IHG buys Regent Hotels – why?!

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We have given some coverage recently to IHG’s much-publicised hunt to buy a ‘true’ luxury hotel brand.  There was much speculation that they wanted Belmond as we reported recently.

IHG has clearly failed to persuade any true luxury brand to sell.

Instead, perhaps more out of desperation than anything else, it has acquired 51% of Regent Hotels & Resorts for $39m, ie peanuts.  For comparison, the refurbishment of InterContinental Park Lane a few years ago cost three times that.

The reasons it is so cheap is that Regent Hotels & Resorts only runs six properties in:

  • Beijing
  • Berlin
  • Chongqing
  • Porto Montenegro (looks nice – see below – but not exactly prime tourism country)
  • Singapore
  • Taipei

That’s it.  The pipeline only consists of Jakarta, Harbin and Phu Quoc.

Here’s the thing.  These are not true luxury hotels in the Mandarin Oriental model.  They are perfectly pleasant and their average TripAdvisor ranking is usually higher than the InterCon in the same city, but that is not the same as buying Aman.

The best Regent is probably Berlin, but this was a Four Seasons until a few years ago so it clearly has a great hard product.  In Singapore, the Regent is actually managed by Four Seasons.  IHG will presumably move to terminate this contract but that is unlikely to improve the hotel.

I’m not entirely convinced, as the press release says, that “IHG has a deep understanding of how to protect what makes the Regent brand so unique and special”.  Kimpton Hotels did at least have a ‘special sauce’ (but everyone complained that IHG would wreck the ‘special sauce’, so admittedly they probably can’t win!).

Regent Hotel Montenegro

I could understand it if IHG had bought the brand with the intention of folding it into InterContinental.  That would have made sense, albeit it would not have added many new markets.  Instead, it intends to roll it out with a view of taking the chain to 40 hotels.

The real question is ‘how?’.  Regent Hotels is a far weaker brand than InterContinental and the properties are interchangeable.  The only logic would be to rebrand the InterContinental resort properties in Asia as Regent.

There is also the issue of Regent Cruises.  Once part of the same business, but no longer, the cruise line not only shares the name but has an identical logo.

And a potentially bad move …..

To bulk up the chain, InterContinental Hong Kong is to be rebranded as Regent Hong Kong when it reopens post refurbishment.  It was originally a Regent when it opened so there is a some logic here.  However, taking InterContinental Hong Kong out of the IC brand is a hit to InterContinental Ambassador members who found it a popular place to redeem their free weekend night vouchers.

We obviously need to see what IHG can make of this.  Even Belmond would have been a better fit in terms of building out a separate ‘tourism rather than business’ focused luxury brand – Regent Hotels only makes sense to me if it was to be re-branded, which it isn’t.

Having spent 16 years of my career in M&A, this feels like a panic buy in response to too-public promises that had been made about an acquisition.  IHG cannot even begin to buy the remaining 49% until 2026, which means that the existing shareholders will be the main winners from any growth in the chain.

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Comments

  1. For reference, Four Seasons is in fact having right in using Regent brand across its existing hotels which were still in operation before selling to Carlson hotels (Regents’ former owner). Singapore is one of them and is the only one that doesn’t rebrand into Four Seasons – probably due to an existing Four Seasons Singapore. I see that Four Seasons will still maintain the Singapore regent brand as IHG will have no control on it.

  2. Well after a few nights in the Holiday Inn Cape Town I would say they are missing out there. At least 8 better that I can think of off the top of my head. Bought an existing mediocre, 1980s decorated hotel and have kept it that way. Still, points towards IC Osaka in the bank at least.

    • IC Osaka is an amazing hotel – stayed there on a corporate rate and it was £70 H&B – loved it!

  3. The Regent Beijing is really excellent – much better than an Intercontinental (and superior to the Peninsula that is round the corner). It doesn’t feel like any chain; it is quite individual, the rooms are huge and the Executive Club vastly superior to the Four Seasons ones in Shanghai. We are going for our fourth stay there next week, iHG can really only devalue it.

