Avoid: Red Lion Hotels
At just $130 million in market cap, Red Lion Hotels (RLH) is the smallest of these chains, operating 51 hotels under the Red Lion Hotels, Red Lion Inns & Suites and Leo Hotel Collection brands.
The art of operating hotels is skewed in favor of large chains that can leverage economies of scale, placing smaller chains like Red Lion at a disadvantage. RLH has struggled with declining margins, although its franchise revenue continues to experience strong growth.
RLH carries a lot of debt — it has only $5.2 million in cash, compared to debt of $79.2 million. Meanwhile, its PEG ratio of negative 1.9 illustrates the fact that Red Lion is losing money. Although the company has done a lot to boost its fortunes — including the launch of a new website and several moves, adds and changes to its property mix — market forces are working against RLH.
As of this writing, Susan J. Aluise did not hold a position in any of the aforementioned stocks.