Hotel real estate owner Service Properties Trust has
threatened to sever ties with InterContinental Hotels Group at the end of November,
citing IHG’s failure to pay approximately $8.4 million in guaranteed returns
Service Properties Trust currently has 103 IHG agreements for
hotels with the InterContinental, Kimpton, Crowne Plaza, Holiday Inn, Staybridge
Suites and Candlewood Suites brands across the U.S., Ontario and Puerto
In a notice sent to IHG on July 23, Service Properties Trust
said that the hotel group must pay the $8.4 million sum, plus interest, by Aug.
24 in order to avoid termination of all operating agreements on Nov. 30.
According to Service Properties Trust, another $17.4 million
in guaranteed returns will come due Aug. 1. If this amount also goes unpaid,
IHG will owe Service Properties Trust $25.8 million plus interest.
Service Properties Trust added that a $100 million security
deposit from IHG has already been exhausted.
“We hope IHG cures this default so that we can move forward
without a termination and rebranding,” said John Murray, Service Properties
Trust’s president and CEO. “However, it is important that we enforce our
agreements and seek to protect our bargained-for cash flows so that we can pay
operating costs and other obligations without interruption.”
In the event of a termination, Service Properties Trust
plans to reflag its IHG properties under Sonesta International Hotels Corp.’s
Royal Sonesta, Sonesta and Sonesta ES Suites brands. Service Properties owns a
34% share in Sonesta.
“While all of our hotels have been significantly negatively
affected by the Covid-19 pandemic, year to date and for the second quarter of
2020 comparable hotel RevPAR performance at existing Sonesta-managed hotels
has been among the least negatively impacted of Service Properties Trust’s
hotel portfolios,” added Murray. “If these hotels are all rebranded with
Sonesta, we also expect that some of the transitioned hotels may be repurposed
to an alternative use or sold in the future.”
A spokesperson from IHG confirmed that the company had
received Service Properties Trusts’ notice but declined further comment.