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Red Lion Hotels sees revenue drop, agrees to sell Denver asset

- Judy Maxwell (Assistant Editor)
Red Lion Hotels will sell its Denver Southeast hotel in Colorado for $13m.

 

Red Lion Hotels Corp., which reported a drop in total revenue in the second quarter of this year, has agreed to sell the Red Lion Hotel Denver Southeast in Colorado for $13m.

 ‘The sale of a non-core property provides us with additional financial flexibility,’ said Jon E. Eliassen, president and chief executive officer of Red Lion Hotels Corp.  ‘The proceeds from the sale of this hotel will allow us to pay down debt, enhance the competitive position of the Red Lion brand and increase shareholder value.’

The sale of the 478-room select-service hotel is expected to close on or before October 31 and the company does not expect the buyer to sign a franchise agreement.

In July, the hotel company sold its asset in Helena, MT, and in this case the buyer entered into a franchise agreement with Red Lion. Also in July the company agreed to sell its hotel in Aurora, CO, and discontinue any involvement with the new owner.

Red Lion Hotels Corporation announced in January 2012 it was listing the Denver hotel for sale. In the fourth quarter of last year, Red Lion also listed for sale its hotels in Medford, OR, and Missoula, MO, classifying them as non-core assets. In the second quarter of this year, Red Lion discontinued operations at its property in Sacramento, CA, in preparation for a sale.

On July 18, the company announced the signing of a franchise agreement with the owners of a hotel in Cathedral City, CA, in the Palm Springs area. The 97-room property is expected to convert to a Red Lion Hotel in fall 2012.

At the end of the second quarter 2012, Red Lion Corp.’s assets totaled nearly $300m, down from $305m in December.

Total revenue from continuing operations reported during the second quarter of 2012 was $38.8m compared to $42.2m in the second quarter of 2011.

On a comparable basis, hotel revenue increased by $1.6m and franchise revenues increased by $400,000, but the gains were offset by a decrease in entertainment revenues of $2.3m.

Second quarter net loss from continuing operations was $400,000, or 2 cents per share, compared to net income from continuing operations of $19.1m or $1 per diluted share, in the second quarter of 2011.

In the second quarter of 2012, comparable EBITDA from continuing operations before special items increased to $5.5m, compared to $4.7m in the second quarter of 2011.

‘We increased our overall market share driven by strong occupancy growth and improved our RevPAR performance,’ up 5.4 percent year over year, said Eliassen. Occupancy increased by 280 basis points.

With an ADR gain of just 1 percent, the CEO said the transactions have ‘well-positioned’ Red Lion to increase rates ‘when the midscale segment rebounds.’

The sales of and agreements to sell non-core assets, including the company's commercial mall in Kalispell, MO,and its plan to expand the number of franchises this year ‘are part of our continued execution of our strategy to improve the competitive position of our core hotel properties … and reduce debt for all Red Lion Hotels shareholders,’ said Eliassen.

Toward that end, Red Lion Hotels in July named Ron Burgett as executive vice president, brand development. His primary responsibility is expanding Red Lion's operations through new franchises. Burgett is also overseeing relationships with the company's franchise owners.

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