Red Lion Is Buying Knights Inn From Wyndham for $27 Million

Red Lion Hotels Corporation announced Wednesday that it is buying the Knights Inn brand from Wyndham Hotel Group for $27 million in cash in a deal that is expected to close in the second quarter.

Knights Inn, an economy hotel brand, has 362 properties located throughout North America and plans to open 47 more hotels. It’s one of six economy hotel brands owned by Wyndham Hotel Group.  Compared to those other brands, such as Days Inn and Super 8, Knights Inn has a relatively smaller footprint and was not as heavily marketed as Wyndham’s other brands.

“Wyndham helped grow Knights Inn into a nationally known name with more than 350 hotels throughout the U.S. and Canada,” Geoff Ballotti, president and CEO of Wyndham Hotel Group, said in a statement. “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 Corporation will only continue to support and grow the brand.”

The deal is part of Denver-based Red Lion’s plan to add new hotel franchises. “The acquisition of Knights Inn enhances RLH Corporation’s position as one of the 10 largest hotel franchisors in the world,” Greg Mount, RLHC president and CEO said in a press statement. “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. 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.”

RLHC’s purchase of Knights Inn aligns with the company’s asset-light strategy to acquire more brands and increase its scale. Last year, the company also purchased Vantage Inn for $27 million. In October, RLHC chief financial officer Doug Ludwig spoke to Skift about the company’s intent to sell its real estate to buy up more brands.

At that time, Ludwig suggested that RLHC’s next brand purchase might be for a brand in the midscale or upscale space. Knights Inn doesn’t qualify as a brand that falls into either one of those categories, but it does boost RLHC’s portfolio of brands, which will soon have four economy brands, three midscale brands, and three upscale brands.

Wyndham is also undergoing a major change this year as well. Wyndham Hotel Group’s parent company, Wyndham Worldwide, is currently in the process of spinning off its hotel unit from its timeshare and vacation rental units. Earlier this year, Wyndham Hotel Group also announced it was purchasing La Quinta Holdings for $1.95 billion in cash.

Selling off a relatively smaller economy brand like Knights Inn for $27 million to RLHC will help Wyndham pursue its own strategy to continue buying more brands. Earlier this year, Wyndham’s Ballotti said the company was still very much in deal-making mode.

One important group RLHC will have to pay close attention to as it integrates the Knights Inn brand into its portfolio will be Knights Inn hotel owners who previously benefited from having access to Wyndham’s much larger loyalty program and global scale.

The Wyndham Rewards loyalty program has 55 million members, and Wyndham Hotel Group’s portfolio consists of 8,422 hotels. RLHC, by comparison, has a total of 1,061 hotels and in its most recent Securities and Exchange Commission 10-K report, it did not disclose how many loyalty members were a part of its Hello Rewards program.

In the company’s press statement regarding the acquisition, Mount emphasized that the Knights Inn owners should see major “benefits” from being a part of the RLHC portfolio.

“Knights Inn owners will be quickly brought onto our state-of-the-art systems, a handpicked suite of the industry’s finest customer acquisition, guest management, and business intelligence tools proven to increase RevPAR, grow market share and boost revenue for our brands,” he said. “Knights Inn will also feature our unique Hello Rewards guest recognition program, giving guests personal touches and extra perks across all our hotel brands.”

Under terms of the agreement, the deal must be completed by August 1 to close or it will otherwise be terminated.