WestCoast readies to expand
Hotelier hopes to double lodging establishments, sell headquarters, Crescent Court, other propertiesJune 1st, 2001
After more than doubling its portfolio of hotels last year through a major acquisition, Spokane-based WestCoast Hospitality Corp. now plans to double that chain againto 100 hotelsduring the next five years.
Meanwhile, WestCoasts computerized ticketing and entertainment division has grown rapidly during the last two years, and the company expects it to continue to grow this year.
To facilitate the companys growth and pay down its debt, WestCoasts real estate unit is seeking buyers for $70 million worth of non-core assets, which include the Crescent Court retail and office building in downtown Spokane, WestCoasts headquarters building just north of downtown, and other properties throughout the Northwest. That unit, G&B Real Estate Services, hopes to retain a 15 percent to 20 percent interest in those properties and manage them for their buyer, says David Peterson, G&Bs vice president.
We simply plan to redeploy that equity into several new equities, Peterson says. By taking the equity from just one of those properties, it could allow us to start three new projects. Those projects could include developing new commercial properties, expanding WestCoasts hotel operation, and paying down debt.
The hospitality company, formerly known as Cavanaughs Hospitality Corp., acquired Seattle-based WestCoast Hotels Inc. on Jan. 1, 2000, increasing the number of hotel properties it owns, manages, or franchises to 46 from just 19, and changing its name to WestCoast Hospitality Corp. Through the acquisition, the Spokane company gained about 1,000 employees, giving it about 3,700, including 1,150 here, says Stephen Barbieri, WestCoasts chief communications officer.
That number has declined since then to about 3,500 people companywide, including about 1,100 here, as the newly combined company found economies of scale and responded to a slowing economy, Barbieri says.
Its streamlining efforts helped WestCoast post an improvement in earnings in its most recent quarter, which ended March 31, after several quarters of decreased net income, says Don Barbieri, WestCoasts chairman, president, and CEO. In the most recent period, the publicly traded company reported first-quarter net income of $676,000, or 5 cents a share, compared with a loss of $147,000, or 1 cent a share, in the year-earlier period.
We expect 2001 to be a good year, and 2002 to be an even better year, Barbieri says. We are seeing a very different situation this year. He says the predicted improved results will be made possible by lower interest rates and increased cash flow of between $18 million and $20 million this year.
We have a good foundation for our next continuation of growth, Barbieri says.
In spite of the companys general optimism, Barbieri is concerned about the companys stock price, which he believes is dramatically understated. He says WestCoasts underlying asset value is twice to three times the price at which its stock recently has been trading. WestCoasts shares, which are listed on the New York Stock Exchange, had been trading at above $8 about a year ago, but fell to a low of $4.90 in April. Earlier this month, the companys stock price rose above $6 a sharefor the first time since last Octoberand last week it was at about $6.25 a share.
For the last several months, real estate and hotel stocks werent being favored, Barbieri says. The U.S. marketplace was afraid of overbuilding in the hospitality industry and instead was putting its money into technology. Now, recently, analysts are returning to the hospitality industry as more favorable.
Broadening the brand
As a result of its big acquisition last year, WestCoast Hospitality began providing third-party management services to other hotel owners, and now a majority of its growth is expected to come through managed and franchised properties, rather than through owning its own hotels, says David Bell, executive vice president of development.
Furthermore, Stephen Barbieri says that while WestCoast isnt actively trying to sell the hotels it owns, it would be interested in divesting those properties, and as with its non-core commercial properties, perhaps continuing to own a sliver of them while managing the hotels for their new owners.
The management and franchise arrangements really have allowed us to expand the brand, Bell says. We now are touching a lot more properties.
Prior to its acquisition of WestCoast Hotels, the Spokane company had operated hotels just in Washington, Oregon, Idaho, Montana, and Utah. WestCoast now has hotel properties in nine of the 13 Western states, although it has yet to enter Nevada, Wyoming, Colorado, or New Mexico, says Tom Barbieri, executive vice president of hotel operations. He says that within the next five years, WestCoast expects to manage or have franchised properties in those four states, as well as in additional cities in its current geographic area, including Missoula, Mont.; Tucson, Ariz.; San Jose and San Diego, Calif.; and Honolulu, Hawaii.
Thats the ticket
TicketsWest, which offers customers computerized ticketing for events and shows; oversees three ticketing and room-reservation call centers in Spokane, Portland, and Colorado Springs. It books Broadway shows and sporting events through WestCoast Entertainment, a division of TicketsWest, and expects to target new markets and expand in its existing markets this year.
Jack Lucas, vice president of that subsidiary, credits Don Barbieri with the vision of packaging entertainment tickets with hotel rooms back in 1987, when the city of Spokane advertised a request for proposals for a company to handle ticketing for the citys entertainment facilities.
What was then Cavanaughs responded. Today, TicketsWest operates 200 ticketing outlets and sells about 5 million tickets a year, up from eight outlets and only 200,000 tickets sold in its first year of operation.
Were pretty unique in the hospitality industry, Lucas says. Our ability to couple hotel stays and entertainment into special packages really separates us from our competition.
The company has been able to fine-tune its packaging of hotel rooms and event tickets through customers use of its call centers, which handle up to 125,000 calls a month, and its Web site.
The Web site requires on-going maintenance, but because we built it weve been able to work on it and continually upgrade its features, says David Barbieri, the companys chief information officer. This is the furthest along weve ever been on cross selling.
The computerized ticketing operation has three main locations: Spokane, where it operates at G&B Select-A-Seat; Portland, Ore., where it serves the Seattle-Portland area as Fastixx; and Colorado Springs, Colo., where it operates as TicketsWest. Lucas says that the ticketing operation has enjoyed tremendous growth in each of those locations, but especially in Colorado, where it had operated just 11 ticketing outlets and now operates 96. The growth was accomplished by the signing of a long-term agreement with the King Soopers grocery store chain last December, which gave TicketsWest 85 in-store ticket outlets throughout that state.
In January, TicketsWest also signed a long-term agreement with the Colorado Rockies major league baseball team to sell tickets to its games. TicketsWest also sells tickets to nine ski resorts in the Denver area and recently began selling tickets to the Pikes Peak International Raceway, in Colorado Springs.
Also earlier this year, TicketsWest expanded its reach into California when it signed a service-provider partnership with a company called Valleytix. Through that arrangement, TicketsWest will be able to sell tickets electronically to customers in an area encompassing Bakersfield, Fresno, and San Luis Obispo.
The division also hopes to expand into the Alberta area soon through its G&B Select-a-Seat operation. There are a couple of other projects on the front burner right now, Lucas says, although he declines to elaborate.