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2008 Interview with: Red Lion Hotels Corporation (RLH-NYSE), Senior Vice President and CFO,Anthony F. Dombrowik - featuring: their upscale and midscale hotels under its Red Lion® brand. |
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| Red Lion Hotels Corporation (RLH-NYSE) | |
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Red Lion Hotels Is Focused On Leveraging
Their Competitive Advantages Of Strong Infrastructure And Control Of The
Brand To Grow Their Footprint
BIO: Senior Vice President, Chief Financial Officer
Mr. Dombrowik has served as our
Senior Vice President, Chief Financial Officer since April, 2008. Prior to
that, he served as the Senior Vice President, Corporate Controller and
Principal Accounting Officer. Mr. Dombrowik has been with Red Lion Hotels
Corporation since May 2003. Mr. Dombrowik was previously employed as senior
manager at the public accounting firm of BDO Seidman, LLP, where he served
as an auditor, certified public accountant and consultant from 1992 to 2003.
Mr. Dombrowik’s public accounting practice focused on auditing and
consulting for mid-market public companies, with particular attention to
consolidations, capital and debt transactions, mergers and acquisitions, and
the hospitality industry. While in public practice, Mr. Dombrowik
represented BDO Seidman, LLP on the Red Lion Hotels Corporation audit
engagement.
Red Lion Hotels Corporation is a hospitality
and leisure company primarily engaged in the ownership, operation and
franchising of upscale and midscale hotels under its Red Lion® brand. As of
March 31, 2008 the RLH hotel network was comprised of 53 hotels located in
nine states and one Canadian province, with 9,266 rooms and 441,640 square
feet of meeting space. The company also owns and operates an entertainment
and event ticket distribution business. Mr. Dombrowik: “Our vision for the hotel is to take the existing footprint of the Red Lion Hotel brand and grow it. We are primarily a West Coast brand right now. We have around 50 hotels, a little over 8,800 rooms in nine western states. We want to take that footprint and grow it and we think that the Red Lion brand is a very strong competitive and growing brand with a lot of existing value. We have some very strong competitive advantages with our infrastructure - we own and control the brand. We also think there is opportunity for brand growth because of the untapped market in places we have been previously when the brand was under a different ownership. We lost some of those markets when the company was under different ownership years ago and we want to get back in those markets where there is some good strong presence and name recognition.”
CEOCFO: Why do people stay at Red Lion and what do they like about the Hotels? Mr. Dombrowik: “The brand is upscale, warm and comfortable. It is not cutting-edge; you are not going to see anybody in all black outfits with little earpieces. We are a warm, comfortable, genuine sincere brand, definitely friendly service and our people make a personal connection with our guests in the hotel. Our tag line is to ‘stay comfortable’ and that is what we are all about; we want you to have an almost home-like experience in our hotel and we think that is one of our differentiators.”
CEOCFO: What is the plan to achieve your goals? Mr. Dombrowik: “We acquired the Red Lion brand from Hilton over seven years ago and that is the primary vehicle for us, Red Lion brands has a long strong history, over a thirty-year-old brand. We think it is going to be a great footprint for us in the West and take us all the way to the Mississippi and hopefully be a national brand in the future.
As far as what we have done with the brand and where we want to take it, we have laid a strong foundation with some of the infrastructure. The website, the revenue management, those sort of aspects of the company and in the near future we are really on an acquisition strategy. Given what prices and cap rates are right now in our strong balance sheet, we think this is an opportunity for us to go out in the market and invest in some hotels and demonstrate the presence of the brand and then fill in and around that with franchise hotels as we demonstrate the growth and strength of the brand.”
CEOCFO: Where will you look first geographically for expansion? Mr. Dombrowik: “Geographically now we are in many of the major markets in the West, Seattle, Portland, we have an Anaheim hotel Orange County, Salt Lake City, Denver. We actually just announced an acquisition pending closing right now at a pretty large hotel in Denver. We are looking also to move geographically into Arizona, New Mexico, the San Francisco Bay area, Los Angeles, Houston and Dallas, those are where we are really looking to immediately grow and then we will start to push east as the hotels fill in.”
CEOCFO: When do you franchise and when do you own? Mr. Dombrowik: “We want to be at owner and really control the hotel in the major market; it is our hub and spoke strategy of really having a major hotel in a key market and then franchising around it. As far as ownership investing in it, I think that is an area where it’s just a hotel-by-hotel basis. Certainly franchising is a great model, it is a market right now where a lot of owners are starting to make changes for various reasons and we think we can take advantage of that here in the next couple of years.”
CEOCFO: You have a very high customer satisfaction rate; how do you maintain the quality of service? Mr. Dombrowik: “First, we recognize that the employee base that we have is our most important asset. We have spent a lot of money both on the infrastructure of the hotel, refreshing the core business, updating the hotels in the last couple of years, but also in our training programs and our focus on human resources and the training for employees as far as providing services what makes the best guest satisfaction, the best guest stay.
The other thing is getting good people, I think this is a very competitive market now for a lot of different industries and we are in the service industry and we recognize that it takes a competitive salary and competitive benefits and we are committed to those things and we are also committed to providing our employees with challenge and opportunity to succeed. I think those things all kind of bring an opportunity for our employees to be successful and bring something to our guests and that is very important to the brand.”
CEOCFO: What demographic are you serving? Mr. Dombrowik: “We have a pretty broad demographic; we have a balanced customer mix, and we are about a third corporate, a third group meeting type business and a third leisure. Our demographic tends to be in the 35-60 range. We are not a cutting-edge hotel. We allow pets and we cater to families, so they can stay comfortable and stay close to family. That is kind of ‘our’ demographic. We take a good look at where our customers travel from, and that is where we are targeting to have hotels.”
