InterContinental Hotels Group PLC agreed to acquire Kimpton
Hotels & Restaurants Group LLC the largest independent
boutique-hotel operator, in a bid to overtake its global rivals in
this hot corner of the hospitality market.
The U.K-based hotel operator is paying $430 million for Kimpton,
which operates 62 hotels across the U.S., InterContinental said
Monday.
The deal would vault InterContinental to the top ranks in the
boutique, or lifestyle, sector, which is characterized by stylish
design and a thriving bar scene to attract travelers tired of
cookie-cutter designs. It also sets the stage for the new owner to
expand the U.S. brand overseas.
"For us, it's bang on strategy," InterContinental Chief
Executive Richard Solomons said in an interview. "It fills gaps we
have in North America, and in Europe and Asia, we see a lot of
opportunity for the Kimpton brand."
While the boutique sector is highly competitive and fast
changing, making it hard to predict which brands will stay on top,
some hotel analysts thought the acquisition made sense.
"This is a well-conceived, strategic use of InterContinental's
cash to quickly gain entry to an important lodging sector with a
well-established lifestyle brand," said Sean Hennessey, chief
executive officer of Lodging Advisors, a hotel-consulting firm.
Starwood Hotels & Resorts Worldwide Inc. was the first major
chain to create a lifestyle brand with W Hotels in the late 1990s.
In recent years, virtually all the major hotel brands have created
their own lifestyle brands to compete in a market sector that has
been especially popular with coveted young travelers whose spending
habits are poised to eclipse older generations.
Hilton Worldwide Holdings Inc. and Best Western International
Inc. both announced plans for their own boutique brands earlier
this year, while this month Marriott International Inc. opened a
boutique Miami hotel under its Edition brand, a new venture with
hotelier Ian Schrager.
InterContinental has its own boutique brand, Hotel Indigo, which
has 60 hotels, InterContinental said. That brand and Kimpton
combined would have more than 200 hotels open or in the pipeline,
InterContinental said.
Kimpton was founded in 1981 and now has hotels in New York, Los
Angeles and Miami Beach and about two dozen other U.S. cities.
While Kimpton manages many of its properties as independents, the
company also runs the Hotel Palomar and Hotel Monaco brands.
The San Francisco-based company was among the first boutique
brands and often has attracted attention from the major brands.
Marriott reached an agreement to buy the company in 2000, but the
deal never was completed.
Kimpton CEO Mike Depatie will step down to focus on management
of the Kimpton real-estate funds, which buy or develop properties
for Kimpton hotels. Mike DeFrino, currently chief operating
officer, will become the new CEO, InterContinental said.
The deal comes at the end of a robust year for deal making,
where M&A volumes reached levels not seen since 2007.
There have been a number of high-profile deals in the
hospitality sector this year. In October, Anbang Insurance Group
Co. of China bought the Waldorf Astoria in Manhattan for $1.95
billion from Hilton Worldwide. Also in October, Highgate Hotels LP
sold a minority stake to private-equity firm Trilantic Capital
Partners LP.
Deal makers in the sector say boutique properties and asset-lite
plays, like management companies that don't own properties, are
particularly hot among buyers.
Write to Craig Karmin at craig.karmin@wsj.com and Dana Mattioli
at dana.mattioli@wsj.com
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