Ouch: 103 IHG Hotels To Be Rebranded As Sonestas

Filed Under: Hotels, IHG Rewards

InterContinental Hotels Group (IHG) will be losing over 100 hotels, and they’ll be rebranded as Sonestas.

Why IHG is losing so many hotels

For the most part, individual hotels aren’t actually owned by the major global hotel groups they belong to. Rather they’re typically owned by investment companies, with the hotel group simply having a management contract for properties.

Well, Service Properties Trust (SVC) owns 103 IHG properties, and has claimed that IHG hasn’t met its obligations.

SVC had previously sent notices of termination to IHG over failure to pay minimum returns and rents due for July and August 2020, which amounts to $26.4 million, plus accrued interest.

Essentially IHG guarantees a certain minimum return for the owners, and since that wasn’t achieved, IHG was contractually supposed to pay, but has refused to do so. IHG had until August 24 to reconcile this situation, but didn’t do so.

As a result, SVC is ending its management and branding agreement with IHG for 103 hotels. The contract will end as of November 30, 2020, at which point all of these properties will be run by Sonesta instead. The expectation is that these will be run under the brands of Royal Sonesta, Sonesta, and Sonesta ES Suites.

The InterContinental San Juan will be rebranded

Which IHG hotels are being rebranded?

The 103 hotels being rebranded belong to six different IHG brands, and the breakdown is as follows:

  • Three InterContinentals
  • Three Holiday Inns
  • Five Kimptons
  • 11 Crowne Plazas
  • 20 Staybridge Suites
  • 61 Candlewood Suites

To me the full service properties being rebranded are the most interesting news. The following InterContinentals and Kimptons are being rebranded:

  • The InterContinentals in Austin, Toronto, and San Juan are leaving IHG
  • The Kimptoms in Washington DC (Palomar), Chicago (Allegro & Palomar), Portland (Monaco) and Seattle (Alexis) are leaving IHG

The Kimpton Alexis Seattle will be rebranded

The transition from IHG to Sonesta

I get why ties are being cut with IHG, but on the surface it’s a bit surprising to see that these hotels are joining Sonesta. Sonesta has about 80 properties right now, with relatively little name recognition.

However, this isn’t the first time that IHG properties have been rebranded as Sonestas. John Murray, CEO of SVC, expects the hotels will perform as well, or better, under Sonesta than IHG:

“SVC and IHG have had a long relationship which began in 2003, but we were unable to reach a mutually agreeable resolution to the defaults by IHG under our management agreements with them. Therefore, after a period of negotiation with IHG, we determined to terminate IHG and rebrand these hotels with Sonesta. Based on historical experience, we believe the current portfolio of 103 hotels may perform as well, or better, as Sonesta hotels post-conversion and once stabilized in their respective markets.”

There seems to be some math to back that up:

  • Sonesta manages 16 hotels that were rebranded from IHG in 2012
  • After conversion and once stabilized, total annual revenue at these hotels improved 14.4%, and EBITDA at these hotels improved 10.3%
  • Not only that, but SVC owns an approximately 34% stake in Sonesta, and will therefore indirectly share in any benefit of the new management agreements
  • SVC also believes having these hotels operated by Sonesta provides greater flexibility, especially if some hotels were to be repurposed to an alternative use or sold in the future

The InterContinental Austin will be rebranded

Bottom line

IHG didn’t following through on its obligations to hotels in these unprecedented times. I can’t blame the owner of 103 hotels for changing management contracts for these hotels as a result.

I would have assumed that properties rebranding as Sonesta (with very little name recognition) would struggle, but past IHG properties being rebranded suggests otherwise.

This is especially sad for the Kimpton portfolio, as Kimpton is losing five of its 68 properties.

See this post for a rundown of Sonesta’s Travel Pass loyalty program.

What do you make of these IHG properties being rebranded as Sonestas?

Comments
  1. @ VITOR SILVA — One thing has nothing to do with the other here. Furthermore, as was emphasized at the time, it was only something Accor was exploring. IHG hadn’t even been approached yet, so any potential merger is still a ways off.

