Red Lion Hotels — Investor Presentation (February 2019)
35 slides from Red Lion Hotels's investor presentation, Feb 6, 2019
Slide 1: The Financial Advantage: Long-Term Outlook February 2019
Exhibit 99.1 THE FINANCIAL ADVANTAGE Long-Term Outlook February 2019Exhibit 99.1 THE FINANCIAL ADVANTAGE Long-Term Outlook February 2019
Slide 2: Disclaimer
DISCLAIMER This presentation (the “Presentation”) is provided for information purposes only. Forward Looking Statements. Certain matters discussed throughout all of this presentation constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Gen
Slide 3: RLH Corporation: Who we are and where we are going
RLH Corporation Who we are and where we are going…RLH Corporation Who we are and where we are going…
Slide 4: Growing and Powerful Brand Owner
GROWING AND POWERFUL BRAND OWNER th 1 10 Largest U.S. Based Hotel Franchisor Presence in 47 U.S. States & 3 Countries 200+ Corporate Employees > 80% 5-Year CAGR in Franchise Unit Growth through 2018 Diverse Brand Portfolio 4 1 – Source: 325 Hotels July/August 2018 Publication GROWING AND POWERFUL BR
Slide 5: Midscale and Upscale Focus
MIDSCALE AND UPSCALE FOCUS “RLH Corp. is committed to propelling our mid and upscale business.” – Paul Sacco, Chief Development Officer Benefits of Mid & Upscale Focus: Longer Term Contracts – Mid and upscale contracts generally have longer contract terms (all ten recent Inner Circle franchise agree
Slide 6: Investment Highlights
INVESTMENT HIGHLIGHTS Asset Light Franchise State of the Art Guest Strong Organic Growth* Model Management Platform ü High ROIC, asset-light franchise model with ü Executed 167 license agreements through ü Developed & deployed proprietary digital guest national and international scale consisting of
Slide 7: Investment Highlights
INVESTMENT HIGHLIGHTS Innovative Rewards Seasoned Leadership Balanced Sheet Poised for Program Team Growth ü Revolutionized rewards program to recognize ü Over 150 years of collective lodging experienceü Transition out of hotel ownership enables us to retail consumer generate the capital base and ca
Slide 8: Strong Growth Model
Strong Growth ModelStrong Growth Model
Slide 9: Compelling Growth Model
COMPELLING GROWTH MODEL GROWTH IN: Franchise Net Organic USB RevPAR M&A Rate/Margin Royalty Growth Growth Growth Shareholder Return 9COMPELLING GROWTH MODEL GROWTH IN: Franchise Net Organic USB RevPAR M&A Rate/Margin Royalty Growth Growth Growth Shareholder Return 9
Slide 10: Net Organic Royalty
Net Organic RoyaltyNet Organic Royalty
Slide 11: Organic Brand Growth – Net Property Count
ORGANIC BRAND GROWTH – NET PROPERTY COUNT USB & SSB Net Property Count Total SSB Total USB High-Profit USB Brand Contracts Target Net Long-Term Growth Projections 2,000 20% to 25% 1,500 SSB Brand Contracts Target Net Long-Term Growth Projections <1% to 5% 1,000 500 - 2018 2019 2020 2021 2022 2023 11
Slide 12: RLH Franchise Selling Advantage
Elasticity Zone Elasticity Zone RLH –FRANCHISE SELLING ADVANTAGE Unique franchise fee structure allows potential owners more leeway to achieve greater operating income with a high RevPAR elasticity*. Lower Ongoing Fees (as % of GRR)* 52% 30% 12.0% Avg. SSB RevPAR Avg. USB RevPAR Elasticity* Elastici
Slide 13: Lower Franchise Fees Yield a Competitive Advantage
LOWER FRANCHISE FEES YIELDS A COMPETITIVE ADVANTAGE FOR FRANCHISE SALES The margin between our stated fees and those of our competition allows for a competitive advantage in signing new contracts and an opportunity to increase fees in the future. RLH Corporation 1 Competitive Fee Range 1 Franchise F
Slide 14: 2018 Proved a High Return on Organic Invested Capital
2018 PROVED A HIGH RETURN ON ORGANIC INVESTED CAPITAL $27.6M 1 NPV Organic Growth $6.2M 12,000+ 2 2 $5M Capital $1.2M Capital Capital Keys 2,500+ Keys Added 9,500+ Keys Added 2 Investment $12.4M NPV $15.2M NPV 1 – Assumes a discount rate of 9%; Avg. Contract Life 9.7 years USB and 3.2 years SSB. 14
Slide 15: Franchise Rate/Margin Growth
Franchise Rate/Margin GrowthFranchise Rate/Margin Growth
Slide 16: Embedded Contractual Ramp Will Drive Margin Growth
EMBEDDED CONTRACTUAL RAMP WILL DRIVE MARGIN GROWTH RLH is able to create rate growth in the future through our franchise agreements with our owners. Most of our midscale (% of Gross Room Revenue structure) deals have negotiated ramps in royalty % YoY. RLH gains margin advantage as revenue increases
Slide 17: External Growth Opportunities
External Growth OpportunitiesExternal Growth Opportunities
Slide 18: Proven Acquisition Strategy
