The motel chain Red Roof Inn hit the roof this week with a thud, defaulting on over $350 million of mortgage payments. The chain, purchased by Citigroup Inc.'s (NYSE:C) Global Special Situations Unit and Westmont Hospitality Group from Accor SA two years ago for $1.3 billion, has suffered a drop in overnights of over 10% since the acquisition.
Red Roof Inn was started in 1972 by Jim Trueman. (Trueman is better remembered as the car racing fan, who provided the opportunity for star driver, Bobby Rahal, to start his career.) The company was based in Columbus, OH until its sale to Accor, and returned there after its most recent sale. The chain has grown to 345 locations, in 36 states. 133 of these Inns are owned by franchisees. 131 of the company-owned Inns were put up as collateral for the four mortgages the chain received. Total debt, according to the Wall Street Journal (subscription required), approaches $1.2 billion.
A spokesman from Red Roof Inn told the Journal that the company is attempting to restructure its debt, and will remain in operation. Nonetheless, I suspect some franchisees are already shopping for a new color for the roofs of their properties.
About a third of Red Roof Inn's mortgage debt was secruitized, as is common in the hotel business . The WSJ cites information from Trepp LLC showing that the default on such bonds has grown from less than 1% a year ago to 5% this month.
European hotel giant Accor sold Red Roof Inn to focus its energy on growing its more successful Motel 6 chain. Accor operates almost 500,000 hotel rooms in 90 countries.
In the struggling hotel/motel industry, expect more highly leveraged chains to bite the dust if travel doesn't pick up sharply this summer.











Reader Comments (Page 1 of 1)
6-25-2009 @ 7:41AM
Jerry said...
I agree with the writer that says we will see more leveraged chains in the near future. Another thing we can see is high discounts - Accor Hotels are offering now a sale in Asia Pacific in 60% off starting rates (about USD 25). You can see more info at http://pea.to/amp12
6-26-2009 @ 6:52AM
Yehuda Hamer said...
Here comes another bailout
6-26-2009 @ 8:49AM
deewhitd said...
Just freaking great. I have pre-paid reservations in Downers Grove, IL for the end of July. I hope I don't get ripped off.
6-26-2009 @ 8:50AM
Ger said...
What a dumb headline. It should have said "Bank Hits the Roof Over Hotel's Debt." Or else "Red Roof Hits the Floor." To "hit the roof" means to be angry.
6-26-2009 @ 9:44AM
Rick said...
Can't say I surprised. We stayed at a Red Roof Inn in Fairfield County, Connecticut and it was absolutely discusting. Our "non Smoking" room reaked of smoke and the stink from having been sprayed with something to try and hide it. The floors were so grose that my wife wouldn't take her shoes off until she was safely on the bed. The place was horrible! We would NEVER stay at a Red Roof Inn again.
6-26-2009 @ 9:48AM
Gary said...
Red Roof Inn is one of the dirtiest hotel chains in America. Good for truckers overnight, but tourists, forget it. The one I stayed in was filthy, dirt embedded in carpets, mildew in shower, and smelled like a cross between cigarettes and crap. Good riddance....
6-26-2009 @ 10:20AM
hmsboston said...
The only time I tried to make a reservation at a Red Roof Inn (in the 1980s), the phone rang for five minutes before I put down the receiver. This happened on a weekday at a time the motel should have been fully staffed. Never again did I ever consider staying at that chain. I'm not surprised that they are going belly-up, only that it has taken this long.
6-26-2009 @ 12:05PM
Bonzersmom said...
I agree with the poster who said that they were filthy places to stay. We had booked one for 3 nights in San Antonio. After the first night I went to management and said, scrub the carpets, clean the crud off the tiles in the bathroom or we are checking out". They made half an attempt to clean the place but it was only marginally acceptable. CLUE - when you wear flip flops in the shower because you are concerned about foot rot.
I would NEVER stay in one again. If it comes to a Red Roof Inn and staying in my car - then I'm sleeping in the car.
6-26-2009 @ 12:19PM
HOWARD said...
MIGHT I SUGGEST THAT RED ROOF,MOTEL -6 AND A HOAST OF OTHER MOTEL/HOTEL LOCATIONS DO THE FOLLOWING:
1. BRING THE PRICES DOWN TO SOMETHING MORE REASONABLE, WHO NEEDS TO PAY $50. TO $75 FOR A COUPLE OF HOURS SLEEP?
2. CLEAN UP THE JOINT ! (TAKE A LOOK AT THE FORT WAYNE INDIANA MOTEL-6 ,FOR EXAMPLE )
3. HIRE PEOPLE WHO HAVE AT LEAST A WORKING COMMAND OF THE ENGLISH LANGUAGE .
4. LISTEN TO THE REQUESTS OF THIER GUESTS, i.e WHEN I ASK FOR A NON-SMOKING ROOM ON THE FIRST FLOOR, I DON'T MEAN A SMOKING ROOM ON THE 4th.FLOOR, LIKE THE ONE I HAD IN SEYMOUR, INDIANA,(MOTEL-6 #4153) WHERE INCIDENTILY, THE FEMALE CLERK WAS MORE INTERESTED IN HER MALE FRIEND AND A COUPLE OF SNOT NOSED KIDS THAT WERE RUNNING AROUND THE LOBBY ,THAN ANYTHING I HAD TO SAY.
6-26-2009 @ 12:30PM
barry cobb said...
red roof in is the worst motel we ever booked. stay out of the one on beach blvd near knotts berry farm, anaheim calif.
my family got eaten alive by bed bugs. ruined our vacation.
filthiest place we ever stayed. not fit for a truck stop. should turn in a red light and charge by the hour.
staff were very inconsiderate and just didnt give a damn.
6-26-2009 @ 12:56PM
belaireg said...
We have a New Red Roodf Inn going up in Beaumont Texas.....it's not even finished yet~
6-26-2009 @ 1:06PM
Di said...
Red Roof Inn in trouble doesn't surprise me. The one and only time we stayed at a Red Roof the room smelled like pesticides and we were denied extra towels. I might add we had four adult women sharing a room for an overnight shopping spree and we needed the extra towels for our hair. We have never stayed at once since nor do we ever plan to again.
7-13-2009 @ 11:51PM
n7774m said...
Hurray, I lost the battle but won the war. I've boycotted them for 10+ years. A travel agent made a reservation at the wrong Red Roof Inn, and therefore, I had to pay two different Red Roof Inns for the same night. Lack of customer service also did them in.
6-26-2009 @ 6:28PM
nick said...
First off all you complaining about red rood and motel 6
you want the cheapest but want a 3 or 4 or 5 star service do not take a vacation if you can not afford one
times are tough for the hotels people are not spending monies and the owners are down sizing i have never stayed in any of these places neither do i own any of these motels. Try renting a condo or a vacation rental next time.
6-26-2009 @ 7:36PM
imflyinthebird said...
They probably had bed bugs anyway!
6-26-2009 @ 10:27PM
Penny S said...
Nick, There is no EXCUSE for filthy or dirty or smelly...I don't care if you pay $10.00/night or $1000.00/night, no one should have be in a dirty room....there are some Motel chains I will not stay in because of the poor housekeeping and these were not cheapie rooms. I have already asked to see the room 1st, some say ok others, no...
6-30-2009 @ 4:47AM
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