Red Lion Inks Deal, Enters Kent

Spokane, Washington-based Red Lion Hotels Corporation (RLH - Snapshot Report) recently inked a franchise license agreement with the owners of a hotel located in Kent, Washington. The 60-guestroom property will now become Red Lion Inn & Suites Kent. This new property will be unveiled once the hotel is refurbished. Financial terms of the deal were not disclosed.

The new property is strategically located just 20 miles south of Seattle and in close proximity to several important venues such as ShoWare Center arena, Emerald Downs, Kent Events Center and the Great Wall Shopping Mall. Additionally, the hotel also offers various facilities such as an indoor pool, an exercise room and meeting space to its visitors.

We view the deal as strategically positive for both the parties. The deal paves the way for the owners of the hotel, Kent South Hospitality, to reap the benefits from Red Lion’s much greater scale and brand name. This will aid the property compete in the mid-scale market.

On the other hand, Red Lion will enjoy the excellent positioning of the property. The company had been in search of an asset in any of the strong markets in the I-5 passage through Washington and Oregon. Management at Red Lion believes that the location of the property will complement and highlight its brand better, once the renovation is complete.

Kent is a popular destination for both domestic and overseas visitors, which makes tourism an important aspect of its economy. Thus, this partnership is expected to increase Red Lion’s reach into the tourism friendly city of Kent. With the presence of an extensive coastline, Kent not only offers traditional seaside holiday resorts but many natural and historic attractions as well.

However, Red Lion’s new property will likely face stiff competition due to the presence of its peers like Starwood Hotels & Resorts Worldwide Inc. (HOT - Analyst Report) and Hyatt Hotel Corp. (H - Snapshot Report) in Kent. Red Lion currently carries a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating.