WestCoast Hospitality Corporation

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WestCoast Hospitality Corporation

201 W. North River Drive, Suite 100
Spokane, Washington 99201-2293
U.S.A.
Telephone: (509) 459-6200
Fax: (509) 325-7324
Web site: http://www.westcoasthotels.com

Public Company
Incorporated: 1997 as Cavanaughs Hospitality Corporation
Employees: 4,400
Sales: $194.2 million (2002)
Stock Exchanges: New York
Ticker Symbol: WEH
NAIC: 721110 Hotels (Except Casino Hotels) and Motels

WestCoast Hospitality Corporation is a public company located in Spokane, Washington, primarily devoted to the hotel business. The company has an ownership interest, manages, or franchises some 90 hotels under the "WestCoast" or "Red Lion" brand names, located in 16 states: Alaska, Arizona, California, Colorado, Hawaii, Idaho, Minnesota, Missouri, Montana, Nebraska, Nevada, Oregon, Texas, Utah, Washington, and Wyoming. WestCoast also owns TicketsWest, a computerized ticketing operation serving nine states and British Columbia through ticketing outlets, toll-free telephone numbers, and via the Internet. In addition, TicketsWest arranges for the presentation of touring Broadway shows and other entertainment event productions, primarily as a way to provide synergy with the company's hotels. Finally, WestCoast maintains a real estate division, which formed the basis for this family-run business. Donald Barbieri serves as chairman, while brothers Richard and Thomas, and their brother-in-law David M. Bell, also work for the company that for many years was headed by their father, Lou Barbieri.

Roots of Company Date to 1937

The son of Italian immigrant homesteaders, Lou Barbieri was born in DeSmet, Idaho, in 1915. Despite their limited resources, his parents were able to send him to Gonzaga University in Spokane where he received a business degree in 1937 and a law degree in 1940. Deciding to stay in Spokane, Barbieri accepted a position with a local bank, Washington Trust Bank, working for its property management division, which had been founded in 1937 and run by a man named Frank Goodale, who served as a mentor to Barbieri. In 1944 Goodale bought the business and Barbieri stayed on. In 1955 he became Goodale's partner and the business became known as Goodale & Barbieri Companies. Although he bought out Goodale in 1959, Barbieri retained the company name. Primarily a manager of apartment properties, Goodale & Barbieri was just a six-person operation when Barbieri gained sole ownership.

In 1969, upon graduation from college, Donald Barbieri went to work for his father at Goodale & Barbieri. It was during his college days that Donald Barbieri became committed to the development of quality low-income and senior housing, a passion that his father shared, so that despite the limited profits involved, affordable housing became a focus of the family company. It took advantage of newly passed federal housing legislation and worked with nonprofit sponsors including the Episcopal Diocese and Catholic Charities. Civic-minded, the elder Barbieri also helped to bring the World's Fair to Spokane in 1974, an event that also marked the entry of Goodale & Barbieri into the hotel business.

Hotel Business Dates to 1975

To provide lodging for the exposition, Goodale & Barbieri built the downtown Spokane Sheraton, a move that spurred the company to become further involved in the hospitality business. In 1975 the company joined forces with Burlington Northern Land Development to build the Cavanaughs River Inn in Spokane, utilizing an old railroad coal yard that had once served the Burlington Northern Railroad. Don Barbieri was instrumental in the diversification of Goodale & Barbieri, and in 1978 he became chief executive officer, succeeding his father, who retained the chairmanship. Other family members also became involved in the business. Thomas M. Barbieri started out in 1979 serving as the general manager of Cavanaughs River Inn. Richard L. Barbieri, an attorney, became a director of the company in 1978, and from that year until 1995 served as outside counsel and secretary of the company, while practicing law for two area firms. He became general counsel for Goodale & Barbieri and a senior vice-president of the company in 1997. In addition, brother-in-law David M. Bell, a trained engineer, joined the company in 1984 and became a vice-president involved in a number of development projects.

Goodale & Barbieri added another hotel in 1978, the 245-room Cavanaughs at Columbia Center in Kennewick, Washington. In 1980 the company took the next step in its move into the hospitality industry by establishing its proprietary Cavanaughs brand name. During the 1980s two more hotels were added to the portfolio: in 1983 the 402-room Cavanaughs Inn at the Park in Spokane; and in 1986 the 132-room Cavanaughs at Kalispell Center, located in Kalispell, Montana. Also in the 1980s the company built Cavanaughs Motor Inn in Moscow, Idaho. In the meantime, Goodale & Barbieri continued its property management business as well as a commitment to low-income and senior housing. In 1988, however, the company built a slightly different kind of senior project, the 105-unit Rockwood Lane Retirement Community, which catered to middle- and upperincome retirees.

