The End of an Era: IHG Acquires Kimpton

The End of an Era: IHG Acquires Kimpton

How much is that boutique hotel in the window? Well, it’s around $430 million.

Yes, that’s the price InterContinental Hotels Group (one of the biggest hotel companies in the world) paid to acquire Kimpton Hotels, the original boutique hotel group, which includes 62 hotels and 71 hotel-based restaurants and bars. The number might sound big, but in reality it’s a drop in the IHG ocean of hotel brands and assets.

Having lived in San Francisco, I saw the best and most vibrant years for the local Kimpton hotels. Now it’s come to this: the latest and, I think, fatal blow to Kimpton as a boutique brand, and the Boutique Era itself.

Kimpton, Schrager and Conley walk into the hotel business.

The 80’s were a wild time. It was also the time when the concept of a “boutique hotel” was born. The three people who took this movement mainstream (in chronological order) were:

1. Bill Kimpton, 1981 – Clarion Bedford Hotel, San Francisco
2. Ian Schrager, 1984 – Morgans Hotel, Madison Ave NYC
3. Chip Conley, 1987 – Phoenix Hotel, San Francisco

These three men had one thing in common: they wanted to do something different than what the established brands were doing. Free thinking is something that does not fit the traditional style of a hotel brand (not in the 80’s, and not today). These guys transformed one boring hotel/building at a time into a hotel that had a soul and something unique about it.

Where are they now?

1. Kimpton just sold to IHG (a brand that owns Holiday Inn Express).
2. Ian Schrager is now designing hotels for Marriott.
3. Chip Conley has quit hotels and is now working with the fastest growing lodging distribution company, Airbnb. (Still crushing hotel brands.)

If the three original innovators are abandoning the boutique concept, I’d venture to say that the concept needs to change. This leaves us with only two kinds of hotels: those that are owned by a big brand (Brand Hotels) and those that are not (Independent Hotels). Soulfulness is no longer part of the equation. You just can’t be boutique and big brand at the same time.

Your call is important to us. Please stay on hold.

KimptonTweetsHow quickly things change! Check out the two standard tweet replies now going out from the @kimpton hotels Twitter account. These are used to reply to all tweets, no matter how positive or negative.

Moving forward, everything goes through IHG legal, no matter how “quirky” you say you are. Want quirky? Go to your local independent coffee house. With big brand comes bigger legal teams. No matter how you hard try and spin it, things are going to be different.

The fact is that IHG already owns two “boutique” brands: Hotel Indigo and Even Hotels. Don’t feel too bad if you haven’t heard of them. They are way under the radar, and IHG casts a pretty big radar shadow, making it hard for an independent concept to take off.

Culture Club

I love the typical response that a lot of big brands give when acquiring “boutique” hotels: “It’s the fastest growing segment in the industry.” The fact is that the best kind of independent hotel grows organically. Once under a big brand umbrella, it’s almost impossible to maintain its original culture. Reports of a big hotel company “nurturing” an independent brand are highly exaggerated. Keep it real: nobody spends $450 million and then doesn’t change a thing.

Keeping the culture of an acquisition alive is especially hard for brands because it almost never makes much business sense (at least on paper). Not that big companies are evil. It’s just that everything is based on maximizing efficiency. Culture is never given priority over shareholder value. Remember (and you can quote me): Big companies measure success in dollars and not smiles.

This trend can be seen everywhere. The technology world is riddled with small, amazing product companies that were slaughtered or ingested by larger corporations. Sure, selling to bigger brands makes the founders a lot of money. But in the long term it kills their product, which is what it was really about. I still remember when Google killed Sparrow, and when Yahoo killed Flickr. There are so many small fish (really cool ones) that will never be the same inside the belly of the big fish. Free market capitalism giveth, and free market capitalism taketh away.

What happens next?

IHG, with the limited success of its Indigo/Even brands, capitalizes on the established Kimpton brand. The focus will be on reproducing more hotels under the Kimpton banner, including sub-brands under Kimpton (Monaco and Palomar). There are already 16 Kimpton hotels in the pipeline that are going to experience the full force of IHG’s development team. Next, IHG’s owner connections, and their massive-scale distribution and procurement teams, are going to hit Kimpton, taking it beyond the US market to Europe and Asia. File it under the “big brand buys an independent brand and takes it global” storyline.

Conclusion

Independent hotels will always thrive with outside the box thinking, service and products, and a strong focus on guest experience. By contrast, a hotel brand’s focus is to have McDonald’s style efficiency and economies of scale. This approach is just not compatible with independent thinking. Sure, you can try and buy innovation, but maintaining it with your industrial-strength departments and strategies in place will be really hard, if not impossible.

The hotel industry today is ripe for innovation. As I have said many times, innovation will not come from brands, but from independent hotels and independent thinkers. We are ready for the next generation of hotel people like Kimpton, Schrager and Conley. We’re ready for the next concept. Who is stepping up to the plate to bat for innovation vs mass production? Maybe you?