Red Lion Hotels — Investor Presentation (November 2017)
36 slides from Red Lion Hotels's investor presentation, Nov 13, 2017
Slide 1: Investor Presentation
Slide 2: Disclaimer
DISCLAIMER This presentation {the "Presentation”} s provided for information purposes only. Forward Looking Statements. Certain matters discussed throughout all ofthis presentation constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Gener
Slide 3: RLH by the Numbers
RLH BY THE NUMBERS 1,100+ Hotels a © 70,000+ Rooms 10th Largest Franchisor in the United States 48 States dbk 1,800+ Associates Work for RLH RLH 4 Countries aff 148% 5-Year CAGR in Franchise Unit Growth
Slide 4: Asset Light Transformation | 2014-2016
ASSET LIGHT TRANSFORMATION | 2014-2016 [Sal Activities and Strategies Disposition of 8 Non-Strategic Strategic Hotel Acquisitions with Real Estate Interests $17M Capital Investment All8 properties remained with the | | v Hotel RL Baltimore brand via the execution of long V Hotel RL Washington DC ter
Slide 5: Asset Light Transformation | 2017
ASSET LIGHT TRANSFORMATION | 2017 Activities and Strategies Sale of TicketsWest and WestCoast Entertainment ¥ On October 3, 2017, RLH closed on the sale of the Entertainment business, Y This allowed RLH to “crystalize the value of this business” and continue on a mission to simplify its business mod
Slide 6: High ROIC, asset-light franchise model
4 ¥ High ROIC, asset-light franchise model with national and international scale H consisting of ~1,100 hotels and | >70,000 rooms ¥ Transformational acquisition adding cycle-neutral income stream and accretive growth potential through technology and operational overlays ¥ Increased brand recognitio
Slide 7: Investment Highlights
INVESTMENT HIGHLIGHTS Innovative Rewards gram ¥ Revolutionized rewards program to recognize retail consumer ¥ Instant gratification as well as rewards for multiple stays ¥ Preferential pricing and premium perks with national, regional and local retailers and service providers ¥ In April 2017, more t
Slide 8: Vantage acquisition: debt free platform
Debt free platform that could contribute $5-7M of EBITDA to RLH in 2017 without assuming any economies of scale Immediately added significant scale to the system with the addition of over 1,000 hotels ~ increasing national presence by 19 states Acquired considerable franchise management talent in th
Slide 9: RLH Franchise of Choice
RLH FRANCHISE OF CHOICE
Slide 10: Adjusted EBITDA
ADJUSTED EBITDA The Franchise division is estimated to contribute over 40% of the overall consolidated RLH Adjusted EBITDA in 2017. This contribution percentage will grow in 2018 as RLH continues to move closer to a fully asset-light business model. {$ in Milfions) Continuins erations Franchise Divi
Slide 11: Positioning RLH as Franchise of Choice
POSITIONING RLH AS “FRANCHISE OF CHOICE” Achieving Franchise Growth by: SS S&S Completing Offering Growing Meeting and Grow brand competitive brands in exceeding internal stratification fees North budget lead America expectations | | generation & Implement new technologies RLH
Slide 12: Increase Brand Awareness, Flexible Franchising, Reduce Costs
INCREASE BRAND FLEXIBLE REDUCE AWARENESS FRANCHISING COSTS More resources per brand Offer owners the ability to More efficient use of Larger footprint per brand | move up or down the quality marketing and Focus brand definitions scale of our 9 brand company resources offerings as their business need
Slide 13: Brand Stratification Plan — Flags
BRAND STRATIFICATION PLAN — 9 FLAGS UPSCALE ECONOMY i Americas Canadas Best Value Inn Best Value Inn Upscale offering Centrally located in destination, adventure and university cities Flat fee (Introductory offer) Midscale offering with or without a restaurant Primary and secondary markets. Variable
Slide 14: Year one average franchise economics
¥ All figures below are year one averages ¥ More than 20 upscale properties expected to open in the next 18 months including 4 Hotel RL properties | ___Hotel RL _Midscale_ Economy _| 130 105 59 Flat per Key* Percent of GRR Flat per Key 350K 136.5K 53.8K 130k 455K 15.2K Profit Margin % 37.1% 33.3% 28
Slide 15: RevPAK revenue management platform
ENGAGE REV CUSTOMERS Customer Relationship PAK ia Software incorporated into RevPAK: MEASURE RESULTS yement © scenovn Go gle — GROUPON —ReviewPro Expedia e > gee — HBS ca => dex M 2016 RevPAR Growth (%) GuestHouse RevPAR 120% tas Soars Under RevPAK I 2015, RLH acquired the c sit ms - ts propert prog
Slide 16: Harnessing OTA distribution channels
When we harness the distribution channels of OTA’s we can: v Reach a much larger audience ¥ Retain more customers ¥ Garner loyalty through our guest recognition program FISHING WHERE THE FISH ARE Channel and Afi Marketing Strate at RLAC ‘expedia ine. GExpedia “pe EGENCIA BP 6 veecon Hotwire Pricelin
Slide 17: Hello Rewards
