RED LION HOTELS Corp. has filed the paperwork with the federal Securities and Exchange Commission for its plan to acquire the Knights Inn brand from Wyndham Hotel Group for $27 million cash. The deal has some Knights Inn owners hoping their brand will now receive more attention than it did under Wyndham.
“The company expects the transaction to enhance franchise revenue and EBITDA growth and boost franchise profit margins as the company will be able to leverage existing technology and support systems,” RLH Corp. wrote in its SEC filing. “The transaction will be immediately accretive to the company’s earnings and cash flow and on an annualized basis the company expects EBITDA related to acquired contracts to be more than $3 million.”
When the company announced its plans last Wednesday the news caught some Knights Inn owners by surprise. Nancy Patel, owner of a Knights Inn in Corpus Christi, Texas, that had recently won an award from Wyndham for her $1 million renovation of the property, was one of them. “A couple of people called me and said welcome to RLHC,” she said.
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Her initial reaction was to hope things will get better under Red Lion’s ownership, because she was not satisfied with the way Knights Inn was treated under the Wyndham flag.
“I don’t think Wyndham was doing a good enough job of promoting Knights Inn,” Patel said, adding Wyndham did not nurture the brand “to the best of their ability.”
“Wyndham did not strive hard enough to focus on the problem child, as we would say, and give the attention needed to Knights Inn.”
Patel said Wyndham could have done more to improve the Knights Inn brand image by removing deteriorating properties from the system. She felt like they did not receive the same “tender loving care” as Wyndham’s other brands, but that may change under Red Lion. “Because we’re a new baby for them, I think they’re going to promote us more,” she said.
She’s also hoping for better results from Red Lion’s reservation system. The Wyndham system only provided about 5 to 8 percent of her reservations. She also questions if RLH Corp.’s marketing and sales will be able to increase Knights Inn’s position in the industry, reputation and financial standing.
Harish Patel, a Knights Inn owner in Ashland, Kentucky, was surprised by the news in his inbox this morning. “I think we all read it at the same time,” he said.
He is familiar somewhat with the Red Lion brand via family and friends who operate hotels under the Red Lion umbrella. “One of the things they like is the lower upgrading costs,” he said.
Harish also thinks Knights Inn will get more attention from Red Lion.
“Sometimes change can be scary, but it also can be a good thing,” he said. “The Knights Inn brand was a smaller fish in a much larger pond under Wyndham. I think Knights Inn will now be a larger fish in a smaller pond.”
Knights Inn’s more than 350 economy hotels, with another 47 conversions in the works, will increase RLH Corp.’s footprint by more than 30 percent, the company said. It will include almost 1,500 hotels across 48 states and Canada, an increase of 55 hotels across eight states just four years ago as the company has undertaken to increase its business this year.
“In the first quarter of 2018, we announced the sale of five hotels and committed to enhance the company’s aggressive organic growth with acquisitions that could be accomplished primarily with our existing cost base and resources,” said RLH Corp. President and CEO Greg Mount. “This acquisition will increase our franchise units by over 30 percent, and we will continue to grow the brand aggressively as we have demonstrated with our other brands.”
The acquisition is expected to close at the end of the second quarter. Knights Inn owners will quickly be included in the Red Lion reservation and support system, Mount said, as well as its Hello Rewards guest recognition program.
Geoff Ballotti, Wyndham president and CEO, said selling Knights Inn will benefit the brand. “While we’re proud of what we’ve been able to accomplish, we believe now is the right time to make this move and are confident that RLH Corp. will only continue to support and grow the brand.”