Sonesta International Hotels Corp., which started in 2020 with 58 hotels and three brands, stayed busier than most over the past year. The company recently added more than 200 former InterContinental Hotels Group (IHG) and Marriott International hotels to its portfolio and unveiled two new brands, Sonesta Simply Suites and Sonesta Select. Last month, the company announced it had agreed to acquire Red Lion Hotels Corp. (RLH), bringing an additional 900-plus properties and eight brands into its stable. Hotels editor Christina Jelski recently spoke with Sonesta CEO Carlos Flores about the company's explosive growth.
Carlos Flores
Q: What made RLH an ideal acquisition target for Sonesta?
A: Although we already franchise and license internationally in South America and the Caribbean, we've always said that franchising domestically is not an "if" as much as a "when" question. We've been familiar with Red Lion for many years. And when thinking about what they've done in the last couple of years and how that plays into our ability to not just execute, but execute at scale in over 900 hotels, they really provided a ready answer to that question.
Q: Are there any concerns about overlap when it comes to bringing RLH's brands -- which include the Hotel RL, Red Lion Hotels, Red Lion Inn & Suites, Signature Inn, GuestHouse Extended Stay, Americas Best Value Inn, Canadas Best Value Inn and Knights Inn -- into the Sonesta fold?
A: We view the combined portfolios as very complimentary in nature. When you think about Royal Sonesta, Sonesta, Sonesta ES Suites and our two newer brands, Sonesta Simply Suites and Sonesta Select, there's not much overlap in the world of Red Lion. The majority of RLH's 900-plus hotels are branded under America's Best Value Inn, which doesn't compete with any Sonesta brands. Sonesta has historically had a lot of upper-upscale and resort properties, though we have more recently moved further into what you might call the middle of the market. We now have a midscale, extended-stay product with the birth of the Sonesta Simply Suites brand, and while Sonesta Select is an upscale brand, it's a [select-service] product. Still, we haven't overlapped with RLH.
The Red Lion portfolio allows us entry into that clear midscale market and some of those economy tiers, which we haven't previously had experience in. And frankly, given the current circumstances, those are segments of the overall industry that, both historically and by recent evidence, have been least impacted by economic downturn.
Q: You're nearing completion of a mass rebranding of more than 200 former IHG and Marriott International hotels, all of which are owned by hotel real estate owner Service Properties Trust. What are some of the biggest challenges you've faced during this process?
A: I'm not aware of anybody in the modern day that has taken on this scale of conversions. And they are, by design, very disruptive events for the hotels, the employees and all the stakeholders: guests, owners, everybody. It's all a matter of really trying to manage that noise down to an absolute minimum and get it behind you so you can start the stabilization process. Having said that, I have a high degree of confidence. We've been planning for this and have been talking about significant scale for some time, so our team is absolutely fired up.
An unbelievable number of the conversions are done already. Now, that doesn't mean that the properties are fully stabilized. It just means that all the conversion requirements have been satisfied. But it's important to remember that this is all a marathon to get to the starting line, right? The real work begins after the conversions, as we stabilize the hotels and we start to establish each one of these assets' rightful position within the market and go beyond.