Red Lion Hotels Corporation Q1 2010 Earnings Call Transcript

May. 7.10 | About: Red Lion (RLH)

Red Lion Hotels Corporation (NYSE:RLH)

Q1 2010 Earnings Call

May 6, 2010 5:00 PM ET

Executives

Stacy Feit – Vice President, Financial Relations Board

Jon Eliassen – President and CEO

Anthony Dombrowik – Chief Financial Officer

George Schweitzer – Chief Operating Officer

Analysts

David Loeb – Baird

Will Marks – JMP Securities

Mike Roarke – McAdams Wright Ragen

Smedes Rose – KBW

David Loeb – Baird

Operator

Ladies and gentlemen, thank you for standing by. And welcome to the First Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will have a question-and-answer session. Instructions will be given at that time. (Operator Instructions)

And as a reminder, today’s conference is being recorded. I would now like to turn the conference over to Stacy Feit. Please go ahead.

Stacy Feit

Thanks [Kwan]. Welcome to Red Lion Hotel Corporations first quarter 2010 earnings call. With us today are Red Lion Hotels President and Chief Executive Officer, Jon Eliassen; and Chief Financial Officer, Anthony Dombrowik. George Schweitzer, Chief Operating Officer is also here with us today and available to address questions.

Before we get started, I want to remind you that our remarks today contain forward-looking information as defined by the SEC that is subject to a number of risk factors that may cause our actual results to differ materially from those expressed or implied. These risk factors are discussed in detail in our annual report filed with the SEC on Form 10-K on March 11, 2010. Both reports are available at our website www.redlion.com or through the SEC website at www.sec.gov.

We will also be referring to a number of non-cash GAAP measures. The reconciliation of these measures to their comparable GAAP measure is provided in the tables to the press release issued this morning. That release is also available on the Investor Relations section of our website.

I would like to now turn the call over to Mr. Eliassen.

Jon Eliassen

Thank you, Stacy, and welcome, everyone, to Red Lion's first quarter earnings call. Today I will recap our first quarter 2010 results and provide an update on some previously announced operational initiatives and the early results we’ve seen from them.

I also want to discuss the investments that we have recently made in executive talent which will support our growth strategies as we move forward. Following that, I’ll turn the call over to Tony for more detailed review of the quarter and our 2010 outlook.

During the first quarter, our owned and managed hotels achieved a 4.9% increase in RevPAR. This was driven by a 4.8% increase in occupied rooms and an average daily rate that remain flat year-over-year. This gain in RevPAR breaks the trend of declines in preceding six quarters and that outpaced Smith Travel Research has reported industry-wide decline of 2.1%.

One of our key strategies has been to change our mix of business away from discounted room rates to a more profit mix of group, corporate and targeted trending business to help drive further recovery of RevPAR.

Along these lines during the first quarter of 2010, we grew our rate index against competitive set by 2.6%. This indicates to me that our revenue optimization strategies and the sales investments are beginning to have an impact. We expect continued positive results as we move through the year. We also grew our occupancy index against our competitive set by 1.7%, both of these indicators are positive news for our team.

As part of this focus on mix of business, we adopted two initiatives at the beginning of the year that are starting to contribute to our performance.

First, we have initiated the strategy we call sensible pricing, which provide our guest with the consistent, easily understood price structure. We are minimizing the gap between having to offer expensive rates than aggressive rate discounting. This one price approach has been well received and even in the quarter that is seasonally slow for vacation travelers, we saw some growth in our trending segment.

Second, the value pricing of our Roaring Start Breakfast has increased our percentage of premium leisure business while at the same time it will contribute to improvement of our food and beverage performance and profitability as we move through the year. We anticipate these initiatives and our continued investment in the business will continue to deliver positive results as the economy recovers.

Competitive pricing pressure is still a concern for all of us, as evidence by the industry-wide pursued of occupancy at the expensive rate. This competitive behavior has restricted our ability to increase rate in the quarter especially in the group and corporate travel segments. But we are capturing more business from these targeted segments as evidence by the year-over-year increases in group room nights of 10% and corporate room nights of 22%.

With improvement in the broader economy, we should see a positive impact on ADR later in the year, as our overall revenue mix continues to improve and industry discounting is hopefully less turbulent.

Our percentage of internet source revenue grew year-over-year with redlion.com’s contribution outpacing the online travel agency sites. We believe this is a result of the increase investments we are making in online marketing, which are driving more internet sourced business to our own Red Lion website.