PROVEN ACQUISITION STRATEGY Focused Acquisition Access to M&A Positive Historical Size is an Advantage Strategy Expertise Acquisition Record • Allows us to focus on • Under-valued Brand • Current Executive team • Completed four smaller, more- Assets ability to assess strong acquisitions in four reas
Slide 19: High Return on Initial Investment: Knights Inn Acquisition
HIGH RETURN ON INITIAL INVESTMENT Knights Inn Acquisition High Return on Invested Capital $5M Annual EBITDA *18.5% Yield on Investment 21,750 $27M Keys Capital Investment 19HIGH RETURN ON INITIAL INVESTMENT Knights Inn Acquisition High Return on Invested Capital $5M Annual EBITDA *18.5% Yield on Inv
Slide 20: Pricing Discipline Drives Acquisition Framework
PRICING DISCIPLINE DRIVES ACQUISITION FRAMEWORK Historical and Future Acquisition Outlook EBITDA ($ in Millions) Additional Hotel Count Target Accretive $30 1200 8-12X Multiples Midscale to Upscale Segment 3-5 Year $25 1000 Consolidated Acquisition Goal: $20 800 • Focus on Midscale to $15 600 Upscal
Slide 21: Growth Model Expected Outputs
Growth Model Expected OutputsGrowth Model Expected Outputs
Slide 22: Illustrative Growth Model
ILLUSTRATIVE GROWTH MODEL Franchise Net Organic Royalty USB RevPAR M&A Rate/Margin Revenue 1% to 3% 8X – 12X EBITDA GROWTH IN: Revenue 10% to 15% Revenue Growth Valuation (10 – 20 bps) 100 bps = $10M Investment = 10 bps = 100 points = Annual Range $0.2M to $0.3M $0.8M to $1.2M $0.1M to $0.2M $0.05M
Slide 23: Organic Brand Growth – Net Royalty Revenue
ORGANIC BRAND GROWTH – NET ROYALTY REVENUE Heavy focus on developing the USB franchise business. USB franchise contracts typically produce higher profit margins and longer terms. This increases our franchise royalty revenue rapidly, while keeping costs down. Midscale RevPAR has been growing at 2.5%
Slide 24: Focus on Maximizing Investor Return
FOCUS ON MAXIMIZING INVESTOR RETURN Unique franchise fee structure provides less revenue volatility given current mix of numerous flat fee agreements. Organic & Non-Organic Franchise Royalty Fee Estimated 3-5 Year Growth 10-15% Flat Based % Based 3 – 5 Year Franchised Net Organic Royalty Growth Esti
Slide 25: 2018 Brand Growth
2018 BRAND GROWTH USB Branded Hotels Red Lion Inn & 1 USB Opened Red Lion Hotel Signature Settle Inn Other Total Hotel RL Suites Beginning Property Count 102 7 38 36 0 3 18 Opened 30 3 14 12 1 0 0 Change in Brand 0 0 (1) 1 (1) (1) (2) Terminated (18) (2) (6) (4) 0 (2) (4) Ending Property Count 8 46
Slide 26: Appendix
CORPORATION Appendix
Slide 27: Based on rate and data in the 2018 FDD filings and applicable STR data..
Based on rate and data in the 2018 FDD filings and applicable STR data.. Based on rate and data in the 2018 FDD filings and applicable STR data..
Slide 28: Based on rate and data in the 2018 FDD filings and applicable STR data..
Based on rate and data in the 2018 FDD filings and applicable STR data.. Based on rate and data in the 2018 FDD filings and applicable STR data..
Slide 29: Based on rate and data in the 2018 FDD filings and applicable STR data..
Based on rate and data in the 2018 FDD filings and applicable STR data.. Based on rate and data in the 2018 FDD filings and applicable STR data..
Slide 30: Based on rate and data in the 2018 FDD filings and applicable STR data..
Based on rate and data in the 2018 FDD filings and applicable STR data.. Based on rate and data in the 2018 FDD filings and applicable STR data..
Slide 31: Based on rate and data in the 2018 FDD filings and applicable STR data..
Based on rate and data in the 2018 FDD filings and applicable STR data.. Based on rate and data in the 2018 FDD filings and applicable STR data..
Slide 32: Based on rate and data in the 2018 FDD filings and applicable STR data..
Based on rate and data in the 2018 FDD filings and applicable STR data.. Based on rate and data in the 2018 FDD filings and applicable STR data..
Slide 33: Based on rate and data in the 2018 FDD filings and applicable STR data..
Based on rate and data in the 2018 FDD filings and applicable STR data.. Based on rate and data in the 2018 FDD filings and applicable STR data..
Slide 34: Remaining Hotel Assets
REMAINING HOTEL ASSETS Hotel Name Brand Remaining Debt Relationship Management Salt Lake City Hotel RL $0 Owned (Joint Venture) Interstate Hotels & Resorts Olympia Hotel RL $0 Owned (Joint Venture) Interstate Hotels & Resorts Atlanta Red Lion Hotel $9,255,000 Owned (Joint Venture) RLH Corporation Ka
Slide 35: For More Information, Please Contact
For More Information, please contact: Evelyn Infurna (203) 682-8265 Evelyn.Infurna@icrinc.comFor More Information, please contact: Evelyn Infurna (203) 682-8265 Evelyn.Infurna@icrinc.com
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