Also during the 1980s Goodale & Barbieri became involved in the computerized event ticketing business. The motivation behind this move was a decision by a touring Broadway production of Cats to bypass Spokane because the city had a population of only 175,000. City officials asked Goodale & Barbieri if it could help and the company arranged with the New York producers to underwrite the show's appearance in Spokane. Goodale & Barbieri then created a Broadway series around that anchor event. To sell tickets for the series, the company in 1987 created G&B Select-A-Seat, and was awarded the event ticketing contract from the city of Spokane, which was looking for an alternative to Ticketmaster. While ensuring that Spokane would not be left out of major entertainment events and offering an alternative to Ticketmaster, Goodale & Barbieri also saw event underwriting and ticketing as a potential benefit to the company's hotel business, because entertainment packages could be marketed in connection with its Cavanaughs hotels.

In the 1990s Goodale & Barbieri enjoyed a period of exceptional growth. In the hotel business, the company added two properties in 1991: Cavanaughs Fourth Avenue, a 153-unit Spokane hotel, and the Yakima Towne Plaza, a 155-unit hotel in Yakima, Washington, which was subsequently renamed Cavanaughs at Yakima Center. While two properties were added to the Cavanaughs chain in 1991, one was sold off. The Moscow Motor Inn became expendable when its market became saturated with lodging. The University of Idaho acquired the property and converted it into student housing. Through the Yakima purchase, Goodale & Barbieri also became involved in the catering business. In early 1992 the company formed a contract foodservices division, which management considered to be a natural out-growth of its expanding hospitality business. It also delved into some side areas. Goodale & Barbieri acquired a historic dairy, Broadview Diary, located in downtown Spokane, around which it created a food processing division. In the mid-1990s the company launched a retail division and acquired a 50 percent interest in Moose Lake Co., a northwestern outdoor experience store, with outlets in Spokane and Kalispell.

The mid-1990s marked a turning point for Goodale & Barbieri. Don Barbieri added the chairmanship to his role as CEO and set an aggressive goal to double the size of the business within ten years, primarily by moving into Seattle and other markets situated along the Interstate 5 corridor. The first step in this plan was achieved in May 1996 when Goodale & Barbieri opened its first Seattle hotel, Cavanaughs on Fifth Avenue, a conversion of a former U.S. Bank building. Only two floors of the 300-unit hotel were opened at first, but by the fall of 1996 all 16 floors were converted and available to be booked. The property was centrally located, close to Seattle's theater community and trendy restaurants. Although the renovation did not save money over new construction, it allowed Goodale & Barbieri to open a facility in less than a year, as opposed to five years if it had been required to go through the normal permit and construction process. Moreover, by utilizing an existing structure, the hotel was exempt from height-control limitations placed on the neighborhood. While new buildings were limited to 85 feet, Cavanaughs on Fifth Avenue stood 250 feet high, able to offer panoramic views of Puget Sound. In addition, because Goodale & Barbieri was able to make use of an empty building, the project was a welcome addition to local efforts to revitalize the neighborhood.

In July 1997 Goodale & Barbieri marked another, and sadder, milestone when at the age of 82 Lou Barbieri died after undergoing kidney dialysis treatment at a Spokane hospital. He left a wife, seven children, and scores of grandchildren and great-grandchildren. His son, Don, told the press, "He always taught us to follow our own passion. It was a good lesson. Every day is a gift. Live it to the fullest. At age 82 he was doing that."

Company Perspectives:

WestCoast Hospitality Corporation provides a commitment of care, comfort & value and takes a leadership position in our communities, which will promote repeat business, profitability and future company growth.

Goodale & Barbieri added another Yakima hotel in 1997, the 172-unit Cavanaughs Gateway Hotel. The company also bolstered its management business by taking over the property management portfolio of R.W. Robideaux and Co., a Spokane competitor, consisting of some office, medical, retail, shopping center, and residential properties in eastern Washington and northern Idaho. But the major focus going forward was clearly on the hotel division. The Barbieri family believed that the Northwest had developed into a strong economic region and that the time had come for a major hotel brand to emerge from the area, and they were determined to make Cavanaughs that brand. In the early weeks of 1998, Goodale & Barbieri added five hotels to its portfolio, including the 167-unit Templins Resorts in Post Falls, Idaho; the 142-unit West Bank Holiday Inn in Idaho Falls, Idaho; the 342-unit Ridpath Hotel in Spokane; the 220-unit Best Western Outlaw Inn in Kalispell, Montana; and the 123-unit Hallmark Inn in Hillsboro, Oregon. Some of these acquisitions were contingent upon Goodale & Barbieri's success in completing a public offering of stock, the proceeds of which the company hoped to use to pay down debt and fuel even further expansion.

