Spokane, Washington-based Red Lion Hotels Corporation (RLH) recently announced the signing of a franchise license agreement with WR Management Co. for a hotel -- Quality Inn & Suites Date Palm -- in Cathedral City, California. The agreement is in line with Red Lion Hotels’ strategy to expand its footprint in core markets through signing new franchise agreements.
Cathedral City, the second largest city in Coachella Valley in California, is famous for local golf resorts and places of tourist attractions. Cathedral City is rapidly emerging as a commercial hub, with tourism playing a key role in the development of the area.
Several major hoteliers like Hyatt Hotels Corp. (H) and Starwood Hotels and Resorts Worldwide Inc. (HOT) already have a strong presence in the city. The consequent demand for world-class accommodation in this area has caught the attention of Red Lion Hotels.
Quality Inn & Suites Date Palm is a hotel under the Quality Inn brand of Choice Hotels International Inc. (CHH). Located in the Palm Springs region of Southern California, the 97-room select-service hotel boasts a class of basic and modern amenities that caters to travelers seeking quality service. As per the agreement, Quality Inn & Suites Date Palm hotel will be converted to Red Lion Hotel Cathedral City in late 2012.
The core Californian market has recovered rapidly after being badly affected during the housing downturn. Presently, the hotel industry, especially in Southern California, is flourishing. Red Lion Hotels already has 6 hotels in vibrant submarkets of California -- Red Lion Hotel Anaheim, Red Lion Hotel Eureka, Red Lion Inn Rancho Cordova, Red Lion Hotel Oakland International Airport, Red Lion Hotel Redding and Red Lion Hotel Sacramento at Arden Village.
However, the company should be wary of its competitors. Renowned hotel companies like Marriott International Inc. (MAR) and Wyndham Worldwide Corp. (WYN) are also poised to expand their presence in California.
Red Lion Hotels owns, operates and franchises midscale, full, select and limited service hotels under the Red Lion brand. As of now, the company’s portfolio consists of over 45 hotels, spanning more than 9,000 rooms and situated in 9 states and 1 Canadian province across U.S. In addition, Red Lion Hotels owns and operates an entertainment and event ticket distribution business.
The company is scheduled to release its second quarter 2012 earnings on August 3, 2012. The Zacks Consensus Estimate for the second quarter is pegged at a loss of 4 cents per share. We presently have a long-term Neutral recommendation on the stock. However, the company carries a Zacks #2 Rank (short-term Buy rating).