And with sensible pricing this enabled us to reduce our dependency on lower margin business derived from highly discounted online third-party channel. We will continue to focus our efforts on higher rated group, corporate and premium trends business in order to maximize profitability.

Revenue, EBITDA and associated margins were relatively flat year-over-year at $34.3 million and $1.7 million, respectively. Hotel operating margin declined to 12.9% from 13.4% in the first quarter of 2009, predominantly driven by investments in key areas in the sales and marketing front to grow revenue.

We have made a number of key strategic additions to our executive team in the first quarter. As we have said, we see franchising as an area of opportunity in this economic environment and as a strong growth driver for Red Lion.

To head our franchising efforts, we named Richard Carlson, Vice President of Lodging Development. Rich brings a broad 20-year record of franchise, development and capital investment experience to the company.

In his team, we’ll continue to concentrate on the western states, where the Red Lion brand is well known. Rich joined us from Summit Capital, where he worked with hotel owners, investors, and others on financing and asset disposition. Before that, Rich was Vice President, Lodging Development for Marriott International.

Also we have appointed Harry Sladich as Executive Vice President of Sales and Marketing. Harry brings over 27 years of hospitality experience to Red Lion. He directed sales and marketing for Sterling Hospitality where he played a key role in developing and expanding the select service hotel properties.

Having most recently served as President and CEO of the Spokane Area Convention and Visitors Bureau, Harry has successful record of bringing national business and visibility to [states of] northwest. Harry officially joined our team this week and will be focus on taking our sales and marketing initiatives to a new level.

In the hotel operating group we have also made two senior level appointments. In February, we added Kenneth Shore to fill a vacant position of Regional Vice President, Hotel Operations. Ken started his career at Red Lion and has had long history in the industry. His keen focus on customer service will benefit the entire portfolio.

In addition, Mark Mahoney was named Vice President, Managing Director of Spokane Hotels to fill another vacant spot. Mark most recently served as Vice President of Sales, joining Red Lion in 2006. We believe having an executive Mark’s caliber overseeing the Spokane area properties, is a very positive move and we are pleased to give him this opportunity.

These key appointments further around out our talented and deeply committed operating group, in nearly seven years that I have been associate with Red Lion, I can definitely say, our team has never been stronger.

I would now like to turn the call over to our CFO, Tony Dombrowik, to cover the financial results in more detail. Tony?

Tony Dombrowik

Thank you, Jon. I'll begin today by addressing our first quarter results in more detail. I'll follow that with a discussion of our liquidity and then wrap up with out outlook for 2010. But first, let me clarify one housekeeping item.

We disclose in the release last night and in the 10-Q, our system-wide marketing support resource referred to the Central Program Fund or CPF is now fully consolidated. The activities funded by these marketing expenses benefit the companies owned hotels as well as the franchise hotel. Historically, we only recognized our proportionate share of the total CPF expenses.

In accordance with this new accounting principle starting this quarter we now include all of the expenses and other balances of the CPF in our consolidated financial statements. This includes revenue received from franchises to support CPF activities.

All prior periods presented in the list and in the form 10-Q have been restated to reflect this change. There is a table in the release that details the line item impact of change and also gives you both the impact for the last three quarters of 2009 and the impact on our 2008 results.

Now, turning to our reported results, total revenues for the first quarter of 2010 were $34.3 million, down just slightly from the same quarter in 2009. Hotel revenue, which comprised almost 90% of total revenue, was also down just slightly at $30.6 million, compared to $30.8 million in the first quarter of 2009.

Our RevPAR for the quarter was up 4.9% as result of several initiatives John just discussed. I’d also note that we are up 4.4% in RevPAR index, compared to our aggregate competitive set, indicating we fed well against our specific competition.

Average daily rate for the owned and leased hotels is up $0.04, but we gain 2.6% in the ADR index versus our competitive set, we were up just over 9100 occupied rooms in the quarter or 2.2 points in occupancy.

Our revenues from food and beverage operations were down $1.1 million in the first quarter of 2010, from the same period in 2009. This change is related to both our move to breakfast-inclusive sale strategy and to our modifications to the food and beverages offering in several markets.

Guest behavior and industry trends drive our decision and we are confident that these changes will make us more profitable, particularly as our business ramps up during the summer season.

On the system-wide basis, RevPAR increased 1.7%, reflecting a 130 basis point increase in occupancy partially offset by 1% decline in ADR. As of March 31st, there were 45 hotels in the Red Lion system, 32 owned or leased hotels and 13 franchised properties.

