IHG Buys Kimpton Hotels For $430 Million

Hi Ben,

What IHG status do you think Kimpton Inner Circle (highest tier) will be matched to? I ask because IHG/Platinum is definitely inferior and I'm hoping they'll extend IHG/Ambassador status as a goodwill gesture to Inner Circle members.

@ Shanghai9 -- I would guess just IHG Platinum, though I'm guessing it'll be a while before anything happens, one way or another.

I wonder if this will be as disastrous as when Marriott bought Ritz Carlton?

As an Inner Circle member, I am not excited about the potential merger into the IHG loyalty program. After perusing the Facebook page of Kimpton, it is nearly universal disappoint in the upcoming merger. We'll just have to wait and how much they gut Kimpton's program.

Very interesting indeed! A couple of observations/questions -

1). This may be a case of the best defense is a good offense. About 9 months ago a rumor was floating around Wall Street that SPG had made an acquisition offer for IHG that was rejected by IHG as inadequate. As is the norm in the things, neither party was willing to confirm or deny the rumors. If, in fact, SPG had made a run at IHG, this acquisition by IHG may be an attempt by IHG to make itself immune to a hostile tender by SPG.
2). I think Kimpton loyalty members are the likely long term losers in this acquisition. As Ben noted, the IHG Rewards is a mediocre loyalty program compared to Kimpton's for Inner Circle members. They can only hope that IHG maintains the Inner Circle as a full-fledged stand-alone program - which is highly doubtful long-term.
3). Does this create synergies or head-winds for IHG's Intercontinental brand? At first blush, I think it create synergies by expanding IHG's high-end foot print. But long-term I'm wondering about brand confusion/dilution. Ben, you're the marketing guy - your thoughts?

@ KahunnaTravel -- That's a great question. I wouldn't go so far as to say that Kimpton/InterContinental create synergies, though I do have two general thoughts in that area:
-- InterContinental lacks an identity. Their hotels range from really nice to shabby chic to just plain drab. Are they competing with St. Regis? Park Hyatt? Sheraton? Westin? Especially in this day and age where each major chain has more brands, InterContinental needs to do something to explain their vision.
-- IHG desperately needs more full service properties, so this is a great addition for the portfolio. There's a huge gap between InterContinental and the next chain in the portfolio, so I think this fills a niche. If only there were more Kimpton properties.

So at the end of the day I'm not sure there are really synergies between Kimpton and InterContinental, though it certainly at least gives them a fighting chance in some markets against what the competition offers.

Ben, have you ever once asked yourself why you feel compelled to sugarcoat consolidation? Whenever there's a merger or acquisition in play you seem to run out in front of it trying to soften the blow and sell your readers on some random potential benefit. History shows us that consolidation sharply reduces options and benefits while raising rates, fees, and penalties with very little in the way of consumer benefits. History also shows us that you'll no matter how bad it looks you'll always be there to spin every negative development into a wash.

Dax, have you ever once asked yourself why you feel compelled to continue reading a blog that angers you so much?

LOL@Neil. I agree. It's a really big Internet, if you don't like what you read here.......

Neil, it isn't necessarily anger just because he doesn't agree. Dax often raises good points that nobody else does.

I agree that consolidation is generally a bad thing for the consumer, and not because of anything to do with capacity like an airline. And I agree that Lucky often paints a positive picture on negative corporate maneuvering. Maybe that's just his personality to put the best light on things, but sometimes it comes across as apologist.

@ Dax -- Let's talk about the airline industry first. I don't think I've *ever* sugarcoated airline industry consolidation. It sucks,and it's not good for consumers. It leads to a reduction in capacity and that's bad. Period.

That being said, I've certainly criticized and complimented the way it has been carried out. Once a merger happens, there's a good and bad way to execute it. So I'm sorry if me complimenting the execution was perceived as me sugarcoating consolidation. But in my life in general I try to avoid thinking too much about things that are outside of my control. So rather than writing "damn you, industry, for consolidating," I like to look at the way it's being consolidated. Since the former is a done deal.

On the hotel front, how am I sugarcoating the situation? I'm saying it likely sucks for people that are loyal to Kimpton, but for people like me it's good news. Because I like Kimpton properties but don't presently stay at them because they don't have enough properties. I'll stay at more of them once they're taken over.

Is that not a valid point from my perspective?

Well, this is certainly interesting. I think I'd disagree on any related synergies between Kimpton and IHG. I was a Kimpton loyalist for many years until my travel patterns had me going to more cities where there weren't Kimpton properties. Like you, Lucky, I LOVE Kimpton and everything the brand offers, as well as stands for. All Hotel chains would do well to look closely at how they operate.

I think IHG needs Kimpton more than the other way around. Because Kimpton loyalists love the brand so much, I see them flocking away from IHG unless IHG really does something to incent them to stay.

For many reasons, I've not given any business to IHG. I rarely stay at any of their properties and don't feel great about their loyalty program. I know it's all perception, but I detest their branding, logo, color scheme, etc - it screams bad 70's California sunset logos and there is nothing fresh, new or exciting about the brand. Doubt any Kimpton loyalists will either.

Just my two cents, but this doesn't excite me in the least unless IHG decides to rebuild their imaging, brand (well, just about everything) around what Kimpton did, the likelihood of which might be zero.

For those of you that might have an interest, here is a news article on IHG's acquisition - http://skift.com/2014/12/15/intercontinental-hotel-group-buys-kimpton-hotels-for-430-million/?utm_source=Skift&utm_campaign=be95df2828-UA-28362693-1&utm_medium=email&utm_term=0_fe7fb4248c-be95df2828-63967681

I remember reading the email from the IHG Americas President detailing acquisition news 12 hours prior to the news going public worldwide.

From the pespective of a hotel enthusiast, it is indeed a silver lining. Loss of personal identity and nifty rewards programs. However, the Kimpton brand will continue to grow far faster under a enormous hotel chain. I wish the very best for the Kimpton brand and hope it continues to survive.

From the perspective of an owner of 3 IHG hotels, the acquisition fulfills IHG's wish to acquire a luxurious boutique hotel into its family. What in the IHG brand compares to Starwood's W hotel or Westin, Marriott's lifestyle collections of brands, or Hilton's newly-created Curio brand? The answer is Kimpton. However, I do not like IHG at all. There is no support, structure, and professionalism for owners seeking to expand and build hotels from an ownership perspective. I hate the design, feel, atmosphere. The other chains are 10 steps ahead of IHG in terms of R&D and these major chain's R&D centers. Hopefully, Kimpton will bring personalized service, high ADR, and will further help to build IHG's growth, reputation, and image. I will be looking to invest and build a Kimpton IF other chains do not provide me a good franchise agreement and as a last resort.

In regards to a few above comments, IHG does have an ambassador program. Keep in mind, this ambassador is exclusive for Intercontinental Hotels, only, and doesn't apply to any other brand in the chain. IHG has attempted to institute a guest "ambassador" at Holiday Inn chain, but it is not strongly enforce and results have been weak at best.

In my opinion, IHG acquiring Kimpton was not because of Starwoods putting a bid to buy-out IHG. It was the need to better compete with Marriott, Hilton, and Starwood with a more upscale lifestyle brand (versus low quality Indigo brand).

The Kimpton program and IHG loyalty program should merge completely between .75 year - 1.25 year, if I remember correctly.

Lastly, it is of my opinion that IHG will need to radically change themselves and the company in order to stay competitive with the industry. Yes, the chain may have more hotels located world-wide, but it is getting very old and staying in the past.