Lofty Ambitions: Sonesta continues growth plan after record 2020 acquisition

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At a time when most hotel companies have been in survival mode due to the Covid-19 pandemic, Sonesta International Hotels Corporation (Sonesta) has pumped up gas regulators in an important way. The company is experiencing its biggest expansion in history with hundreds of new hotels being added to its portfolio. Part of this is due to the acquisition of Red Lion Hotels Corporation, which added hundreds of hotels to its growing list of hospitality brands and destinations.

CEO Carlos Flores explains Sonesta’s trajectory and how it plans to continue its growth strategy for 2020 in the midst of a pandemic.

How many hotels did Sonesta have at the beginning of 2020?

At the beginning of 2020, before the start of the pandemic, there were 80 hotels worldwide, and today we have around 1,200 properties representing just over 100,000 rooms. Of our 13 brands, Sonesta ES Suites, our extended stay offer is the largest. The whole thing is very exciting, because in 2012, the domestic footprint of Sonesta was only three hotels.

While it may seem fast, this great growth is something we have planned over the years. Since the pandemic provided some unique growth opportunities, we would not hide under a rock. As a small but competent group with high ambitions, we now see these plans come true.

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In March 2020, we acquired Red Lion Hotels Corporation, which helped us diversify the brands we can offer, as well as expand our geographic scope of hotel locations.

What was so attractive about the merger is that there was not much overlap between our two respective portfolios.

We were good places in the top upscale level with brands like Royal Sonesta, Sonesta and Sonesta ES Suites, while Red Lion gives us some economy brands as part of their portfolio that we did not previously serve.

We have a large selection of brands with Royal Sonesta at the top, competing in the “top upscale” space, although in some markets it competes well in the luxury segment. Our brands go from top upscale to the economy segment with America’s Best Value Inn, Canada’s Best Value Inn and Knights Inn filling a gap that we previously did not serve. This gives travelers and business travelers a greater range of options.

Are you looking to add new brands?

There are opportunities when we expand our franchising platform, but I’m pretty familiar with the different brands we’re in right now. When we consider moving into other segments, we expect franchising to be part of the equation. We have plenty of white space to navigate.

Strategically, we can eventually enter the luxury market, but now we are more focused on expanding our range of locations and how we enrich the experience within each brand. When it comes to financial brands, the Knights Inn makes sense to us, but I do not suppose we will look at a lower financial segment.

Where do you see gaps in your portfolio?

Greater Los Angeles and New York City are big markets that we want to fill, and I have great confidence that we will be able to satisfy that.

We also want to grow internationally. Our Posadas del Inca brand has a good presence in South America in places like Chile, Colombia and Peru. We think we can grow further with our other brands there and eventually in Europe and Asia.

How did Sonesta buy nearly 200 Marriott and IHG hotels last year?

Service Properties Trust (SCV) owns a large majority of our domestic portfolio. We added 101 IHG hotels and 89 Marriott hotels via SVC under an option window where these hotels were available for transfer to Sonesta. It grew our portfolio overnight and made sense for these hotels due to challenging market conditions.

While it may be a challenge as the next operator, as we are suddenly in a host of new markets in hotels that had their own loyal customers, we are committed to serving the new business.

What I hear most right now from people is that “oh hey, I was right on this highway or in this town” and saw one of your Sonesta properties. New hotel signage in places where we were previously or previously present is driving immediate brand awareness.

Are loyalty programs important for your growth?

Sonesta Travel Pass is a powerful program that went point-based many years ago. Red Lion brings its own Hello Rewards loyalty program to the table, and we are ultimately seeking to merge the two. We are already seeing an inclusion in Sonesta Travel Pass memberships at the new hotels that switched from other brands.

Now the challenge is to start a relationship with them to cultivate their loyalty. It’s still a bit early in that sense because much of that growth happened so quickly and recently (during a pandemic), and now we’re just starting to notice trends in consumer behavior. We look to see if they return after registration to stay with us, as well as if they try one of our brands and locations.

As we grow, we are adding hotels of all types and sizes. The largest hotel by room count in the portfolio is the 613-room Sonesta Los Angeles Airport, followed by the 485-room Royal Sonesta Houston Galleria and two 483-room hotels: the Royal Sonesta Hotel New Orleans and The Allegro Royal Sonesta Hotel in Chicago. As you can imagine, this provides a lot of opportunities for meetings and conventions.

What does this growth mean for Sonesta Travel Pass?

To begin with, there is much more choice of where members can earn and redeem their points, including in an increasing number of international cities. Red Lion brought a large portfolio of Canadian hotels in the economy segment and we have also added some upper exclusive properties in Canada. Our strategy is continued growth and franchising will help us grow much faster. This is good news for Sonesta Travel Pass members.

Loyalty is the thread that we pull through the network. There is no better advocate than the people who are already dealing with you.

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