  4. The reason they bought the brand is so they can open more InterContinentals. The theory goes that if they rebrand the IC HK as a Regent, this allows for opening a new IC in HK, with the Regent charging an ADR of $100 more than when it was an IC. Repeat that across the global cities, and that starts to really drive revenue. IC is IHG’s most profitable brand where properties are managed by IHG.
    Also, I would be surprised if that’s it in acquisition terms.

    • There are already multiple ICs in various cities inc HK with no major revenue dilution. Why swap an iconic brand for an unknown one?

      • Take HK as the example city, 2 ICs in Kowloon within a mile of each other, one franchised one managed. IHG couldn’t open another managed IC Hotel in HK, but change the IC to Regent, and you then have brand space for another IC, maybe on the Island. As mentioned previously, the revenue generated from managed Luxury properties, especially on Asia, is massive vs. Opening a ton of franchise holiday inn expresses. Granted, there’s some work to do in bringing he Regent Brand back really into the travelling public’s conscious, but changing the IC HK to one is a pretty bold start.

        • There is more damage to be done in downgrading IC than by boosting Regent. Take Sheraton. Since they put the nice hotels into Sheraton Grand, you automatically know that any plain Sheraton is a dog and to be avoided. If the 10 top ICs become a Regent then people will start instinctively avoiding the rest because the chain will get a funny smell.

        • European consumers may have lower awareness in Regent Hotels, yet this is definitely not the case for Asian and North American markets as they had a number of notable properties by the 1990s. Nowadays the brand is still highly-acclaimed. Regent Hong Kong is a legacy of the ‘Golden age’ of Hong Kong, so there is a substantial reason behind the rebranding of IC Hong Kong. In the case of Sheraton Grand it is different from the Regent-IC relationship because Sheraton Grand shares the same Sheraton brand identity and I personally would see Sheraton Grand as a ‘massive’ Sheraton. It doesn’t affect my perception of the ‘normal’ Sheraton given that is still an upscale hotel brand.

          Conversely, bringing Regent into IHG would probably degrade the Regent brand rather than IC. IMO only flagship properties like Da Nang, Samui or Bora Bora, are qualified for carrying the Regent brand, yet it is likely that IHG would ‘overuse’ the Regent brand since they want to expand into more than 40 properties.

  5. The proposed site of Regent Jakarta is on the Crown Plaza, not sure if is a refurb or rebuild. So IHG are gaining nothing there except a long wait.

    How about the Regent Cruise business, has that been thrown in as well does anyone know?

  6. kt1974 says:

    That’s a harsh assessment of Regent. It has a long heritage as a luxury business brand, and this is a peanuts price to buy a brand that’s historically been more upscale than IC. Before it was acquired by Four Seasons in the 1990s, it was a much larger, capital city hotel chain (remember the Regent Beverley Wilshire in Pretty Woman?! And the Regent that’s now the Landmark in London, plus the Regents in Sydney and New York that are now Four Seasons). The brand belongs to the hotel chain, and is licensed to the cruise line. So it’s just a brand that can used to rebadge better ICs. I bet the HK IC won’t be the last to change…

    • Andrew says:

      Thinking back to my late teens and early 20s, the first thing that springs to mind is waiting for Teletext to cycle round for deals, then dialing 0800 40 40 40 to book a weekend in the Regent Palace Hotel in London…

      • ….. which, as that was the stinkiest (and cheapest) hotel in the West End, was almost certainly nothing to do with this Regent!

    • I’m late 40’s and I have no memory of it as a luxury brand, so this is something that, at best, will vaguely resonate with people over 50 – and who will be nearer 60 by the time IHG gets full control.

