Gurbir Sandhu was a Hanford High School student in 2005, likely driving down George Washington Way in Richland, past the old Hanford House/Richland Red Lion.
Little did he know then that he’d eventually own that hotel.
That’s what happened Feb. 28 when Sandhu, with his company Hanford House Hospitality LLC, bought the Richland Red Lion from the Red Lion Hotel Corp., or RLH.
Sandhu and his partners bought the Richland hotel, plus the Red Lion Hotel in Boise, for a combined $16.75 million last month.
The Pasco Red Lion also sold, with the sale of the three regional hotels totaling $29.9 million, according to RHL.
The new owner of the Pasco Red Lion could not be reached for comment.
RLH Corp.’s total gain on the sales is expected to be about $8 million, and $22.8 million of the sales proceeds were used for debt repayment at the closing, according to an RLH news release.
The two buyers signed franchise license agreements to retain the Red Lion Hotels brand.
The franchise agreements run for 20 years and call for each hotel owner to pay RL Franchising a monthly royalty and program fees, set at a percentage of the hotel’s gross room revenue.
Either party may terminate the franchise agreement without penalty on the fifth or 10th anniversary of the hotel’s opening date by providing at least 180-day notice of termination.
In 2015, the Spokane-based RLH decided to sell off its hotel properties and get into franchising.
It allows the company to benefit from its brand, yet allows the franchisees to do what they do best — run hotels.
Together with the sale of two California Red Lion hotels in Redding and Eureka in February, the five properties accounted for $26.6 million combined revenue on an annual basis for 2017, RLH reported. The hotels’ combined adjusted earnings before interest, taxes, depreciation and amortization, or EBITDA, on consolidated reporting was $4.7 million and RLH’s share of the adjusted EBITDA was about $2.6 million for 2017. This impact does not take into account the previously announced corporate overhead adjustments to reduce operating costs.
“We are pleased to announce the close on the sale of the next three of the 11 hotels we have listed,” said RLH President and CEO Greg Mount in a release. “The sale of these five properties over the last week is a major step in becoming an asset light company. This effort requires less capital to grow and will provide higher profit margins.”
What it means for customers at the Richland Red Lion is hopefully an improved experience, Sandhu said.
“We are going to put a lot of capital into this hotel,” said Sandhu, while sitting in the Richland Red Lion’s restaurant. “This place has infrastructure issues.”
The biggest issue — heating, ventilation and air conditioning problems —will be attacked first.
“There have been heating and cooling issues here for a while,” said Sandhu, 30. “People complain, depending on where your room is, of it being too hot in the summer or too cold in the winter. We’re starting to get proposals out to contractors.”
Sandhu said there also will be property improvements.
“The room lock system will be replaced with cellphone keys, like you see in bigger city hotels,” Sandhu said. “We want to bring the modern amenities to this hotel. People want a quiet, safe, clean place to stay. And you can’t have dimly-lit parking lots for safety reasons.”
Sandhu also said Richland’s rooms have been renovated in the last seven years so those aren’t a high priority.
These are the sixth and seventh hotels Sandhu and his business partners —some are family members, others from California — have purchased.
In 2014, they bought the Kennewick Red Lion near Columbia Center.
In February 2015, Sandhu and his company, Edge Hospitality Corp., bought the Red Lion Hotel Wenatchee for $4.1 million.
There, Sandhu committed to improvements to the 149 guest rooms, public spaces and the exterior, spending $3 million.
In 2016, Sandhu’s company bought the Red Lion Inn and Suites near the Toyota Center in Kennewick.
He’s also an owner of the new Kennewick Hampton Inn; Quality Suites Conference Center in Keizer, Ore.; and a five-story Marriott in East Wenatchee.
Sandhu, president of Ignite Hotels LLC, and the managing principal for Core Hospitality Corp., both hotel management companies, is especially excited about the Richland Red Lion.
“I like the location,” he said. “I like the hotel size. Operating a 150-room hotel is our bread and butter.”
It’s the same size as the Wenatchee hotel, he noted.
Sandhu also said operating a hotel with less than 80 rooms can be too easy, while something with 200 rooms or more has additional challenges.
The hotel business excites him.
“I like tearing it down, building it back up, and seeing what the customers think,” he said. “Hotels have marketing, human resources, staffs. It’s a mini-economy of itself in one hotel.”
Having a solid staff is key to their success because he can’t be everywhere, Sandhu said.
“You have to trust your staff,” he said. “The only way to have these hotels is to trust your staff. So you don’t have to be there every day.”
He’s ready for these new hotels to be added to his portfolio.
“I’m very excited,” he said. “I just love the Northwest. I’m 30. I spent my first 15 years in California. I spent the last 15 years in the Northwest. I’m a West Coast guy.”
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