits that are being driven by RevPak while also deploying RevPak-lite to our acquired economy-segment franchise hotels. We have also initiated our brand-stratification plan that we expect will improve profitability throughout the brand network and attract additional unit growth demand for RLHC. We are well positioned to capitalize on our asset-light franchise model, which in turn we expect to translate to continued growth in EBITDA over the years to come.”
In Q1 2017, RLHC brands opened hotels in 13 states, including two Hotel RLs, four Red Lion Inn & Suites, 11 Americas Best Value Inns and one Country Hearth Inn. Notable property openings were Hotel RLs in Omaha, Nebraska and Brooklyn, New York; Red Lion Inns & Suites in Fayetteville, North Carolina and Everett, Washington; and Americas Best Value Inns in Fort Worth, Texas, Houston, Texas, and Baton Rouge, Louisiana.
Of RLHC’s 34 executed franchise license agreements in the quarter, 23 were changes in the underlying ownership where the owner chose to stay with RLHC. The remaining 11 franchise license agreements were new to the platform and were executed in seven different states, including two Red Lion Inn & Suites and nine Americas Best Value Inns. The company now has over 1,140 hotels and over 73,000 rooms in its system.