  2. Between this and the recently closed Hotel Indigo Gold Coast, IHG has taken quite a tumble in Chicago. I thought these were really attractive options in their class.

  3. Ugh this makes me so mad. Was saving all my IHG points to use in Jan 2022 for the Intercontinental San Juan.

    Also, the Palomar in Chicago was the flagship Kimpton hotel in Chicago and has one of the best locations. It was always my first choice to stay at. The rates for it had gone so high though in recent years, so I wonder if Sonesta will bring the rates back down a bit?

  4. Don’t you think Sonesta is going to have a major problem with the fact that they will more than double the size of their portfolio? Plus I wonder how many people have heard of the Sonesta brand? Something tells me this isn’t going to go well

  5. The Palomar in Washington DC has been rebranded before, and it survives because it is in a great location a block from Dupont Circle near restaurants and a subway stop. I didn’t see much improvement back when it changed from Barcelo to Palomar.

  6. If we have reservations through IHG for point stays or Chase anniversary nights, is there a way to determine whether it will be effected?

  7. I mean IHG is stingy as hell, I guess that translates to other aspect of their dealings…

    The only time I’ve ever heard and used Sonesta was in St. Maarten. Long time I when there to enjoy the beaches and see planes land at Princess Juliana airport.

  8. Tommy Trash spending a minute googling both those W questions would give you the answers.

    Instead you made yourself look like an idiot.

  9. ChrisC, yes Sonesta does have a cobranded MC card and a loyalty program but is it necessary to publicly embarrass someone on the comment section. Tell you what, ask Ben to take down your comment and then I will ask Ben to take my comment., Be well, stay safe and love one another! Howie!

  10. IHG lost my custom a couple of years ago and I jumped ship to ACCOR as 3rd of 3 chains. I didn’t see much value in the program relative to the others, and especially so when being asked to pay a premium for ICs ( ..for limited or no benefits).
    I’ve gone from 50 plus IHG nights to 2 or 3 , and those mostly airport HIXs.

  11. I work for Royal Sonesta in Cambridge,ma In the 90’s one of their first properties .. I cannot believe how far they have expanded and was surprised to see a deal of this size .

  12. IHG is really hurting. The average Crowne Plaza in North America is as bad or worse than the worst Sheraton or Delta in North America.

    I don’t even consider Holiday Inn anymore since many Holiday Inn Express are newer and offer a better value than their full-service older sibling. Intercontinental tries to be luxury, but generally speaking is far below St. Regis or Ritz-Carlton.

    At best, the best Intercontinental properties are somewhere between really good Marriott/Westin properties and really good J.W. Marriott properties.

    Kimpton is such a small brand that it is never really an option for me.

    IHG seems to be putting all of its money on Asia, at least with respect to full-service properties. Everyone I know who is an IHG loyalist does business in the Asia–Pacific region. I don’t know anyone who has top-tier status with IHG in North America. And I say that as someone who started with IHG’s old Priority Club back in 2002. I had Intercontinental Royal Ambassador status for a couple years back then too. I only stay at IHG properties when I’m in Wyoming, Montana, Nebraska, etc. as generally the only consistently good option is a Holiday Inn Express.

  13. Sonesta has a credit card via BOA. Might be worth taking a look at it once the points prices come online!

  14. Really disappointed by the IC San Juan leaving. I’m IHG Platinum and have the credit card. Was looking to book a stay there in the near future.

  15. There was a nice hotel in Scottsdale (Gainey Suites) that I used to stay at and they joined/got bought by Sonesta. Not a lot changed except they no longer give out teddy bears to guests.

  16. Howie no I won’t ask Ben to take my comment down

    It’s an easily searchable question.

    Tommy Trash embarassed himself by not checking before posting.

  17. Reading this seeing only a handful of nice properties will be affected thinking that won’t matter, Im only planning 2 trips through 2021 rn anyway.
    *sees Austin and San Juan IC at top of the list*
    Welp, so much for those plans…

  18. Shame about the IC Toronto Yorkville but IC still has IC Toronto downtown and the Kimpton just down the street in Yorkville.

    Also the IC Yorkville is aging but this really wasn’t a problem but Hyatt is close to finishing the rebuild of the Grand Hyatt just around the corner.

