5 things to know: 31 December 2020
5 things to know: 31 December 2020
31 DECEMBER 2020 11:23 AM

From the desks of the Hotel News Now editorial staff:

  • Sonesta announces plans to buy RLHC
  • How the pandemic hit hotel development
  • Unemployment claims see a small drop
  • Omni responds to union’s PPP claims
  • Vaccine rollout slower than hoped in US

Sonesta announces plans to buy RLHC: Officials with Sonesta announced they’ve reached an agreement to buy RLH Corporation, bringing Sonesta’s portfolio to 1,200 properties across 13 brands. Sonesta began the year with 58 hotels, but recently saw an infusion of growth as officials with hotel REIT Service Properties Trust (SVC) converted hundreds of properties from IHG and Marriott International brands to Sonesta.

The deal is expected to close in the first half of 2021. RLH Corporation officials announced the deal is an all-cash transaction of $3.50 per share, for a combined value of roughly $90 million, a 30% premium over the 30 December closing price.

The deal will bring Sonesta’s portfolio to 13 brands and will introduce the franchising model to its system. Sonesta also announced plans to bring on Keith Pierce as EVP and president of franchise and development following the closing of the deal.

Michael Bellisario, senior hotel research analyst and director at Baird, said in an email interview that Sonesta’s growth in 2020 has been “gaining scale and becoming a more relevant hotel company in the eyes of both consumers and owners. Almost all of the growth, however, has been inorganic—assuming the brand and management contracts of many of SVC’s properties and now acquiring Red Lion. The next stage of growth for Sonesta, especially in order to become a more formidable hotel competitor, will need to be growing the third-party development pipeline and overall system size in an organic and capital-light manner, which we view as key elements of a powerful hotel brand platform.”

How the pandemic hit hotel development: A lack of financing and clarity about the future of the hotel industry combined to put the brakes on new hotel construction in 2020, with sources telling HNN’s Sean McCracken that projects that weren’t already well underway have been delayed, converted to different asset classes or abandoned.

Alan Reay, president of Atlas Hospitality Group, said his company has observed a large jump in deferred or abandoned projects in the second half of 2020.

“A lot of those developers are trying to pivot to other uses, but unfortunately there aren’t a lot of choices,” he said. “It comes down to residential multifamily or for-sale condos, and in a lot of cases, zoning doesn’t allow for (those changes).”

Unemployment claims see a small drop: The U.S. Labor Department announced initial claims for jobless benefits fell by 19,000 to a seasonally adjusted 787,000 for the week ending 26 December, The Wall Street Journal reports. The modest drop was the second consecutive weekly decline after claims hit a three-month high in early December and remained at levels “higher than any recorded before this year.”

The newspaper notes that holiday weeks are typically volatile for unemployment claims due to “challenges with seasonal adjustment.” This past week was even more so given uncertainty of a government stimulus package to extend unemployment benefits.

Omni responds to union’s PPP claims: A report earlier in the week from NPR noted that officials with the union Unite Here claimed that Omni Hotels & Resorts had received roughly $76 million in funding from the Paycheck Protection Program but weren’t using that to pay workers. Officials with Omni have now responded, saying that characterization is untrue.

The following statement comes from Omni President Peter Strebel:

“As a privately held company, we generally do not disclose financial information; however, we must correct misleading information recently shared regarding Omni’s use of PPP loans. All PPP funds have been used for approved expenses as outlined in the legislation, and more than $51 million, the vast majority of the loans, have been paid out as payroll and benefits to thousands of associates. Any contention to the contrary is false and defamatory.

“Consistent with the program terms, any portions of the loans that are not forgiven will be repaid with interest and unused balances will be returned. On behalf of the thousands of associates who have benefited from the loans, we are grateful to have participated in the PPP program. It has been instrumental to our survival during this pandemic, enabling us to safely re-open hotels and bring several thousand associates back to work. Any statements that falsely accuse Omni of misusing the funds or failing to use any of the loan proceeds for payroll costs appear to be designed solely to harm Omni’s business, which will only further harm our associates.

“We pray that this virus is eradicated completely and quickly. Until that day, we will continue to fight to make the very best of these extremely challenging times for both our associates and guests.”

Vaccine rollout slower than hoped in U.S.: Government officials in the U.S. set a target of 20 million people vaccinated against COVID-19 by the end of 2020, but on the final day of the year only 2.6 million people have received their vaccination shots, The New York Times reports.

President-elect Joe Biden has noted at the current pace it could take multiple years to vaccinate the entire U.S. population against the virus, despite Pfizer and Moderna distributing 14 million doses of their vaccines across the country.

In a news conference Wednesday, administration officials acknowledged the rollout has not gone as planned.

“We agree that that number is lower than what we hoped for,” said Moncef Slaoui, scientific adviser of Operation Warp Speed, the federal effort to accelerate vaccine development and distribution.

Compiled by Sean McCracken.

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