RLH Corporation Provides COVID-19 Update

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Red Lion Hotels Corporation (NYSE: RLH) yesterday announced a series of organizational changes and cost cutting measures including changes to senior management, a reduction in force and the closing of the Company’s Spokane office.  These initiatives accelerate cost-cutting measures begun at the end of 2019 and broaden the scope of cost reductions in light of the COVID-19 pandemic.

The Company announced the following organizational changes:

  • Nate Troup was promoted to Chief Financial Officer effective April 1, 2020; previously Mr. Troup was the Company’s Chief Accounting Officer.  

  • Paul Moerner was promoted to Chief Accounting Officer; previously Mr. Moerner was Senior Director, Technical Accounting and Reporting. 

  • Julie Shiflett, existing Chief Financial Officer is leaving the Company to pursue other interests.

  • The Board of Directors has also suspended the Company’s search for a permanent Chief Executive Officer at this time.  John Russell, as interim CEO, will continue to lead the organization through this economic challenge.

The Company has implemented the following additional measures as part of an accelerated cost-cutting program:

  • A reduction in force.  RLHC will be reducing its corporate workforce by roughly 40% to approximately 100 full-time equivalent employees.  After this reduction, the Company has reduced 48% of the corporate workforce on a quarter-to-date basis. The workforce reduction was part of the cost cutting measures begun in late 2019; the Board elected to accelerate these measures in response to the impact of the COVID-19 pandemic.  Severance expense of approximately $0.6 million will be recorded related to this reduction in force.

  • Company-wide compensation reductions. Virtually all associates will be taking salary reductions.  John Russell, interim CEO will be taking a 25% reduction in compensation.  Most remaining staff from EVP to more junior staff levels will be subject to compensation cuts between  5% and 25%.  The Board has also agreed to a 25% reduction in their base retainer for the second quarter.  

  • A reduction in capital spend. The Company is reducing its 2020 capital expenditures to include only essential projects for an estimated savings of $2.9 million. Furthermore, additional key money commitments for franchisees will be reduced during this challenging economic time.

    Operational Update Related to COVID-19

    “The safety of our guests and team members around the country is a top priority,” said John Russell, Interim Chief Executive Officer.  “We have provided our franchisees guidelines and safety recommendations by the U.S. Centers for Disease Control and Prevention (CDC) detailing how to identify COVID-19 symptoms and mitigate its transmission.

    Measures taken to support our franchisees include:

    • Royalty and Marketing Fee deferral program for all brands

    • Temporary fee reductions for review responses, guest relations fees, and certain other fees

    • Delay capital intensive brand standards

    • Providing information on new legislative relief that may be available to them       Suspending New Contract Signings Guidance

      Prior to the escalation of the pandemic, the Company was seeing a resurgence in interest for its franchise agreements that has slowed in the last several weeks.   Given the lack of visibility on how long travel restrictions and social distancing may remain in place, which is having a disproportionate unfavorable impact on the lodging sector, the Company has decided to suspend its guidance on new location contract signings.

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