Sonesta levels up with expanded franchise offerings

Sonesta International Hotels Corp. might have operated a bit below the radar in the U.S. during most of its 80-plus years, but that is not the strategy any longer. The company has been in the news on a regular basis during the past nine months, growing its portfolio 350 percent since mid-2020.

Sonesta got the expansion ball rolling by adding more than 200 hotels that Service Properties Trust, which owns 34 percent of Sonesta, moved from Marriott International and IHG Hotels & Resorts flags to the Sonesta portfolio.

Next came the introduction of the upscale focused-service Sonesta Select and the extended-stay Sonesta Simply Suites brands, adding to its three other brands in the U.S.: Royal Sonesta, Sonesta Hotels & Resorts and Sonesta ES Suites.

It ended 2020 by acquiring RLH Corp. at the end of December in an all-cash transaction valued at approximately $90 million. That deal added more than 900 franchised locations to the company’s existing global footprint for a total of 13 brands and approximately 1,200 franchised and managed properties with more than 100,000 guestrooms in the portfolio.

Its next big move: a new hotel franchising effort that was launched a mere 10 days after the RLH deal was finalized.

All this from a company that had only three domestic properties in 2012.

“The idea of building a platform for franchising domestically is always been a when, not if, question,” said Carlos Flores, president and CEO of Sonesta. “It’s always been on the road map since way back in 2012 when we acquired Sonesta and I became a part of the organization. We do franchise and license outside of the U.S., so this isn’t completely new to us, but franchising in the U.S. is a quite different beast than elsewhere in the world.”

Primed for Growth

The Royal Sonesta brand includes the Royal Sonesta Kaua’i Resort Lihue
in Hawaii. Photo credit: Sonesta International Hotels Corp.

To spearhead the brands’ growth, Sonesta hired 35-year hotel industry veteran Keith Pierce as EVP, president of franchise & development. Also joining the company is Brian Quinn as chief development officer. Quinn has more than 20 years of senior development and sales management experience, including nearly three years as chief franchise sales officer at Red Lion.

According to Pierce, Sonesta will begin franchising the Sonesta, Sonesta Select, Sonesta Simply Suites and Sonesta ES Suites brands in the third or fourth quarter, depending on when the franchise disclosure documents are finalized and approved. The company will continue to franchise the eight RLH brands that are already being franchised, including Americas Best Value Inn, GuestHouse Extended Stay, Hotel RL, Knights Inn, Red Lion and Signature Inn.

“Leading up to the close, and then after the close, we’ve gotten a lot of inbound interest, not only on Sonesta brands, but what’s happening on the RLH brands,” Pierce said. “The good news is that between the merger agreement and the close … we had been using all of that time effectively to start to prepare, to get the ball rolling, so franchise disclosure documents, brand standards, making sure that we’ve got a clear delineation between the 13 brands, all of that work is started and is in process. The minute we closed, we didn’t have to start the process; we were already way down the road.”

Flores said interest from the franchisee community has been high, even though it will be months before deals can be signed.

“We see a tremendous amount of opportunity within the market on our focused-service brands, particularly the two extended-stay brands and our new Select [brand],” he said. “The core [Sonesta] brand has gotten a tremendous amount of attention from the development franchise community. There [are] a lot of people out there that are flying flags that they’re looking longingly at other options.”

According to Pierce, the number of deals expected is up in the air at this point in time.

“It’s challenging to put a number on it right now because it’s such a transition year,” he said. “We’re strengthening the areas of the organization that we need to strengthen to make sure we get not only more deals through the organization, but we get the right deals, the right opening numbers.”

Next Moves

While the current focus is on growth in the U.S., the plan is to expand in North America and Latin America in short order, followed by greater international growth.

“The rest of the world is interesting obviously, when you look across some of the competitive environments in Asia and what has happened pre-COVID; the growth was unbelievable,” Pierce said. “The world is our oyster and these brand names will do really well internationally.”

According to Flores, this is the perfect time to introduce the combined company and its franchising opportunities.

“I think that there [are] plenty of objective reasons for us now to be enthusiastic and optimistic about the future of lodging fundamentals,” he said. “We’re going beyond green shoots now, we’re talking about numbers on the books that suggest we’re going to have a wonderful second half of 2021 that’s going to set us up for the future.”

And there will be more news from Sonesta in the future, Flores said.

“The window’s not completely closed on opportunities,” he said. “We’re not done by a long shot.”