Our franchise revenues, which is tie to our franchised hotels room revenue was flat with prior year -- with the prior year period at 558,000. System-wide this is usually our seasonally slowest period.

Entertainment revenue was also relatively level year-over-year at $2.5 million. We have one last best of Broadway Show production during the quarter, as compared to the first quarter of 2009. However, the ticketing operations fed well. Overall operating margin segment expanded by 2.6%.

Turning to profitability in the hotel segment. The direct hotel margin was 12.7% during the quarter, down 70 basis points from 13.4% in the first quarter of 2009. As Jon mentioned, our ongoing investment in direct sales, marketing and related technology impacted our margin. We are confident returns from these investments will be realized in 2010 and beyond.

Moving down the income statement. Undistributed corporate expenses for the quarter were $2.4 million. That includes the special item. A charge of $1.2 million in cash and non-cash separation cost related to the departure of our former President and CEO in January, 2010. The remaining $1.2 million of corporate related cost were down slightly year-over-year.

Depreciation and amortization during the quarter was $5.2 million, up from $5 million last year. We also had an increase between competitive periods in interest expense of approximately $400,000. As you will recall, we amended two of our credit agreements in February 2010, resulted in a slightly higher interest rate for those notes.

Net loss before special items was $3.6 million or $0.19 per diluted share and first quarter EBITDA before special item was $1.7 million, up from $1.6 million last year.

Looking at the balance sheet. Capital expenditures during the first quarter were $1.5 million, on track for our total expected 2010 spend of approximately $12.7 million for core investments and maintenance technology, and necessary hotel improvement projects.

Total debt outstanding at March 31st was $137.4 million and we were in compliance with all covenants of our credit facilities with total leverage of 5.0 versus the modified 5.25 times threshold. As of March 31st, our cash balance was $9.3 million, including $4.3 million in cash and cash equivalence and $5 million restricted cash.

Looking at the remainder of 2010, our first quarter results are encouraging and we continue to be cautiously optimistic about 2010. However, there are still very limited visibility into the summer peak season that drives the majority of our revenue and profit. The industry remains on period considerable rate pressure giving the aggressive marketing and sales environment and associated to our booking with us. We hope to see reverse for some of these trends in 2010 and into 2011, and certainly several of our markets are showing signs of improvement.

Based upon the information we have now, we are increasing our guidance to the following. 2010 RevPAR for owned and leased hotels to be between down 1% and up 2% on annual basis, 2010 direct hotel operating margin is expected to range from flat to up 100 basis points and EBITDA is expected to between $28 million and $30 million before any special items.

With that, I’ll turn the call back over to Jon.

Jon Eliassen

Thanks, Tony. Good update. And with that, Tony, George Schweitzer and I will be available to answer questions. So I’ll turn it back to the operator.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) And our first question comes from David Loeb with Baird. Please go ahead.

David Loeb – Baird

I just have one or two or four or five…

Jon Eliassen

Good morning, David.

David Loeb – Baird

Good morning. Good morning. This, I guess, maybe this is for George. With group business up, I understand about, including breakfast in F&B, but was there some F&B offset from additional catering?

George Schweitzer

Well, catering business was down for the quarter somewhat surprisingly because actually our group rooms were up. But as far as an offset from catering, is there something more specific you are looking over there?

David Loeb – Baird

I guess, that was part of it, give any color on why, I guess, the groups are using more rooms but less food beverage.

Jon Eliassen

Yeah. David, this is Jon. I think, that’s true, and I think, it’s not just the trend with us. I think the trend in the industry, some of the groups that are coming through are not utilizing the catering that we are offering. And it’s something that we’re certainly focus on from the sales perspective, making sure we are being competitive and I don’t know over the long-term trend but in the near-term with the economic downturn we are seeing that.

David Loeb – Baird

Yeah. And, I guess, just to understand the margins. I know you guys did an awesome job a year ago and a lot of other quarters, as well as the year ago quarter in cost control in a really difficult revenue environment. But I would think with flattish rooms revenues went up, RevPAR and much lower F&B that your margins might have actually had a benefit from more rooms and less F&B. Was it really just a sales and marketing investments that were effecting that, how, I guess, another way to look at that is, how was the rooms departmental margin?

Jon Eliassen

Yeah. You know, when you look at the overall profitably of the hotel operation itself, it is pretty consistent margin. We actually experience a little bit of an uptick because of the utility cost in the hotels, we have pretty mild season over here in the west coast, specifically in the northwest.

