Sonesta continues to grow after record acquisitions in 2020

At a time when most hotel companies were in survival mode due to the Covid-19 pandemic, Sonesta International Hotels Corporation (Sonesta) significantly increased gas. The company is experiencing its largest expansion in its history with hundreds of new hotels added to its portfolio. This is in part due to the acquisition of Red Lion Hotels Corporation, which has added hundreds of additional hotels to its growing list of hotel brands and destinations.

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

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

At the start of 2020 before the pandemic started, there were 80 hotels around the world, 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. This is all very exciting because in 2012 Sonesta’s domestic footprint was only three hotels.

While it may seem rapid, this major growth is something we’ve been planning for years. When the pandemic presented unique growth opportunities, we weren’t going to hide under a rock. As a knowledgeable little group with big ambitions, we are now seeing those plans come to fruition.

What does the merger of Red Lion Hotels bring to Sonesta?

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

What was so interesting about the merger was that there wasn’t much overlap between our two respective portfolios.

We were well placed in the high end with brands like Royal Sonesta, Sonesta and Sonesta ES Suites, while Red Lion offers us budget brands as part of their portfolio that we haven’t served before.

We have a wide range of brands with Royal Sonesta in the lead, competing in the “high-end” space, although in certain markets it is very competitive in the luxury segment. Our brands range from the upscale to the economy segment with Americas Best Value Inn, Canadas Best Value Inn and Knights Inn filling a gap we haven’t served before. This gives travelers and business travel buyers a wider range of options.

Looking to add new brands?

There are opportunities as we grow our franchise platform, but I’m pretty comfortable with the range of brands we’re in right now. As we consider moving to other segments, we expect franchising to be part of this equation. We have a lot of white space to navigate.

Strategically, we can eventually enter the luxury market, but now we are focusing more on expanding our range of locations and on how to enrich the experience within each brand. When it comes to budget brands, Knights Inn makes sense to us, but I don’t think we’ll be looking at a lower economy segment.

Where do you see gaps in your portfolio?

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

We also want to develop internationally. Our Posadas del Inca brand has a strong presence in South America in places like Chile, Colombia and Peru. We believe we can develop further with our other brands there and possibly in Europe and Asia down the line.

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

Service Properties Trust (SCV) owns a large majority of our national portfolio. We added 101 IHG hotels and 89 Marriott hotels through SVC during a window of opportunity where these hotels were available to move to Sonesta. This made our portfolio grow overnight and made sense for these hotels due to the difficult market conditions.

While this can be a challenge as an incoming operator, given that we are suddenly in a multitude of new markets in hotels that had their own loyal customers, we are committed to earning this new revenue.

What I hear the most right now from people is, “oh hey, I was just on that highway or in this town” and saw one of your Sonesta properties. New hotel signage in places where we were neither present before reinforces instant brand awareness.

Are loyalty programs important to your growth?

Sonesta Travel Pass is a solid program, based on points many years ago. Red Lion offers its own Hello Rewards loyalty program, and we are eventually considering merging the two. We are already seeing an increase in Sonesta Travel Pass subscriptions at new hotels that have transitioned from other brands.

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

As we grow, we add hotels of all types and sizes. The largest hotel in terms of number of rooms in the portfolio is Sonesta Los Angeles Airport with 613 rooms, followed by the Royal Sonesta Houston Galleria with 485 rooms, and two hotels with 483 rooms: Royal Sonesta Hotel New Orleans and The Allegro Royal Sonesta Hotel in Chicago . As you can imagine, this offers plenty of opportunities for meetings and conventions.

What does this growth mean for Sonesta Travel Pass?

For starters, there are many more choices of places members can earn and redeem their points, including in a growing number of international cities. Red Lion has brought a large portfolio of Canadian hotels into the economy segment, and we’ve also added a few high-end properties in Canada. Our strategy is continuous growth, and franchising will help us grow much faster. This is 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 who already do business with you.