RLHC continued franchise-business growth momentum in Q3
 
RLHC continued franchise-business growth momentum in Q3
03 NOVEMBER 2017 9:02 AM

Executives at RLH Corporation said during a third-quarter earnings call with investors that the company continues to make strides with its new asset-light strategy and is actively gaining franchise segment revenues.

DENVER—Franchise-business growth continued to be top of mind for RLH Corporation executives during the third quarter as the company moved forward with its new asset-light strategy.

RLHC executed 120 franchise agreements within the first nine months of the year, with 20 properties expected to open within the next 18 months, said President and CEO Greg Mount.

Now the company expects its full-year count for executed franchise agreements to be 130, which is an increase from guidance given during the second quarter.

Mount said the franchise-business growth is not specifically driven by any market or brand.

“It’s really spread out through the entire system and our geography,” he said.

“We have good momentum around a number of the brands,” he said. “We’re working hard to extend ourselves more deeply into markets like Canada where we’ve been able to secure a licensing to bring our franchises up there.”

He added that about 40% of RLHC hotels opening within the next year are in the upscale and midscale segments.

Franchise-segment revenues for the quarter increased 167% year over year to $12.7 million, according to the company’s earnings news release.

Details on asset-light model
On 5 October, RLHC announced that its Board of Directors had approved the sale of 11 of its 18 owned assets as part of a new asset-light strategy. Four of the 18 properties are leasehold interests, and 14 are joint ventures.

On the earnings call, EVP, CFO and Treasurer Douglas Ludwig announced the 11 properties on the market are valued at approximately $165 million to $175 million total.

“Based on the pricing, we anticipate there will be disposal gains on each of the 11 hotels,” he said. “We expect the sale of the 11 hotels should allow us to eliminate $73 million of consolidated debt associated with those assets.”

Offering more insight into how the properties might be sold, Ludwig said it likely will be on an individual basis, rather than in small groups, and through a prudent but not-too-slow process.

“I think we will hit our targets,” he said. “This will have a major impact on (earnings before interest, taxes, depreciation and amortization) from operations next year; there will be a number of points of discontinued operations.”

New hire
Mount also touted the hiring during the quarter of Paul Sacco as chief development officer of upscale brands and corporate development to help support unit growth efforts.

Q3 Performance
Systemwide revenue per available room for the quarter was up 1.6% year over year to $69.46, according to the earnings news release. Average daily rate grew 2.5% to $99.40, while occupancy decreased 0.9% to 69.9% for the quarter.

The company reaffirmed its full-year guidance of between 1% and 3% system-wide RevPAR growth.

As of 30 September, RLHC has 70,800 rooms across 1,102 hotels.

As of press time, RLHC’s stock was trading at $8.77 per share, up 5% year to date. The Baird/STR Hotel Stock Index was up 31.5% over the same period.

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