When you factor in these investments that we were making both in sales people and in technology that was really driving the margin to be a little bit lower but I think for the year, we’re still focused on being somewhere to flat, up 100 basis points. And we’ll see some of those investments we are making now, really have an impact later, we’re taking the charges now but we’ll have a positive impact later in the year.

David Loeb – Baird

That actually makes a lot of sense. And sort of gets to my next one, which is, it’s really essentially how do you get to margins up flattish RevPAR, and that’s really the answer, you’re saying, you’re going to improve mix and improve operating efficiencies to be able to do that. Is that fair?

Jon Eliassen

Yeah.

George Schweitzer

It’s all about mix. We are on a mission to improve mix.

David Loeb – Baird

So other than working really hard to under promise and over deliver, how come you are so conservative in your RevPAR numbers relative to the rest of the industry related to very strong performance in the first quarter?

Jon Eliassen

Well, I think, first of all, we didn’t go down as far as everybody else in our guidance at the opening of the year. And I think, secondly, there is still a lot of Rev pressure and lack of visibility in the market, when it comes to the peak season and booking windows are shorts, so that really impact the trends in business. And while we’re generally seeing some signs of life in group in the preferred corporate business, it’s off. So we want to -- we do tend to as you know, under promise and over deliver, and we want to be off, the word is conservative, but we want to make sure that we deliver, what we say we are going to do.

David Loeb – Baird

Okay. Just two more. Any, seriously, only two. Can you give us a little bit more color on which markets did better, was it major markets versus smaller markets, with the difference is there or Northwest versus and then for other markets?

Jon Eliassen

Sure. Well, over half of our properties are in the Northwest, specifically Washington and Oregon, and those markets in general were up compared to what was happening with the economy. RevPAR was up for the state of Washington and little over percent it was up, couple of percent for the state of Oregon. We also had individual markets that were strong for us.

Seattle is one. Seattle were doing extremely well downtown and the market is doing well. Occupancy was up 16% for the Seattle market itself, although there is heavy rate pressure, RevPAR was up in Seattle about 10%.

Bellevue was well, Bellevue was up 15% in occupancy but RevPAR was only up 2%. That gives you an idea, just how much rate pressure is out there with occupancy push like that. So it shows businesses really starting to move out there little better at least we'd like to think so.

Anaheim was also strong for us year-on-year. The market itself is still a little soft. In Anaheim property, the occupancy was up about 5 points, but it was down significantly in RevPAR because of rate pressure. And in Disneyland in (inaudible), the occupancy was just about flat and RevPAR was down. So there continues to be pressure there as well.

David Loeb – Baird

But you did better than that.

Jon Eliassen

Yeah. Actually, we did great year-on-year. Our growth was significant for that hotel and it should be.

David Loeb – Baird

Yeah.

George Schweitzer

David, when I look at it, you look at the increase in occupancy index, which is a measure of how we are doing against our competitive sets. We are up 1.7% in occupancy. So I think that's really trend driven more people in the rooms. But what we really did well is, through the mix changes we’re up 2.4% in index on the rate, so those two combined really made us look pretty good for the quarter.

David Loeb – Baird

Got it. That's very helpful. Okay, last one for now. On the balance sheet, can you give us a little bit of an update on compliance with covenants and what you are thinking about uses of capital other than CapEx?

Jon Eliassen

Yeah. As far as compliance goes, we have the new benchmark with the amended agreement we did February of 525. I think we ended the quarter at like 49 on the leverage ratio, which is the one we always talk about.

David Loeb – Baird

Yeah.

Jon Eliassen

So, going through the rest of the year, I don't anticipate any problems with meeting those covenants and we’re still on track for our $12.7 million spend in capital for the year. And spend, I think, by roughly $1.5 on capital during the first quarter in such slowest period, and we’ll, start to roll some of that out as the economy improves. We are trying to match the recovery with the cap spend too.

David Loeb – Baird

Okay. Great. Thanks.

Jon Eliassen

Thank you.

Operator

And our next question comes from Will Marks, JMP Securities. Please go ahead.

Will Marks – JMP Securities

Thank you. Hello, everyone. I had a question, just really one on -- and David, sort of asked this, on the guidance versus what you saw in the first quarter. I know, you being conservative, your numbers are similar to some other companies. But is there anything you’re actually seeing that would cause, let's say the second quarter and beyond to be any worse than the first quarter?

