InterContinental Hotels Group (IHG) will acquire Kimpton Hotels & Restaurants to become what IHG claims will be the world's largest operator of boutique hotels.
U.K.-based IHG said last week that it will pay $430 million in cash for San Francisco-based Kimpton, which operates 62 hotels and 71 restaurants and generated $995.2 million in revenue last year. The acquisition, which doesn't include the Kimpton real estate entity that owns 16 of the hotels outright, is slated to close by March.
IHG, best known for its InterContinental Hotels luxury brand and its Holiday Inn and Holiday Inn Express midscale badges, is looking to complement its smaller Hotel Indigo brand and its new Even Hotels brand by expanding its presence in the boutique-hotel segment, which the company says is outpacing the rest of the industry.
Revenue per available room (RevPAR)among boutique hotels has grown 9.4% a year during the past five years, compared with an overall annual RevPAR growth of 6.8%, according to STR.
Between Kimpton's individually named hotels and its Hotel Monaco and Hotel Palomar minibrands, IHG will have almost 200 boutique hotels either operating or in the development pipeline. That's about five times the number of the next-largest boutique competitor, Commune Hotels & Resorts.
"It is a great brand with enormous potential for growth both in the U.S. and globally," IHG CEO Richard Solomons said in a Dec. 16 webcast.
Between Kimpton's growth prospects and potential efficiency gains in operations, IHG forecasted that its new division would almost double the company's annual earnings before interest, taxes, depreciation and amortization to $39 million in 2017, from $20 million this year.
With Kimpton's RevPAR of about $180 a night, Solomons said Kimpton fills a pricing void between InterContinental on the upper end and both Hotel Indigo and Crowne Plaza at the more moderately priced level.
Additionally, with Kimpton, IHG gets a company that appears to run counter to many of IHG's standardized brands by stressing individuality as well as a food-and-beverage emphasis.
Founded in 1981 by Bill Kimpton (who died in 2001), the hotelier helped define the boutique sector during its early growth within its native San Francisco Bay Area. It has since broadened geographically to Southern California, the Pacific Northwest and the Washington, D.C., area. The company in more recent years has emphasized growth in the southern U.S., with plans to open properties in Austin and San Antonio next year and in Nashville in 2016.
"Aligning with IHG meant we could continue our vision and expand globally," said Kimpton CEO Mike Depatie, adding that Kimpton would maintain operations out of its San Francisco offices.
IHG, which has more than 4,700 hotels totaling more than 697,000 guestrooms, also delves into the upper-upscale soft-branding arena occupied by Marriott International's Autograph Collection and Hilton Worldwide's Curio. While Kimpton has 10 Hotel Monaco properties and six hotels under the Hotel Palomar badge, none of them carries the company name.
"It's hard to imagine two more different companies," said Mark Eble, regional vice president for consultant PKF Hospitality, who cited Kimpton's higher price point and its presence in many of the most visited U.S. cities. "IHG certainly has an enormously powerful group of licensees, but I don't think anyone would accuse them of being leading-edge in the next generation of hotels. So this could be fantastic for IHG."