Spokane, Wash.-based Red Lion Hotels Corporation (RLHC) is buying Vantage Hospitality Group, a Coral Springs, Fla.-based franchisor of upscale, midscale, and economy hotels, in a deal valued at a total of $27.8 million, with $23 million in cash, and approximately $4.8 million in stock, subject to change depending on the close date.
Vantage Hospitality’s 10 brands include Signature Inn, America’s Best Value Inn, Canada’s Best Value Inn, and Value Inn Worldwide, among others. The privately owned company was founded in 1999 and has 1,000 hotel properties, or 59,000 rooms, throughout the U.S. and Canada.
For Red Lion, which currently has five brands (Hotel RL, Red Lion Hotels, Red Lion Inn & Suites, GuestHouse, and Settle Inn) and 124 hotel properties, the move is a strategic scale up at a good price. Vantage’s current leadership and staff will also “become the hub for all RLHC select-service brand operations,” Red Lion president and CEO Greg Mount said in a statement.
Mount told Skift, “We’re taking 15 or 16 years of expertise and culture that’s been developed around the economy-branded hotels in Vantage and leveraging that and pairing it up with our innovative approach to e-commerce, and digital marketing, as well as our technology. It’s allowing the two companies to work together to build a formidable offering for franchisees.”
With the addition of Vantage, RLHC’s franchised hotel network will increase to more than 1,100 hotels, or 73,000 rooms, and give prospective franchisees more brands — now 15 — from which to choose. Whether all those brands will remain following the close is still up for analysis, said Mount.
“At this point we will look to stratify those and figure out what the best mix [of brands] will be,” Mount said. “That will be down the road though; there are no plans to eliminate any brands currently.”
The deal, which is expected to close by the end of this month, includes the acquisition of Vantage assets that include membership, franchise, and license agreements, equipment and machinery, customer lists, trademarks and tradenames, records, supplies, and accounts receivable of the business.
Following the first and second anniversaries of the acquisition close, additional compensation of up to $7 million in cash and an additional 690,000 shares may also be earned, contingent upon unnamed “performance metrics.” The additional consideration also includes a $1 million minimum cash payment on the first and second anniversaries. RLHC expects the deal to add to its earnings within a year of closing.
“We are excited to become part of the RLHC family of brands,” said Roger Bloss, founder, president and CEO of Vantage. “Joining RLHC’s platform will provide our members with additional resources to grow their businesses and our guests with a broad array of brands to enjoy. Vantage’s COO, Bernie Moyle, and I are proud that we will be contributing to RLHC’s strategic growth plan and are excited about leading the select service brands initiative. RLHC and the Vantage team are a winning combination.”
In addition to purchasing Vantage, Red Lion has been generating considerable industry interest, much of it critical, for its controversial decision to partner with Expedia.com and Hotels.com.
The company, which has been known to have a contrarian approach to direct bookings in comparison to its industry peers, is allowing Expedia and Hotels.com to have access to its loyalty membership program information. In exchange, customers have access to Red Lion member-only rates on Expedia.com and Hotels.com and if they aren’t already a member, they are immediately enrolled into the program after booking.
Once the Vantage deal closes, this same partnership will also be extended to Vantage’s properties, Mount said.
Addressing critics of Red Lion’s decision to partner with Expedia, Mount said, “If you think about it this way, 54 percent of rooms are booked thru online travel agencies (OTAs). To ignore that marketplace is a really poor decision. Outside of the bigger companies like Hilton or Marriott, anyone else who is saying they are pushing back on that is not being truthful with themselves. They continue to participate in those [online travel agency relationships]. We happen to take a different approach: This is a marketplace we need to participate in.”
He added that the partnership, so far, has been a “win-win situation” for Red Lion and for Expedia and it has “extended demand into our hotels” and has “proven to be a valuable customer acquisition tool.”
Going forward, we can also expect Red Lion to form similar partnerships with other online travel agencies, Mount said. “We’re looking to extend that with some of the other OTAs as well.”