Choice Hotels International (CHH-N) has a deal to acquire the franchise business, operations and intellectual property of Radisson Hotel Group Americas and its 624 hotels for approximately $678 million (all figures Cdn).

The transaction includes the company’s Canadian properties. Radisson Hotel Group Americas lists 28 hotels under a variety of its banners across the country, from Vancouver to Frederiction. Other Canadian cities with at least one Radisson property include the Greater Toronto Area, Montreal, Winnipeg, Calgary, Edmonton, Regina, Saskatoon and London, as well as some smaller centres.

The rest of the properties in the transaction are spread across the United States, Latin America and the Caribbean and operate under nine banners.

The 68,000 rooms will expand Choice Hotels’ presence in the mid- and upscale hospitality segments, the company says, particularly in the West Coast and Midwest regions of the U.S.

“Choice has a well-established history of smart acquisitions in new segments where our world-class franchising engine can spur future growth,” Patrick Pacious, president and chief executive officer of Choice Hotels, said in the Monday morning announcement.

“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.”

Choice Hotels’ growth strategy

The mid- and upper-scale markets are areas where Choice Hotels has been seeking to expand its presence. The company believes the acquisitions will “provide a more holistic product offering across segments” and allow it to capitalize on what it sees as growing travel trends for remote work, increasing retirements and road trips.

Consistent with Choice Hotels’ long-term strategy of growing in higher-revenue segments, the Radisson brands generally offer larger room counts and are located in higher RevPAR (revenue per available room) markets, driving higher royalty revenue per hotel.

“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,” Federico J. González, CEO of Radisson Hotel Group, said in the announcement.

“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.

“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.”

Funding and transaction details

Included in the acquisition is the real estate value of three owned assets.

Choice Hotels says the acquisition will be funded with a combination of cash on hand and revolving credit line borrowings.

Radisson Hotel Group Americas includes 10 Radisson Blu hotels, 130 Radisson hotels, nine Radisson Individuals, one Park Plaza hotel, four Radisson RED hotels, 453 Country Inn & Suites by Radisson and 17 Park Inn by Radisson hotels, as well as the Radisson Inn & Suites and Radisson Collection brands.

Choice Hotels will independently own and control the brands in the Americas and will work with the Radisson Hotel Group on overall strategy in the region.

The transaction is not anticipated to change Choice Hotels’ capital allocation strategy related to dividend payments and planned share repurchases, the company said.

The transaction has been unanimously approved by Choice Hotels’ board of directors and is expected to close in the second half of 2022, pending approvals and closing requirements.

Credit Suisse Securities (USA) LLC is serving as financial advisor to Choice Hotels and Willkie Farr & Gallagher is serving as legal advisor. Baker McKenzie is serving as legal advisor to Radisson Hotel Group.

About Choice and Radisson

Choice Hotels International operates nearly 7,000 hotels, representing nearly 600,000 rooms in 35 countries and territories as of March 31, 2022.

It offers a range of lodging options from limited-service to full-service hotels in the upscale, mid-scale, extended-stay and economy segments.

Radisson Hotel Group Americas represents Radisson Hotels operations and brands in the United States, Canada, Latin America and the Caribbean.

The Radisson Hotel Group Americas portfolio of brands includes Radisson Collection, Radisson Blu, Radisson, Radisson RED, Radisson Individuals, Radisson Inn & Suites, Park Plaza, Park Inn by Radisson and Country Inn & Suites by Radisson, brought together under the overarching Radisson Hotels Americas name.

Radisson Hotel Group has over 1,700 hotels in operation and under development, more than 260,000 rooms and a footprint spanning over 120 countries and territories.

Over 100,000 global employees work for the Radisson Hotel Group and at the hotels licensed to operate in its systems.