  19. I used to get the Intercontinental in downtown Toronto for $75-$100 on weekends, when there is no convention, sports or offices open.

  20. @Kyle Montibello I was thinking the same thing! haha don’t really care about all the candlewood suites leaving but IC in Austin and San Juan were very appealing to visit!

  21. Ugg, Fantastic. I just signed up for the IHG Ambassador program and the majority of my stays are in Toronto. This is really annoying.

  22. @HL & @FNT Delta Diamond

    While the press release just referred to the IC in Toronto, there are 2. The IC Yorkville is the SVC property, the IC downtown by the convention centre isn’t owned by SVC according to their property portfolio list and so it unaffected.

  23. Does anyone have a complete list of the SVC properties that are leaving IHG? I am particularly interested in whether the Hotel La Concha (a Crowne Plaza) in Key West is part of this group of 103 SVC hotels that are departing IHG. Thank you.

  24. @Lucky – a link to the departing properties would be great! (The HI’s are of interest to me.)

  25. I wonder if IHG’s legal team failed to include force majeure clauses, or if SVC wouldn’t permit them. BTW, Covid 19 alone wouldn’t trigger the clause, but government restrictions on travel and hotel occupancy likely would.

  26. Not the first time this has happened with SVC they rebranded the old Intercontinental Houston to Royal Sonesta Houston nearly 10 years ago now.

  27. I think it’s rude. The months that they haven’t paid for are covid? So they are taking away the hotels when the bookings would have been way down or nothing.
    Minimum numbers should not be held accountable right now.

  28. So if we have reservations for after the date they are changing from IHG, will ihg give us points for the trouble? This kinda happened to me in Barcelona, I had a hotel booked way in advance and they had to close for remodeling those dates. So they give me points For the first night at the new hotel they moved me to. I think there is something in the terms I found if they are unable to offer you a room they must offer you a room else where at there expense for 1 night minimum. So I booked a few of the still bookable hotels that are closing, just for that reason alone. If I have 5 reservations cancel, they can’t help but to give me something for the (trouble). You ruined my honeymoon…… etc. any idea or past experiences?

  29. I live in PR and wasn’t planning on flying until May of 2021. My free night expires 12-31-20 as IHG gave an automatic extension to everyone for the free night program. What is likely to happen if I book NOW for a stay at Intercontinental San Juan Puerto Rico for AFTER 11-30-20, which is the scheduled/estimated Sonesta conversion date? If I make my booking now to stay on 12-31-20, will Sonesta honor the booking? Or will they say they can’t/won’t for all bookings after the conversion? I’d actually prefer to NOT use the free night and get another year extension on it, to use in the states next year in May. However, if it’s a “use it or lose it” then I plan to use it/book it for 12-31-20, hoping the pool is back open by then. The free night was already extended from my May 2020 expiration, automatically to 12-31-20 due to Covid. There aren’t many hotel choices in PR with IHG, only the Intercontinental San Juan and a Holiday Inn in Condado. How could I get IHG to give another extension? What if I wait until after 11-30-20 to book, assuming then there are no longer any free night hotels in PR with IHG, would IHG likely give another extension to be after the 12-31-20 expiration date, since I’m avoiding travel due to Covid? Or are they likely to take a hard line on the 12-31-20 free night expiration and not extend further?

    I found this from the Sonesta 7-23-20 PR:
    http://www.svcreit.com/news/press-release-details/2020/Service-Properties-Trust-Sends-Notice-to-Terminate-IHG-Agreements-Covering-103-Hotels/default.aspx

    “SVC has the right to keep the hotels branded and managed by IHG for up to one year post termination to aid in an orderly transition.”

  30. As an employee at one of the hotels that is being rebranded, I’m a bit pissed that I learned about this through my IHG rewards page and not through management. I guess I should get my resume together.

  31. From what I’ve heard, the affected hotels will still honor reservations (paid ones, not rewards/free night redemptions) past November 30, they just won’t earn IHG points. However, rewards nights/free night bookings will be cancelled and IHG will contact members to rebook at alternate IHG properties nearby.

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