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Lofty Ambitions: Sonesta Continues Growth Plan After Record 2020 Acquisitions

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 the throttles in a major way. The company is seeing 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 more hotels to its growing list of hospitality brands and destinations.

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

How Many Hotels Did Sonesta Have In Early 2020?

In early 2020 before the start of the pandemic, there were 80 hotels worldwide, and today we have about 1,200 properties representing just over 100,000 rooms. Of our 13 brands, Sonesta ES Suites, our extended stay offering is the largest. It’s all very exciting because back in 2012, the domestic footprint for Sonesta was just three hotels.

While it may seem rapid, this major growth is something we have been planning for over the years. When the pandemic presented some unique growth opportunities, we were not going to hide under a rock. As a small, but competent group with lofty ambitions, we are now seeing those plans come to fruition.

What Does The Red Lion Hotels Merger Bring To Sonesta?

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

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

We were well places in the upper upscale tier 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 great range of brands with Royal Sonesta at the top competing in the “upper upscale” space although in some markets, it competes well in the luxury segment. Our brands go from upper upscale to the economy segment with Americas Best Value Inn, Canadas Best Value Inn and Knights Inn filling a gap we previously did not serve. This gives travelers and corporate travel buyers a greater breadth of options.

Are You Looking To Add New Brands?

There are opportunities as we build out our franchising platform, but I am pretty comfortable with the range of brands that we are in right now. As we contemplate moving into other segments, we expect franchising to be part of that equation. We have a lot of white space to navigate.

Strategically, we may eventually enter the luxury market, but now we are more focused on expanding our scope of locations and how to enrich the experience within each brand. When it comes to economy brands, Knights Inn makes sense for us, but I don’t suspect we will look into a lower economy segment.

Where Do You See Gaps In Your Portfolio?

Greater Los Angeles and New York City are major markets that we are looking to fill, and I have a high degree of confidence that we will be able to satisfy that.

We want to grow internationally, too. Our Posadas del Inca brand has 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 down the line.

How Did Sonesta Acquire Nearly 200 Marriott And Ihg Hotels Last Year?

Service Properties Trust (SCV) is the owner of a large majority of our domestic portfolio. We added 101 IHG hotels and 89 Marriott hotels via SVC during a window of opportunity where those hotels were available to transition to Sonesta. It grew our portfolio overnight and made sense for those hotels due to challenging market conditions.

While it can be a challenge as the incoming operator, since we are suddenly in a host of new markets at hotels that had their own loyal customers, we are committed to earning that new business.

What I hear most right now from people is that “oh hey, I was just on this freeway or in this town” and saw one of your Sonesta properties. New hotel signage in places where we were previously nor present is driving instant brand awareness.

Are Loyalty Programs Important For Your Growth?

Sonesta Travel Pass is a strong program, which went points-based many years ago. Red Lion brings its own Hello Rewards loyalty program to the table, and we are looking to eventually merge the two. We already see an uptake in Sonesta Travel Pass memberships in the new hotels that transitioned 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 a lot of that growth happened so quickly and recently (during a pandemic), and now we are just starting to notice trends in consumer behavior. We watch to see if after signing up if they return to stay with us as well as if they trial one of our brands and locations.

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

What Does This Growth Mean For Sonesta Travel Pass?

For starters, there is a lot more choice of where members can earn and redeem their points, including in a growing number of international cities. Red Lion brought a large portfolio of Canadian hotels in the economy segment, and we have added some upper upscale properties in Canada, too. Our strategy is continued growth, and franchising will help us to grow much faster. That’s great news for Sonesta Travel Pass members.

Loyalty is the thread that we pull through the network. There is no better advocate than the people that already do business with you.