A decade ago IHG completed its acquisition of Kimpton Hotels. They outbid Hyatt for the asset, and promptly destroyed it.
Kimpton could have been a fabulous acquisition but IHG never understood what to do with it, and they were the wrong chain to pull it off.
- No one really talks about the Kimpton brand anymore. It used to be buzzy.
- People used to go out of their way to stay at Kimpton. And they’d pay a premium to do so.
Kimpton Surfcomber Hotel, Miami Beach
What’s interesting about Kimpton was that they were more than just ’boutique’ they had a sense of place and style. They spoke to the narrative guests have about themselves. People wanted to stay there and felt better about themselves because of it – and as a result they could earn a real revenue premium.
Furthermore, their restaurants were actually good. They were places you’d go eat even if you were a local. I used to brunch at Kimptons when I lived in D.C. (back when they were still independent). They weren’t just creating spaces to sell food and beverage to guests, offering lowest common denominator food that would work regardless of who at there, sort of like the median airport restaurant.
The right approach would have been to buy Kimpton and learn from it, trying to figure out what you could port over to other more mass consumer brands to capture some of the experience and drive revenue gains. That’s hard but at least it’s a theory for how the transaction could have been additive.
Instead, IHG largely destroyed value. Here’s how they even described the reason for the transaction, ‘the boutique business is fast growing and we want more of that, consistent with how we’re already executing our current strategy.
This acquisition is right in line with our strategy to run a brand-heavy, asset-light business model and focus our growth in key markets like the United States. The boutique segment is the fastest-growing in the hotel industry and this gives IHG yet another foothold.
IHG is known for franchising rather than managing, and for weak control over owners. They don’t enforce standards. Contrast that to the early phase of Starwood Hotels launching the W Brand where properties had to spend heavily on lobby candle displays, and they had to be right regardless of cost. They were creating an experience, which was the entirety of the brand, and the reasons guests chose those hotels over alternatives.
It turns out that this is not controversial take. IHG itself knows it. From their Luxury & Lifestyle Americas Conference they are trying to ‘reinvent’ the Kimpton Brand.
I do think you can do an edgy, boutique-style hotel brand inside of a larger hotel conglomerate. W Hotels worked. But you need strong brand vision and a willingness to stick clearly to it, over the mantra at larger chains of ‘net rooms growth’ where they’ll do anything to sign owners and avoid imposing costs out of fear of scaring them away. You can’t require standardization, which is the typical way chains think about their value add.
A lot of what I’ve really liked about GHA Discovery is that the loyalty program has been a way to tie together small brands while those brands remain small and independent. I can leverage my rewards to try new places, and receive recognition even with small hotel groups I’ve never stayed with before. In some sense, it’s the best of both worlds (though it makes consistent delivery of benefits that much harder to achieve).