THE BOUTIQUE BUYER
Solomons filled the upper-upscale gap in IHG's portfolio with a renowned brand. Solomons' purchase anticipated the industry's move toward boutique style in 2015.
Major hotel companies moved toward boutique brands in 2015, and Intercontinental Hotels Group led the charge, announcing in December 2014 that it would acquire boutique giant Kimpton Hotels & Restaurants Group for $430 million. The deal marked the most significant acquisition of a boutique brand by a major hotelier in recent history and demonstrated CEO Richard Solomons’ insight into what was ahead for the lodging industry.
“There were a number of things that attracted us to Kimpton,” Solomons told BTN. “It’s a unique, well-established and award-winning brand with a leading position in the boutique hotel segment: the fastest growing in our industry. It also has a portfolio of world-class hotels and destination restaurants located in some of the most attractive urban and resort locations.”
The acquisition filled the upper-upscale hole in IHG’s brand portfolio, and Kimpton complements IHG’s other boutique brand, the upscale Hotel Indigo. Prior to its acquisition, Kimpton’s portfolio featured 62 hotels—most in key U.S. markets like Chicago, New York City, Boston, San Francisco and Washington, D.C.—and 16 more under development, as well as a robust loyalty program, Kimpton Karma, comprised of 1.6 million members.
Though no other company has been able to match the boutique acquisition, hoteliers like Best Western Hotels & Resorts and Starwood Hotels & Resorts rode the boutique wave in 2015, introducing boutique-style or soft brands, like Vib and Tribute, respectively. IHG’s buy also initiated the industry’s most recent round of M&A activity, which had been subdued aside from Marriott’s acquisition of South Africa-based Protea Hotels in April 2014. “We’ve admired Kimpton for a long time, and the decision to acquire the brand was very much in line with our strategy to invest in high quality, asset-light growth,” Solomons said.
The deal closed in January 2015, and IHG had opened five Kimpton hotels and signed six more by the third quarter, putting its pipeline at 16 properties. The brand did face a setback in July when seven of its nine hotels in San Francisco exited the portfolio. Solomons told investors the losses were the result of an isolated labor issue in the market. The CEO still expects results for 2015 to make it the best year for openings and signings in the brand’s history.