CEOCFO: You have done major renovations in 2007; what do you need to do on an ongoing basis? Mr. Dombrowik: “The hotels have a regular maintenance and updating and some refreshing every year. We also want to on a case-by-case basis look for incremental changes to the hotels that would increase our profitability and return on individual hotels.
In 2001, and this happened industry-wide, we took a step back after 9/11 and the subsequent dip in the industry; those were really hard times for hotels. A lot of companies took a step back from their capital plans. Now we have reinvested in our properties. We are committed to maintaining them. How we do it going forward is by having strong product and strong major markets and being committed to keeping them up to brand standards. We have committed to our brand standards and have all the franchisees committed to our brand standards and we will maintain those.”
CEOCFO: What is the financial picture of Red Lion Hotels today? Mr. Dombrowik: “Very strong. We have had, from a RevPAR standpoint, a three-year 10% compound annual growth rate. Our EBITDA has been real strong. If you look at our financial statements, we are looking at about $33 million in EBITDA this last year, and over a three-year period about a 19% increase in EBITDA. From a more recent, like the last three months, we just came out with our quarter-one results in the end of May, and we had an increase in our RevPAR 3.9%, we had a 204 basis point increase in our margins and a 4.4% increase in our EBITDA. So in a pretty tough market we are actually doing very well and we feel that we are very strong with our competitive sets in the market that we are in.”
CEOCFO: How are you able to overcome the increases in price for virtually everything today; do you pass along any of those costs? Mr. Dombrowik: “We are affected by the economy like most industries. Our biggest concern is travel patterns especially for leisure travel patterns. We are actually seeing some good solid base business for the rest of the year in our markets. We have given guidance for the year and we stuck by that in May. We believe we will be able to come in at three to six percent RevPAR growth. As far as the economy and how it affects the hotels, I really think that given where our markets are and the patterns that we are seeing that people are going to still travel, take vacations, still do business but we don’t think there is going to be as much of a dip in the travel patterns as maybe anticipated. As far as other commodity prices, it still honestly cheaper for us to take over a hotel to buy rather than build new construction so a lot of that has to do with commodity prices and things like that. It is still easier for us to buy than build and that is what we are focused on is acquisitions.”
CEOCFO: Is it a good time to be acquiring? Mr. Dombrowik: “It is! In the last couple of quarters we have seen sort of a right sizing of prices in the market. Certainly, some individuals who are maybe in the market looking for a quick turn on a property are maybe out of the market or bringing down their expectations for a price. There is still a gap but we think there is more opportunity in the market and we certainly have seen a lot in the market. We are being very careful and being good stewards of our money and making sure it is the right acquisition.”
CEOCFO: You are new to the CFO position although you have been with the company for some time. The role CFO position has taken on much more importance over the last few years; how do you view the role of CFO and the responsibility involved? Mr. Dombrowik: “I have been with the company for about five years and I am new at the CFO role. My view is to be a good steward of both the financial resources and the brand itself and be both a watchdog for integrity for the company and also for bringing a balance to what the growth plans are for the company. We want to make sure that we are doing things that are financially sound, that we are doing things in the best interest of our shareholders, and that is the view that I bring to the table as far as the CFO role. Our CEO, Anupam Narayan, is the former CFO so I think the two of us together bring a lot of strength to the business and a lot of financial background to the business. Also, we have a lot of vision for the future and what the brand can be. Anupam has surrounded himself with a very strong team with experienced individuals that have a lot of history with brand. We have a new VP of Operations George Sweitzer who has a long history of the brand; he had been out of the industry for a while and then came back. We think that team together is going to move the brand forward and be very successful.”
CEOCFO: Why should investors be interested? Why pick Red Lion out of crowd? Mr. Dombrowik: “We are a strong and competitive growing brand. We have existing value and a profitable cash flowing business. We have a renovated product with substantial real estate assets and we have an experienced team. From a competitive advantage we are a complete and scalable infrastructure, we are ready to take on more properties, and we own and control the brands. When we are doing acquisitions, there is not another ‘brand’ for someone to get comfortable with it. We own and control the brand so we can make decisions ourselves. The brand has a strong history and it’s a tested investment.
From our growth strategy we are investment capital ready, we have a fifty-million-dollar unused line of credit. We are not contingent upon financing and that is one of the competitive advantages we have in acquisitions. We have a franchising model that is ready to roll, down the road. We think we have some opportunity in untapped markets where the brand is known but hasn’t been there for a few years and we want to get back in those markets. From a growth and company position I think we are in good shape and it would be a strong investment for people to have.”
CEOCFO: What should readers remember most about Red Lion?
Mr. Dombrowik:
“That the brand is a strong brand, it is committed to customer service and a
commitment to having our guests stay comfortable and that the foundation has
been laid for a good growth in the future for Red Lion Hotels Corporation.” |
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“Our vision for the hotel is to take the existing footprint of the Red Lion Hotel brand and grow it. We are primarily a West Coast brand right now. We have around 50 hotels, a little over 8,800 rooms in nine western states. We want to take that footprint and grow it and we think that the Red Lion brand is a very strong competitive and growing brand with a lot of existing value. We have some very strong competitive advantages with our infrastructure - we own and control the brand. We also think there is opportunity for brand growth because of the untapped market in places we have been previously when the brand was under a different ownership. We lost some of those markets when the company was under different ownership years ago and we want to get back in those markets where there is some good strong presence and name recognition.” - Anthony F. Dombrowik |
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