      • kt1974 says:

        Well, in popular culture, Regent will *always* be connected to Pretty Woman, released in 1990 – it was the first of the “old money” luxury hotel brands to embrace “new money”, like the story in the movie… Four Seasons gutted the brand 2 years later and converted all its best hotels into (the then less upscale) Four Season brand. The question is whether IHG can do a better job of rejuvenating the brand than Carlson did(n’t) in the 2000s…

      • Michael Jennings says:

        I certainly remember the Regent in Sydney having a reputation of being the nicest (or one of the nicest) hotels in Sydney when I was a child there in the 1970s. Sydney only had a few luxury hotels in those days, but the name probably still has some cachet amongst people like me.

  7. Sergey says:

    Regent Taipei seems to be a very nice property, and IHG strangely lacks its own properties in Taipei so far (well, there is one rather crappy Holiday Inn in the outskirts of city). I see it as a very positive thing if Regent joins IHG.

  8. I think the fast growing luxury market they are after is China and maybe wider Asia. Regent probably works well in India too.

    Maybe Hualuxe isn’t working out too well as a brand and they want a more local one. Or maybe they will flip the 7 existing and 21 theoretical Hualuxes over to regent too which starts to build a decent footprint.

    • Peter D says:

      There’s also the pressure from the PRC to not open any new property in Taiwan, whereas an acquisition is hard to prevent.

  9. Tim Rogers says:

    In what sense is the IC Hong Kong closed right now? When is the re-opening as Regent?

  10. Daftboy says:

    I thought the reader comments attached to the similar article on One Mile At A Time were quite interesting, which I would sum up as there seems to be more brand equity in Regent than those of us not based in Asia realise
    http://onemileatatime.boardingarea.com/2018/03/14/ihg-acquires-regent-hotels/

    (I’m sure Rob won’t mind me linking to another blog in this instance)

  11. Oliver says:

    Well, there’s this as well.

    “Intercontinental Hotels Group has teamed up with a property investor to participate in the £1.2 billion auction of the company behind the Principal and De Vere hotel brands.

    The Holiday Inn and Crowne Plaza operator and its unnamed partner are understood to be among a small number of remaining bidders for the Principal Hotel Company, which is being sold by Starwood Capital Group, the American investment firm, through UBS.”

    https://www.thetimes.co.uk/edition/business/holiday-inn-operator-intercontinental-hotels-group-joins-1-2bn-race-for-luxury-hotels-ghdj57w0h

    • Interesting. Principal is exceptionally good and these would be outstanding additions to the UK portfolio.

  12. I’ve been to the Regent in Montenegro and thought it was absolutely excellent. Hopefully bookable on IHG points sometime soon!

    • Is there anything to do there? Jamie (who you may have met at the Christmas party, he took the photos) works on a super-yacht moored in the harbour there for half the year and I keep thinking of going down for a bit, but he works seven days a week and I’d need to entertain myself during the day.

      • william merrett says:

        I spent 3 days there in between rafting in Bosnia and visiting Dubrovnik. Not a huge amount to do around porto montenegro except lazing around at the beach/pool.

        The yacht club is a lovely place to spend a day by the pool and I remember the bar being quite swanky at night.

        We had a car and went driving around and the surrounding areas were breathtaking, if I went again I’d get on a boat and go for a trip around the bay.

        Good dining as well from memory.

        • william merrett says:

          I’ve considered returning a couple of times but other places came up. Wouldn’t hesitate to go back there if I was looking for a relaxing 3 night break though.

  13. Peter D says:

    To be clear, the Ambassador weekend certificate is a BoGo not a straight free weekend night. Extend the certs to be accepted at IC and. Regents worldwide.

  14. What’s the future for the Ambassador scheme if ICs are no longer the top of the IHG tree? Having just got home from the US, I think that a good many of the Kimptons now redeemable with points are more attractive proposals than ICs for less…

    • Short term I would guess Regent gets rolled in. But, yes, IC is opening a can of worms here especially if good IC hotels move across. No mover and shaker wants to stay in the second-best chain …..

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