Tony Dombrowik

This is Tony. First of all, hi, Will. And David asked a lot of questions that I think you’re kind of reiterating. The rate pressure is the biggest concern that we have. Being very competitive in our markets as we are, we have to sort of respond to what the consumer is doing with the short booking windows. It's a concern for us. George, you want to…

George Schweitzer

I think that says it all.

Tony Dombrowik

Yeah.

Will Marks – JMP Securities

Okay. I don't think you really addressed it. I mean, there was great pressure in the first quarter as well.

Tony Dombrowik

Sure.

Will Marks – JMP Securities

I’m just saying. Did you give April stats by any chance?

Tony Dombrowik

We have not given April stats. We generally don't give until the…

Will Marks – JMP Securities

Are you seeing any trends change in April?

Tony Dombrowik

Well…

Will Marks – JMP Securities

I mean, without giving me the number, perhaps you can qualitatively discuss?

Tony Dombrowik

Not generally speaking. April tends to be a group deficit month and we certainly saw that, and that's why we tend to be strong. So, I think, directionally it was a little bit weaker than we had anticipated. But, Q1 has much less of an impact overall for the entire year, again a seasonally slowest and where we really focus is on the summer business once we reach most of our benefit.

So being conservative, we want to make sure we know how we are going to do before we start giving pretty high level guidance.

Will Marks – JMP Securities

Okay. And then just one other thing, on the F&B, when would you expect growth to turn positive?

Tony Dombrowik

Growth, as far as revenue growth or growth in profitability.

Will Marks – JMP Securities

Okay. Both.

Tony Dombrowik

Well, we purposely shifted our thought process in Food and Beverage. And so, as a result of changing some of our operating hours and our pushed that, as well as, offering our breakfast buffet, which is a new unique offering through all of our properties. We saw drop in revenues because of that and we expected that.

We as well saw a change in our margin. And we expect as the year progresses, it's now in its infancy that will get much better. That will show growth in profitability towards year end. But we do anticipate through the year, our food revenues to be down.

Will Marks – JMP Securities

Okay. That's all for me. Thank you.

Tony Dombrowik

Thanks Will.

Operator

Our next question comes from Mike Roarke, McAdams Wright Ragen. Please go ahead.

Mike Roarke – McAdams Wright Ragen

Hi. Afternoon, everyone. Just a handful of short ones. How many rooms were in system this time a year ago, owned and leased as well as franchised.

Jon Eliassen

It's about the same number of rooms. Compared to last year, we are down, I believe one franchise hotel quarter-on-quarter and a store is at the mix of stats, because it's been closed for the entire quarter.

Mike Roarke – McAdams Wright Ragen

Okay. So that store is – how about, was there any change in vendor at all?

Jon Eliassen

In the number of rooms?

Mike Roarke – McAdams Wright Ragen

Yeah.

Jon Eliassen

I don't believe so.

Mike Roarke – McAdams Wright Ragen

Okay. On the interest expense, what you paid this quarter is that kind of a good annual run rate, the budget for?

Jon Eliassen

Well, I mean, the only difference there would be is, if there is changes in LIBOR, but right now, we are not anticipating big swings in that. So, yeah, I believe, that will give good run rate.

Mike Roarke – McAdams Wright Ragen

It’s kind of strengthening. And then in the markets, out side from pricing, are you seeing anything in the way of capacity coming on or being taken out from the competition?

Jon Eliassen

You know, from, particular markets, I know that there is some capacity coming on in the Seattle market, probably, close to 2011 and it's going to be more upper upscale luxury. But in general we are not seeing a lot of movement in the number of rooms with the supply coming online in our markets.

Mike Roarke – McAdams Wright Ragen

Okay. Okay. Thank you.

Jon Eliassen

You bet.

Operator

And our next question comes from Smedes Rose, KBW. Please go ahead.

Jon Eliassen

Hey, Smedes.

Smedes Rose – KBW

Hi. I wanted to ask you just a question, is my usual on the, I guess, on the franchising efforts. I think, Jon, last quarter on your call you talked about maybe being a little more flexible, the kinds of hotels that could be in the franchise system, maybe not having a food and beverage, a full service restaurants.

Can you just sort of broadly set, what’s your goal might be along outside of the business over the next year or so, where you would like to be in year from now?

Jon Eliassen

Yeah. And I let George address this specifically, but that’s true, we have added a lot of flexibility in terms of food and beverage options at not only our own hotels but what we are looking at in terms of potential franchise operation as well.