HELLO cy rewards Hello Rewards is a recognition-based loyalty program that offers guests the best rates and rewards with every stay. ¥ Membership increased by 49% in 2016 and by 71% in 2017 through September 30 ¥ Hello Rewards has accounted for nearly 35% of direct bookings in 2016 and year to date
Slide 18: RLH Future Growth Opportunity
RLH FUTURE GROWTH OPPORTUNITY
Slide 19: Multiple Drivers to Maximize Value
MULTIPLE DRIVERS TO MAXIMIZE VALUE RLH will create value through organic franchise growth, targeted franchise acquisition, real estate sliver equity investment in key MSA markets, and improved efficiencies across the company Organic Growth Selective Accretive Platform Acquisitions Franchise pevelopm
Slide 20: Investment Opportunities
INVESTMENT OPPORTUNITIES Minimum Performance Hurdles be, 2 10-13+% Stabilized cash-on-cash returns ¥ Adaptive Re-use of existing structures (not limited to historic) y Extensive Rehabilitation (full renovation... close, re-hab, reopen) ¥ New Construction (Shovel-ready site, development incentives, E
Slide 21: Franchise Development Opportunities
FRANCHISE DEVELOPMENT OPPORTUNITIES RLH Recent changes with many industry brands result in unhappy franchisees and are targets for our development efforts. The teams look to convert other brands and independent properties. We have a practical common- sense approach to property improvement capital pr
Slide 22: RLH Recent Results & Outlook - 2017
RLH RECENT RESULTS & OUTLOOK - 2017
Slide 23: Summary Income Statement - Q3
| = Summaryincome Statement-Q3 enamel | Revenue 2017 2016 %A Hotel 338M $38.90 15% Franchise $127M S4.M 1868% Other $0.0M $0.0M otal Revenue $51.0" 343.7 16.8% Adjusted EBITDA stam S106 1.5% Revenue 2016 %A Hote! 398.001 0.8% Franchise $12.2 1956% Other S0.0M - Total Revenue 3133.40 $110.2" 11.0% Ad
Slide 24: 2018 Outlook
1% to 3% Adjusted EBITDA $22 to $23 Million Capital Expenditures $9 to $11 Million Executed Franchise Agreements 130 hotels
Slide 25: Strong Leadership Team
STRONG LEADERSHIP TEAM Well-Respected Hospitality Veterans Driving Corporate Strategy Greg Mount, President & CEO 30+ Year Industry Veteran JV Real Estate Expert Proven Growth Strategist Doug Ludwig , CFO & Treasurer Bill Linehan, EVP & 30+ Year Industry Veteran ‘ Chief Marketing Officer Former CFO
Slide 26: Key investment elements
\\ MEN ATS State of the Art Asset Light Strong Organic Guest Mgt Franchise Model Growth Platform (RevPAK) Innovative Balanced Sheet Rewards Seasoned Poised for Program (Hello Leadership Team Franchise Unit Rewards) Growth RLH|
Slide 27: Appendix
RLH APPENDIX
Slide 28: Revitalized Prototypes
Slide 29: Hotel RL
HOTEL RL BY RED LION PIONEER We're bold, always pushing forward and confidently leading the pack NURTURE We're welcoming, comfortable, inspired —a place to pursue passions freely WONDER We keep curiosity alive with great art, tech and events Full service Food & beverage Upscale 3-star brand Launched
Slide 30: Red Lion Inn & Suites
Friendly service and unique local flair + Full service hotel + Food & beverage + Meeting facilities + Diverse room selection Fitness center Midscale + Average size: 120-300 rooms Clever design RED providing guests the LI®@N essentials they need INN 4 SUITES —_— + Limited service hotel + No food & be
Slide 31: Settle Inn
SETTLE INN With big, comfy studio rooms, neighborly service and lots of a O space to relax and do your thing, we invite you to unpack, unwind and settle in. Midscale + Select service + Extended stay 31
Slide 32: Economy brand
Sit back, relax and enjoy a crisp, clean stay. We focus on getting all the comforts of home just right—spotless spaces, friendly faces, and service you can rely on—because when you stay here, you're a guest in our house. Economy + Select service Average size: 60-200 rooms
Slide 33: Signature Inn
Signature Inn is an upper-economy brand with an Sigh’ independent ethos. It is ideally suited for conversions in primary and secondary markets. Upper economy + Convenient locations Independent ethos + Colorful and hip tone of voice + Modern retro design
Slide 34: Americas Best Value Inn
kA Americas Best Value Inn Canadas Best Value Inn Guests always leave with a sense of pride knowing they received the most for their money. It's this value that makes us such an accessible option for solo travelers and families alike, and why we so strongly uphold our small business identity and the
Slide 35: Country Hearth Inn
sountryHearth, Rag With a strong concentration on getting the essentials just right, our guests can expect an effortless hotel experience whether they are just coming in off the road or made a reservation in advance. Ideally suited for conversions in secondary and tertiary markets + Lower economy Fo
Slide 36: Reconciliation of Adjusted EBITDA
RECONCILIATION OF ADJUSTED EBITDA Three Months Ended September 30, 2017 2016 ($ In 000s) Net income (loss) $ 3,627 $ 3,513 Depreciation and amortization 4,660 3,771 Interest expense 2,119 1,793 Income tax expense 174 166 EBITDA 10,580 9,243 Acquisition and integration costs ‘!) 1,235 1,413 Employee
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