AT FIRST SKIM, an article about the opening of Red Roof’s first soft-branded hotel in downtown Chicago may read like a typical story about a landmark conversion.
But the tale of revival does not belong only to the hotel. It’s also the saga of Red Roof, which less than 10 years ago faced a fading brand and financial troubles that threatened the same high-profile hotel and some of its other owned assets.
Today, the private partnership that owns and franchises Red Roof hotels has rescued and revived the 45-year-old company. It has refreshed the Red Roof brand image and redefined its mission.
“To have the vision to say, ‘We can save it,’ and save it in the way it’s been saved is phenomenal,” said Andrew Alexander, president of Red Roof, based in Columbus, Ohio.
Over the past decade, the company has redesigned its flagship hotels, dramatically grown its franchising business, launched new brands in higher-price segments and gained footholds in urban markets. Last month, it entered the extended-stay sector with HomeTowne Studios by Red Roof.
“In many ways we relaunched Red Roof in terms of investment in renovations, in terms of design and in terms of philosophy.”
Andrew Alexander, president, Red Roof
In mid-September, Alexander sat at a pub-height table in the lobby of the 16-floor St. Clair Hotel at Ontario and St. Clair streets. Construction workers could be heard hammering and running power saws to finish up in time for the hard opening on Oct. 1.
All that surrounded Alexander had been transformed in a year-long multi-million-dollar renovation that repositioned the asset from an economy offering to an upper-midscale revenue generator for Red Roof and its owner Westmont Hospitality Group.
The nearly 100-year-old red brick building has always been a hotel, opening in the 1920s as the Hotel Eastgate. Before its conversion, it was a Red Roof Inn. It was already closed for renovations in summer 2017 when the company announced the rollout of its soft brand, The Red Collection.
“The Red Collection is meant to be in the hearts of cities,” Alexander said. “Growth is being done on a thoughtful and selective basis. We don’t want to grow for growth’s sake. We will open Red Collection hotels where it makes sense.”
Although being located one block from Chicago’s Magnificent Mile is exciting, Red Roof also seeks to grow the brand in smaller or secondary cities with walkable urban cores with restaurants, bars, shopping and entertainment venues.
Phil Hugh, chief development officer at Red Roof, said the Red Collection “allows the brand to enter into locations where we have demand for it.” Unlike its economy products, the soft brand, “does not allow us to be capped on rate. It allows us to drive higher rate.”
Although the Red Collection is open to accepting newly built hotels, Hugh said the current cost of construction and getting to market will most likely open franchising opportunities with existing hotels.
When the St. Clair Hotel checked in its first guest, the Red Collection’s second hotel also had opened. The State House Inn in downtown Springfield, Illinois, is managed by Packard Hospitality Group, a long-time franchisee which also has Red Roof Inn and Red Roof Plus hotels in its portfolio.
Like the St. Clair and the State House Inn, most hotels will undergo renovations to qualify for the Red Collection, Hugh said. The two properties give owners a good idea of what the company is looking for in terms of location, design and amenities.
Alexander said Red Roof hasn’t inked anymore soft-brand agreements but is in discussions with several prospective franchisees. He expects the collection will grow at a comfortable, steady pace.
The upside of being privately owned is not having to bear pressure from shareholders eager to increase earnings. Red Roof manages 115 of its namesake hotels. Publicly traded companies such as Hilton Worldwide and La Quinta Inns & Suites have spun off their owned assets into private REITs. “Real estate is not always conducive to public companies,” Alexander said. “It’s a long-term investment, and Wall Street is a quarter-to-quarter business.”
Red Roof plans to maintain its ownership model as it allows the company to test new ideas and products before rolling them out as brand mandates to franchised hotels.
Westmont Hospitality Group owns the Red Roof brand. The company also in recent years has found financial support from private lenders and partners for renovation and expansion programs.
Alexander’s career involves leading both public and private hospitality companies. An attorney by trade, he was general counsel at Renaissance Hotel Group, and helped take it public before Marriott International acquired it. He then went on to serve as general counsel for Boykin Lodging Co., which eventually put itself on the block. Westmont Hospitality Group was the winning bidder and closed on the deal in fall 2006.
About six months later, Alexander recalled, Westmont told him it planned to acquire Red Roof from Accor Inc. “They asked me to be part of the team to start the brand back up in Columbus, Ohio. At the time, Citibank was the primary investor along with a Canadian pension plan.”
The partnership acquired the brand for $1.3 billion. “But in 2008 and 2009 that all changed, of course, and assets were being put up for sale,” Alexander said.
But Westmont leadership and Alexander knew what Red Roof could become and did not want to squander what little opportunity it had left, no matter how impossible it appeared at the time. “Westmont, along with my team, was able to create a strategy and find JV partners who believed in our vision for Red Roof.”
In 2009, Alexander was named president of the company. In 2011, Red Roof Inn was its only brand when the company launched NextGen, a $200 million company-wide renovation initiative.
In 2013, it rolled out phase two – the launch of Red Roof Plus, which created an “upper economy” segment by offering value-seeking guests more through design and amenities.
From the beginning of its revival, the company focused on growth through franchising. Five years ago, it had approximately 350 hotels. By the end of this year, it will have more than 600, the majority are franchised Red Roof Inn and Red Roof Plus hotels.
“In many ways we relaunched Red Roof in terms of investment in renovations, in terms of design and in terms of philosophy,” Alexander said.
“Red Roof is special. Why it’s special is because we talked to people with experience in the hotel industry who grew up staying in economy hotels. A lot of memories come from Red Roof. Almost every time we ask, their face lights up and they have a story to tell. That’s something we cherish and have worked very hard to revive.”
Alexander said Red Roof began to lose its brand identity after it went public in the 1990s and even after Accor acquired it, positioning it next to its Motel 6 and Studio 6 economy brands.
“We were on the edge of losing that nostalgia; that special spark. We had to act fast and restore confidence with our guests. We returned to our roots. We retained key personnel, those who understood what it takes to make it happen.”
What does it take? “We focus on our franchisees and our associates,” Alexander said. “We make sure we are focused on our brands and what is right for the brands.”
Hugh said another Red Roof executive recently told him that when he joined the company five years ago he felt he was reading the first chapter of a fantastic book. “He said, ‘I can’t wait to see how it ends.’
“We are probably on our fourth or fifth chapter,” Hugh said. “With our brands, we have a lot of space grow.”
“It’s a remarkable journey when the viability of the company in 2009 was very much in question to today,” Alexander said. “It’s been a busy 10 years.”
Red Roof in the U.S.
Total Red Roof properties open in the U.S.
Rooms in the U.S.
Red Roof Inn hotels
Red Roof Inn pipeline
Red Roof Plus
Red Roof Plus pipeline
Red Collection hotels
Red Collection pipeline
HomeTowne Studios by Red Roof
HomeTowne Studios pipeline
(Note: Globally, including the U.S., Red Roof has 584 hotels and 53,616 rooms)
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