Going Public in 1998

In preparation for going public, the company had already changed its name to Cavanaughs Hospitality Corporation in October 1997. Following a month-long road show, the initial public offering (IPO) was completed in April 1998, raising $89 million. A month later Cavanaughs added another hotel to the fold, paying $31.6 million for the 393-unit Olympus Hotel and Conference Center in Salt Lake City, Utah. In August 1998 the company continued its acquisition spree, buying four hotels from Sunston Hotel Investors, Inc. for $30.3 million: the 238-unit Boise Park Suite Hotel in Boise, Idaho; the 112-unit Canyon Springs Park Hotel in Twins Falls, Idaho; the 152-unit Pocatello Park Hotel and Convention Center in Pocatello, Idaho; and the 149-unit Colonial Inn in Helena, Montana. At the close of the year, Cavanaughs made one more purchase, picking up the 177-unit Olympia Holiday Inn in Olympia, Washington. With the completion of this deal, the Cavanaughs chain consisted of 19 hotels and 3,933 rooms, as well as 47 restaurants and lounges and 196,900 square feet of meeting space.

Along with the growth of its hotel portfolio, Cavanaughs bolstered its entertainment business. The company's New Millennium Series, which had offered 27 performances of Broadway shows in 1998, grew to 70 performances in 1999. Cavanaughs also decided in 1999 to merge its entertainment division with its computerized event ticketing service, creating a new operating division called TicketsWest.com, which had the capability to allow patrons to purchase travel services (both airline and car rental), lodging, and entertainment tickets through a single source. Cavanaughs quickly moved to bolster the unit by acquiring Portland-based Oregon Ticket Company, operating under the Fastixx name in 93 outlets located in a territory that stretched from California to Canada. Many of the outlets were housed in supermarkets owned by The Kroger Company, the largest grocery retailer in the United States. TicketWest.com struck a subsequent arrangement with a subsidiary of Kroger to establish outlets in Colorado supermarkets to sell ski lift tickets.

The most important development for Cavanaughs in 1999, however, came late in the year when it acquired Seattle-based WestCoast Hotels, a larger rival in the region. The total purchase of $45.5 million included $21.4 million in cash and the assumption of $17.2 million in debt and other liabilities. WestCoast had a deep history, established in 1910 as Vance Hotels. In 1987 Vance became WestCoast Hotels and began a rapid expansion, primarily achieved through franchising and management agreements. The WestCoast acquisition added 46 hotels to Cavanaughs' portfolio, but, more important, gave the company a presence in first tier cities along the Interstate 5 corridor. Management believed that the WestCoast brand was more descriptive of the chain than Cavanaughs—a name that Goodale & Barbieri had difficulty selling to Wall Street during its IPO. The company quickly moved to rebrand existing Cavanaughs hotels, and then in February 2000 renamed the corporation WestCoast Hospitality Corporation.

To further the company's growth, management sought more management and franchising arrangements, with the goal of expanding the WestCoast chain to 100 hotels in the next five years. To help fund this plan the company in 2001 sought to divest some $70 million in noncore assets. It also expanded on a franchising and branding effort initiated two years earlier, now looking to establish as many full-service hotel franchise operations as possible in a territory that ranged from the Mississippi River to the Pacific Ocean. This effort was greatly enhanced by the $52 million cash and stock purchase of the Red Lion hotel chain, adding 41 properties. The Red Lion brand was established in the 1960s and peaked at 59 hotels in 1996 when it was acquired by Doubletree. Over the next several years, the chain shed hotels as ownership changed hands to Promus Hotel Corp., and then Hilton Hotels Corp. Because the Red Lion name was well established in certain markets, WestCoast decided to rebrand a number of hotels under the Red Lion name. The brand also proved helpful in WestCoast's franchising efforts.

As was the case with the lodging industry in general, WestCoast suffered a downturn in business due to a slowing economy and the adverse impact the terrorist attacks of September 11, 2001, had on travel. Nevertheless, WestCoast fared better than most of its competitors and was very much a company on the rise. It would carry on, however, with a new chief executive officer. In April 2003 Don Barbieri stepped down, turning over the CEO position to longtime Chief Financial Officer Art Coffey. Barbieri remained as chairman. While there was a belief expressed in some quarters that what WestCoast needed to take it to the next level was an experienced outsider with a reputation, other observers hailed the choice, believing that Coffey was up to the task of growing WestCoast despite poor economic conditions.

Key Dates:

1937:: The company is launched as the property management division of a bank.
1944:: Frank Goodale buys the business.
1955:: Lou Barbieri becomes a partner of the company.
1959:: Barbieri buys out Goodale.
1975:: The company builds its first hotel.
1997:: The company goes public.
1999:: WestCoast Hotels is acquired.
2001:: The Red Lion hotel chain is acquired.