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Sonesta International to acquire Red Lion Hotels

Boston-based Sonesta International Hotels Corp. announced an acquisition agreement with RLH Corp, parent company of Red Lion Hotels and Americas Best Value Inn. The transaction, valued at approximately $90 million, is expected to close in the first quarter of 2021, bringing Sonesta's portfolio to approximately 1,200 hotels and 13 brands.

Sonesta is expected to acquire more than 900 hotels from RLH in North America, a transaction that, on its own terms, will make the Boston-based company one of the largest hotel companies in the United States.

" Upon the completion of hotel conversions previously announced and the acquisition of RLH, Sonesta will become one of the largest hotel companies in the U.S.," said Sonesta CEO Carlos Flores in a statement. " Whereas all of Sonesta’s hotels in the U.S. are currently self-managed, the acquisition of RLH significantly accelerates Sonesta’s hotel franchising capabilities by adding a franchise platform with more than 900 hotels".

The Sonesta Group includes the following brands: Royal Sonesta Hotels, Sonesta Hotels & Resorts, Sonesta ES Suites and Sonesta Simply Suites. While the RLHC brand portfolio includes Hotel RL, Red Lion Hotels, Red Lion Inn & Suites, Signature Inn, GuestHouse, Knights Inn, Americas Best Value Inn and Canadas Best Value Inn.

The company's relationship with Service Properties Trust (which holds a 34% partial interest in Sonesta and are both managed by the RMR Group) enabled growth in its portfolio in August, after the hotel and retail property investment fund terminated its agreements with Intercontinental Hotels Group (IHG) on 103 hotels due to a dispute over rent payments and did the same for 122 hotels in the Marriott Group.

The cancellation of the real estate company's franchise agreements with major brands in favour of Sonesta allows the owner to make higher profits and the acquisition of RLH provides Sonesta with even greater opportunities for growth through franchising.

" We are excited about unlocking shareholder value through this all-cash transaction with Sonesta," said R. Carter Pate, President of RLHC, in a statement. " After conducting a thorough review of strategic alternatives, the board believes (Wednesday’s) announcement is in the best interest of all of Red Lion’s shareholders.”

Carlos Flores also said RLHC was a target for Sonesta not only for its franchise business but also because of other attributes, " mainly the underlying real estate, which they’ve really pivoted from over the last couple of years in favor of … (an) asset-light strategy".

In addition, a majority of RLHC's properties come from the 2016 acquisition of Vantage Hospitality Group. This transaction, which cost $23 million and 690,000 common shares, allowed the combined company to operate or franchise more than 73,000 rooms.

Prior to 2020, Sonesta had fewer than 100 hotels in North and South America and Egypt. Carlos Flores stated in the fall of 2020 that his goal was to grow Sonesta's portfolio to 1,000 hotels within five years. The agreement with RLH should thus far exceed the forecasts.

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