In a major move that’s set to shake up the North American hotel sector, Choice Hotels International has entered into a definitive agreement to acquire the franchise business, operations and intellectual property of Radisson Hotel Group Americas for approximately US$675 million.
Choice Hotels’ President and CEO, Patrick Pacious, said the addition of Radisson’s nine hotel brands in the Americas is the latest chapter in Choice’s successful strategy to expand its growth opportunities by bringing the company’s “best-in-class franchising platform to adjacent hotel segments and to a new set of hotel owners”.
He said the added 624 hotels with over 68,000 rooms expand Choice Hotels’ presence in the upscale and core upper-midscale hospitality segments, particularly in the West Coast and Midwest of the United States.
It is also the intention of Choice Hotels to not just keep Radisson’s brands, but further grow the business across the Americas.
Pacious said the acquisition of some of the industry’s most recognized brands extends Choice Hotels’ customer reach in the upscale segments, as well as to more business travelers and a broader demographic within Choice’s core leisure segment.
The combination strengthens Choice’s ability to provide a more holistic product offering across segments and continue to capitalize on consumer trends expected to fuel future demand for travel such as remote work, increasing retirements and road trips, according to Pacious.
“Choice has a well-established history of smart acquisitions in new segments where our world-class franchising engine can spur future growth,” he said.
“This transaction brings together two highly complementary businesses, enhancing our guest offerings in the core upper-midscale hospitality segments, while extending our reach into the upper upscale and upscale full-service segments and in higher revenue geographic markets.
“We are confident that guests and franchisees will significantly benefit by combining these two exceptional sets of brands,” Pacious said.
He said the transaction brings Choice’s industry-leading RevPAR (revenue per available room) growth performance to a new set of franchisees and hotel investors and provides new growth opportunities to expand Choice Hotels’ presence to additional locations in Canada, Latin America and the Caribbean. Consistent with Choice Hotels’ long-term strategy of growing in higher revenue segments, the Radisson brands typically have larger room counts and are located in higher RevPAR markets, driving higher royalty revenue per hotel.
According to Pacious, the transaction unlocks significant potential value for the Radisson brands in the Americas.
He said Choice Hotels has a deep familiarity with the Americas franchisee community and will bring a strong commitment to driving the success of Radisson franchisees, many of whom already have franchise agreements with Choice Hotels.
“Our long track record of establishing mutually beneficial relationships with our franchisees has resulted in a best-in-class voluntary retention rate, and those franchisees are the source of a majority of our new hotel development,” he said.
“Our existing and new hotel owners will benefit from the improved business delivery capabilities of the combined companies, including our award-winning loyalty program, proprietary tools and emerging technologies that will enable them to capture more business, lower their hotel operating costs, reach new customers and respond to evolving industry trends.”
Radisson Hotel Group CEO, Federico J. González, said Choice Hotels was the right partner to grow the company’s brands in the Americas.
“Since the introduction of our strategic transformation plan in 2017, Radisson Hotel Group has been committed to the global success of the Radisson brands and expanding the overall footprint of our global operations,” he said.
“We have achieved strong results, doubling the number of rooms signed per year in EMEA and APAC, confirming Radisson Blu as the largest upper-upscale brand for over 10 years and establishing Radisson as the upscale brand with the largest growth in EMEA.
“We are confident that Choice Hotels is the owner with the right long-term strategy, resources and management team to successfully accelerate the growth of the Radisson business in the Americas.
“Radisson Hotel Group will continue to leverage the strength of operational excellence to set our business in EMEA and APAC on a significant growth path with the aim of doubling the portfolio in those markets by 2025.
“Together with Choice, we will work to ensure that customers continue to experience the highest levels of service and a superior brand experience,” he said.
Radisson Hotel Group Americas Interim CEO, Tom Buoy, added: “Our associates have been working hard to solidify the power of our brands, build a better commercial engine and offer best-in-class solutions to franchisees and customers.
“We are very pleased that the Radisson family of brands in the Americas will join Choice Hotels.
“We believe that this acquisition will drive growth in a highly competitive market and enable stronger performance for our franchisees,” he said.
Choice Hotels will acquire the franchise business, operations and intellectual property of Radisson Hotels in the United States, Canada, Latin America and the Caribbean, for approximately $675 million, inclusive of the real estate value of three owned assets.
The acquisition, which includes real estate value of three Radisson-owned assets, includes 10 Radisson Blu hotels, 130 Radisson hotels, 9 Radisson Individuals, 1 Park Plaza hotel, 4 Radisson RED hotels, 453 Country Inn and Suites by Radisson and 17 Park Inn by Radisson hotels, as well as the Radisson Inn and Suites and Radisson Collection brands.
According to Choice Hotels, the company will independently own and control the brands in the Americas and will work with the Radisson Hotel Group to drive the growth, continuity and success of the brands.
The transaction is not anticipated to change Choice Hotels’ current capital allocation strategy related to dividend payment policy and planned share repurchases, according to the company.