So it does give us flexibility that we probably didn’t have in the past and it’s opened up some opportunities for us, we didn’t have in past as well. But George, can talk a little bit more about it.

George Schweitzer

Sure. The outlook is promising there has been considerable interest out there. We dedicated the resources and believe we’ve got a competitive advantage because of our flexibility and being able to offer to both whole service and limited service.

And with Rich on board, we are very excited about Rich Carlson that his contacts and knowledge of opportunities in the west is exceptional, which really match with, where our properties are located.

So, although, we don’t have anything to announce yet, we’ve got multiple properties in the pipeline. I’m very excited about where we are headed in this area.

Smedes Rose – KBW

Okay. But there are no new addition to this and on the franchising side right now or there is no, I mean, there is, are there any more departures coming up?

Jon Eliassen

No. Not at this time.

Smedes Rose – KBW

Okay. And then, I just, I was looking back on some notes, and I just curious, you guys have talked once about, your Anaheim property, I think, the lease payment its about $1.8 million there a year and what is your costs you thought in that contribution, would be about zero in 2009, but should be positive in 2010. Do you still think that is reasonable goal?

Tony Dombrowik

Yeah. This is Tony. I do think that’s a reasonable goal and we are seeing some real strong increases in RevPAR year-on-year. When you look at the Anaheim hotel, it’s actually, one of our greatest brand represented the, I know the Expedia award or the Expedia insider choice award based upon customer service, and how the feel the property is. And it’s just – it’s running at a good maturation rate in that market. So I would anticipate by the end of the year at some place, right around $1 million positive to EBITDA.

Smedes Rose – KBW

Great. Okay. Thank you.

Tony Dombrowik

Thanks, Smedes.

Operator

(Operator Instructions) And we do have a follow-up David Loeb, Baird. Please go ahead.

Jon Eliassen

Dave (inaudible).

David Loeb – Baird

Not only two, I have more. But Smedes actually asked one of mine. That’s fair play. I wanted to ask if you would had any consumer testing or what your thoughts are on the consumer reception of widening the brand standard a bit?

And, given, what you were talking about full service, limited service franchising. What do you think the reaction is going to be, how do you expect that to play with the public when you have very different kinds of hotels owned at the same brand?

Jon Eliassen

Well, actually, we’ve tested that for years, whether it’s known or not Red Lion has actually had some limited service since it inception. And last year with what occurred in the economy, we did cutback, we skilled back purposely in some of our food and beverage areas, and we did not get negative responses from our customers, generally speaking. And in fact with the recent changes we’ve made, we’ve had very positive response. So that, at this point has been our field testing and we’ve felt very happy about it.

Tony Dombrowik

One thing, this is Tony. One thing to keep in mind too is, where we are moving to a limited service presence in the market is primarily in the tertiary and some secondary markets. And we’re modifying some food and beverage to be not just limited service but sort of lunch and dinner but on a more limited basis maybe its bar food, something little bit more, it came to what being demanded in that market.

This whole thing is really a response to sort of customer preferences and where they want to go. Well, we are still on a major market and we have significant banquet and group rooms. We’re still full service hotel and I think its going to bode well for us going forward.

David Loeb – Baird

George, maybe you could give a little historical context. If we go back to the days when you opened Columbia for example and had Santa Barbara and big Bellevue, did the brand perception and presence was definitely moving upper upscale, how did that work, was that successful at translating customers from those kinds of upper upscale hotels to the smaller market free tax limited service hotels?

Jon Eliassen

Yeah. Even back then we still had properties in Coos Bay, in Astoria, in Klamath Falls and Bend, and there was considerable difference it was out there between the product and people still expected one great hotel experience.

David Loeb – Baird

Okay. That’s actually very helpful. That just really helps to me understand how your brand will be perceived as you continue to grow it. Thank you for that.

Jon Eliassen

Thanks for your question.

Operator

And there are no questions at this time.

Jon Eliassen

Hey, that -- thank you all. Thank you, operator. But thank all of you too, who participated in the call today for your interest in Red Lion and for all the questions. Look forward to speaking to you all again on our next earnings call.

Operator

And ladies and gentlemen, this conference will be available for replay after 1:30 PM today till midnight June 6th. You may access the AT&T teleconference replay system at anytime by dialing 1800-475-6701 and entering the access code 155110, international participants dial 320-365-3844. Those numbers again, 1800-475-6701 and 320-365-3844, access code 155110.

That does conclude our conference for today. Thank you for your participation and for using AT&T Executive Teleconference. You may now disconnect.

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