Photo courtesy Kimpton Hotels & Restaurants
InterContinental Hotels Group (IHG) has reached an agreement to acquire Kimpton Hotels & Restaurants for $430 million.
The question now is: What does it mean traveling forward?
Plenty of people are curious, from IHG guests and loyalty program members to Kimpton guests, employees and hoteliers.
Perhaps what makes this acquisition particularly interesting is that IHG and Kimpton have strikingly different business models and points of emphasis. Kimpton is an independent boutique hotel operator that manages 62 properties in the United States.
IHG is a major global company with over 4,700 hotels in nearly 100 countries around the world, boasting nearly 674,000 rooms (more than any other hotel company in the world). Kimpton, established in 1981, is one of the pioneers of the boutique hotel concept. IHG-with brands such as Holiday Inn-is one of the pioneers of the traditional brand hotel concept. It's no wonder why there has been such a strong response since the acquisition.
You only need to look at Kimpton's Twitter page to realize how much people care about what will change (or won't change) about Kimpton. Kimpton Twitter page moderators have been answering questions from guests since the acquisition was announced. They have also been assuring guests that Kimpton will not change, and this is simply an opportunity for the brand to grow.
Some, however, appear unconvinced.
Henry Harteveldt, a travel industry analyst and co-founder of Atmosphere Research Group in San Francisco, is a bit skeptical that IHG would pay $430 million for Kimpton and simply leave it alone.
"That's about as credible as an airline executive overseeing a merger saying, 'We're going to leave all our airline hubs intact,'" Harteveldt said. "I fully expect IHG will want to learn from Kimpton. And I certainly expect Kimpton to benefit from IHG business practices and disciplines such as distribution, loyalty marketing and procurement. And I think the IHG development team will be able to certainly help dramatically expand the Kimpton footprint. What I'm really concerned about is: Will IHG force its culture and ways of doing business on Kimpton in ways that could end up being counterproductive?
"The first word in IHG's name is 'Intercontinental' and IHG is truly a global brand," Harteveldt added. "Kimpton is small, it's relatively informal, and it prides itself on being a very uncorporate-like culture, and I hope IHG will be smart enough to realize that with Kimpton they've found themselves a small but strong thoroughbred and that it would be counterproductive for them to dilute what makes this organization so special.
"I commend them for this initiative, but there's also a part of me that's worried: Has my favorite burger joint been taken over by McDonald's?"
[BLURB]"I commend them for this initiative, but there's also a part of me that's worried: Has my favorite burger joint been taken over by McDonald's?"<em>- Henry Harteveldt. Atmosphere Research Group</em>[/BLURB]
Surely, there is concern in that respect among Kimpton loyalists, on Kimpton's Twitter page alone.
It should be said that IHG is not just Holiday Inn, of course (although that is certainly a brand that is prominent for the company). Its luxury InterContinental Hotels & Resorts brand is iconic, as Harteveldt noted. It already has a boutique brand of its own in Hotel Indigo (started in 2004), and it recently introduced the health-and-wellness brand EVEN Hotels.
The addition of Kimpton gives IHG more than 200 open or pipeline boutique and lifestyle hotels across 19 countries. An IHG press release noted, "In particular, there is a significant opportunity to expand the (Kimpton) brand in Europe and Asia where there is strong demand for boutique brands."
One thing's for sure: The fact that such a large company has now invested in two boutique brands is an indicator that boutique hotels aren't going away anytime soon. Boutique hotels have been the fastest growing segment in the U.S. hospitality industry over the past four years, outperforming the overall industry in demand, supply and RevPAR growth. Kimpton in particular has enjoyed much success, achieving 4 percent growth in system size (per annum) and 7.7 percent average growth in comparable same store RevPAR in the last five years. Kimpton's EBITDA is expected to be approximately $20 million by the end of 2014.
"(Boutique hotels) have had an enormous impact on hotel design and food and beverage operations," Harteveldt said. "Hotels were all about conformity and consistency and the uniform look. Boutique hotels revolutionized the industry. Kimpton put boutique brands on the map…The boutique hotel revolution remains very, very strong."
The question is: Can a company with many traditional hotel brands co-exist with a highly specialized boutique brand, as well as the boutique's customer base, owners and employees?
In Harteveldt's opinion, it could be challenging.
"Most branded hotels are like Labradors or Golden Retrievers. They're hardy, they're reliable, they're trustworthy," Harteveldt said. "Boutique brands are more like a poodle. They need attention. They can sometimes be more high maintenance than you may like, but they're cute and they're adorable. Boutique hotel customers love boutique hotels. They see them very much as reflections of who they are, how they live their lives and how they want others to see them."
In that case, perhaps IHG's best strategy is to, well, do nothing.
But try telling anyone who has invested $430 million into something to do nothing with it.
It's going to be interesting to see how the IHG-Kimpton partnership unfolds.
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