Two themes emerged from the Red Lion Hotels Corp. Q1 2020 earnings conference call: the drastic cost cutting measures Red Lion took will remain in effect for the foreseeable future, and the company is optimistic that travel will resume in earnest this summer with many of its franchisees benefitting.
Cost Conscious Operations
During the opening comments, John Russell, interim CEO, described how RLHC took “decisive action to sustain our company” including a large reduction in workforce, company-wide compensation reductions, consolidation of operations in Denver, closing the Spokane office, and reducing capital spend.
Later in the call, Nate Troup, chief accounting officer, emphasized this point again, saying: “We’re focused on watching where every single nickel is spent. We cut very judiciously and we think very hard about any dollar spent.”
RLHC, like all other hotels, has been working with franchisees to implement new safety measures for guests and staff. During the call, Russell mentioned a few new standard operating procedures. For example, mobile check-ins will become more common; customers will swipe their own cards instead of handing their card to the front desk attendant; guests will occupy every other room on property at first; housekeeping SOPs for cleaning guestrooms will be different; and buffets will no longer be available to the public, instead hotels will offer packaged amenities.
Travel Resumes this Summer
On a positive note, Russell indicated that RLHC feels travel will begin to pickup as early as late May as consumers hop in their cars and begin to drive to visit friends and family and state parks. Russel mentioned that he recently saw a statistic that RV sales were up 21 percent.
“That’s an indicator that there’s going to be an awful lot of road traffic over the summer,” he said. “We’ve got a lot of hotels, particularly some exterior corridor hotels that are off the interstate highways on your way from point A to point B that should relish a lot of that business.”
RLHC is particularly optimistic about this since it has quite a few properties in secondary tertiary cities and in warm weather locations where consumers are more likely to go. Russell also quoted a statistic from Smith Travel Research, saying that occupancies within cities where travel restrictions were lifted, doubled over the course of one weekend.
“We feel very strongly that the leisure markets will come back substantially and pick up June, July, August into September,” he noted. “And that’s great for economy hotel brands like Americas Best Value Inn and Knights Inn.”