Now that InterContinental Hotels Group has completed its $430 million acquisition of Kimpton Hotels & Restaurants, industry members and brand loyalists are eager to see how the integration will play out. Naturally, the blockbuster deal was front and center when we spoke with IHG’s CEO Richard Solomons at the Americas Lodging Investment Summit last week in Los Angeles. In addition to the company’s plans for the popular boutique chain, Solomons discussed the growth of the InterContinental and Even brands in the United States, and why trust capital is the new business imperative.
What led to IHG’s purchase of Kimpton? We’ve been in the boutique space a long time with Indigo at a certain price point, and we want to have more in upscale North America, in the fastest growing sector. When Kimpton became available, it was quite a limited auction, in the sense that they spoke to people who they felt culturally would fit. We had our eye on it, and I’ve known Mike Depatie for a little while, so it was nice when he asked us to have a look. And we recognized that creating the biggest branded boutique business—not necessarily to the consumer but in terms of what we can deliver—was a good place to be.
That’s where the market is, and that’s where a lot of owners want to be. Clearly for IHG, we can take something from Kimpton. They run great restaurants, which no other hotel really does consistently. Kimpton also has great design and operational expertise, and they know how to deliver that product through people, because their hotels are eclectic and different. We can add a lot of value through things like technology, buying power, and bringing overseas visitors into the U.S., and then we can take the brand overseas, so there’s a lot we can do together.
Is it tricky having Kimpton based in San Francisco with the rest of IHG’s U.S. operations in Atlanta? No, it’s fantastic. Part of the reason is because Bill Kimpton created the company in San Francisco, and it operated only in San Francisco for quite a long time until he was persuaded to go up to Portland. [New Kimpton CEO] Mike DeFrino has stepped up and the key team has committed to us, and so we’ve got the same people running Kimpton in that creative environment. Over time, Mike will be working with [IHG Chief Commercial Officer for the Americas] Oliver Bonke to figure out how best to integrate things. I think it’s essential to recognize what drives the brand and the business, and right now keeping Kimpton doing what it’s doing is important.
How hard is it to integrate a brand like Kimpton, given the way it’s been built and run up until now? You have to be very sensitive to it, which has been the case with any business we’ve bought. Candlewood is a great example. We acquired that brand in 2003, and last year it won the J.D. Power [extended stay customer satisfaction] award even though it’s a mid-market brand. We grew it from 100 properties to 319 currently with 84 more in the pipeline, and we’ve really strengthened Candlewood’s culture. Our whole ethos with people is about providing room to be yourself. And you have to be sensitive to what you’re acquiring—it’s not a business, it’s people.
So for us, Kimpton is a perfect fit. There aren’t that many brands that really work with our philosophy of branding, with the quality of what we want to try and do. And it’s quite energizing for the business to go and actually buy something like Kimpton, which is such a famous name, and partner with a company that’s done a great job.
How will you take Kimpton overseas? Clearly Kimpton wasn’t able to grow overseas outside America—the company didn’t have the scale, the capability, the financial muscle, or the relationships. While all this is obvious, resolving it isn’t so easy because that involves figuring out how to deliver the same experience to a global market and tailoring the brand so it’s relevant. We know there’s a huge market for it. Indigo has been very successful outside the U.S., and we’ll do this with Kimpton. It’s a great opportunity.
Two new InterContinental Hotel projects were announced for D.C. and L.A. What’s the growth strategy for the brand in the U.S.? Given how little development there is in the luxury end of the market, these are exciting. We have a slight uphill battle with InterContinental because, as a brand, it was developed to be outside America. It’s the largest luxury brand in the world and very successful in Asia, the Middle East, and Europe. In the U.S., we’re putting a lot of effort into growing this brand, such as the $175 million we put into the InterCon Barclay in New York. It’s currently closed for refurbishment and will be a fantastic property when it comes back. Still, it’s hard to grow a luxury brand in North America, with very little new build. The fact that we have two of the new builds out there says quite a lot about the strength of the brand and what it delivers to owners and customers.
Is it difficult launching into D.C. because it isn’t quite performing as well as the other markets? Yes, but I think it’s very dangerous looking at the segregated data. It’s all you can look at, but the InterCon Willard has been there—it’s one of the oldest, most established hotels. It’s an iconic hotel that performs very well and this new InterContinental has the same owners. Clearly, if they weren’t getting good results, they wouldn’t be building another hotel. Still, you get winners and losers in all markets, and these owners are making long-term calls. The capital city of the U.S. is always going to be a good place to be if you have the right product in the right location.
Why has it taken so long for Even Hotels to ramp up? It’s deliberate. It’s such a new concept—very well founded—and while you never get the first one 100 percent right, we got it 95 percent there. The first two are new hotels in different markets—Connecticut and Maryland—and both reached number one on TripAdvisor within months of opening. That shows they’re really well targeted. So we’re making sure we get it right with the next ones coming to Manhattan and Brooklyn.
Can you talk about IHG’s recently released trends report? It’s really about how, as a brand, you want to create true loyalty. Anybody can do a discount and get repeat business, but you want to create the kind of trust that’s really a multiplier. We all know what a brand is—a promise delivered consistently.
We have fewer brands than other companies. I think there’s a limit to how many brands you can have and still deliver, truly. You can just hang names on buildings but fundamentally, are you giving the consumers something they understand? That comes through defining the brand well and training people—that’s what we’re absolutely all about. The second level of trust is defining who you are and what you stand for. One of the strengths that we have is that our business was founded on true hospitality. Kemmons Wilson created a brand in Holiday Inn that is about delivering hospitality. One trip from Pan Am created InterContinental, and we’ve created new brands since. There’s a real core in the business, which is one of the reasons why the connection with Kimpton is so strong.
And there are a lot of businesses out there, particularly so many new intermediaries. I’m hearing from all of them. Whether it’s a hotel intermediary, or an Uber, or anything else trying to create a monopoly position and charging high fees—they’re about making money. We want to make money too, but with IHG, our strength is embodied in a core of delivering true hospitality. You can trust us because we’re about giving you a great experience. With intermediaries and aggregators, their objective is something different. The way we see it, the more there’s channel proliferation, the more important brands like ours become.