IHG to buy boutique hotel chain Kimpton

InterContinental Hotels Group, the largest hotel chain in the world by room numbers, has agreed to acquire one of the most well-known U.S. boutique hotel brands, Kimpton Hotels and Restaurants.

IHG, headquartered in the U.K., will pay $430 million in cash for what is perhaps the largest boutique hotel operator in the U.S.

IHG CEO Richard Solomons said Monday night that his company wanted a stake in what he believes to be the fastest-growing segment of the hotel industry.

Kimpton, which is based in San Francisco and has 62 properties across the United States, had been seeking a potential buyer, he said.

"We were delighted to have the opportunity to acquire this business," he said in an interview with USA TODAY. "It's a very high quality business."

IHG, parent company to Holiday Inn and Crowne Plaza, already has dabbled in the boutique hotel segment with Hotel Indigo. Last year, it also opened EVEN Hotels, a brand devoted to fitness and wellness.

Boutique hotels are typically smaller properties in major cities or smaller hubs. They are focused on design, technology and food and beverage. They also attempt to blend in with the local culture rather than fitting in with the cookie cutter offerings that traditionally define big hotel chains such as IHG, Marrriott and Hilton.

In recent years, those hotel giants, in an effort to appeal to a younger generation of travelers, have been aggressively trying to acquire or create their own boutique brands.

Marriott partnered with Ian Schrager, the man often credited with creating the boutique hotel concept, to create EDITION hotels, the most recent of which opened in Miami.

Hilton recently introduced a new lifestyle brand called Canopy that focuses on technology, design and the local culture.

Acquiring Kimpton, known for smaller properties with free wine hours each night and whimsically designed bathrobes and minibars, pits IHG against those brands and other independently owned chains such as SIXTY Hotels and 21c Museum.

'We're buying this business because of the capability it brings, their brilliance in food and beverage and design," he said. "They can really add to our business and we to theirs."

Hotel industry analysts at the firm SunTrust Robinson Humphrey, Inc., said they think IHG is making a wise investment.

"As far as 'Did the buyer get a good deal here?' question, we believe so," said analysts C. Patrick Scholes and Bradford Dalinka in an email. "IHG has been lacking a material presence in the upper upscale segment and this acquisition fills that void. Until now, IHG had exposure in the luxury segment with the InterContinental brand and the mid-scale segment with Holiday Inn and Holiday Inn Express brands but other than Crowne Plaza, nothing significant in between."

IHG hopes to give Kimpton more exposure as well. Thus far, Kimpton has only operated in North America. Solomons says the acquisition will allow Kimpton to become a worldwide brand.

"We are looking to grow the brand outside of the U.S.," he says.

When asked if such a large hotel company can operate a truly boutique hotel business, which is often thought of as a small company that fits easily into its surroundings, Solomons said IHG has already been able to do that with Hotel Indigo and EVEN.

"They are all about the local city," he said. "They do tell the story of where they're from."

Kimpton will still be based in San Francisco, Solomons said. There will also continue to be a focus on design, technology and drinks and eats.

"We're going to hopefully make it better," he said. "We can help it operate more efficiently."