Belmond hotel group puts itself up for sale – will IHG strike now?

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Back in March I wrote an article on the rumour that IHG, which operates InterContinental, Holiday Inn, Holiday Inn Express, Crowne Plaza, Hotel Indigo etc, was in talks to buy hotel group Belmond.

The story made sense.  IHG had been talking about its desire to buy a ‘true’ luxury hotel brand.

Whilst InterContinental does have some excellent five star hotels, they are primarily business focused city centre properties.  The few InterContinental resort hotels, mainly in Asia, are generally well regarded but sit a little oddly in the context of the broader brand.

Some of the names banded around as potential suitors for IHG were laughable, such as Mandarin Oriental and Peninsula.  I struggle to think of anything that would be worse for the luxury hotel sector than to see IHG get its hands on either of those.  The Ritz Carlton was sucked into Marriott many years ago and with very negative consequences, although there have been signs in the last couple of years that the brand is regaining some of its former lustre.

When rumours surfaced of IHG buying Belmond, it DID make sense.

Whilst the Belmond name may not be familiar to you, you have probably heard of its old name, Orient Express Hotels.  The company rebranded a couple of years ago after a dispute with the ultimate owners of the Orient Express name.

Belmond tells people that it is a luxury hotel brand.  It certainly runs some iconic properties which are world famous.  However, to those of us in the industry, it is a bit of a joke.  It would never be discussed in the same breath as Four Seasons, Mandarin Oriental or Aman.

This means that IHG couldn’t have messed it up.  There is only upside – the hotels would benefit from being part of a wider group, there could be some shuffling of the leisure-focused InterContinental hotels into Belmond and we would benefit from being able to redeem IHG Rewards Club points at some high end leisure hotels.

Here are some of the highlights of the Belmond portfolio:

Belmond Iguassu Falls

Copacabana Palace, Rio de Janeiro

Hotel das Cataratas, Iguassu Falls (awesome photo above, click to enlarge)

La Résidence d’Angkor, Siem Reap

Hotel Cipriani, Venice

Hotel Splendido, Portofino

Villa San Michele, Florence

Sanctuary Lodge, Machu Picchu

Reid’s Palace, Madeira

Grand Hotel Europe, St Petersburg

Mount Nelson Hotel, Cape Town (photo below)

La Residencia, Mallorca

Le Manoir aux Quat’Saisons, Oxfordshire

….. amongst others.  They are also taking over a hotel in Chelsea later this year.

And then it all went wrong ….

We don’t know what happened in talks with Belmond.  All of a sudden, however, IHG announced that it was buying Regent Hotels.  Here is our story on that deal.

This was, frankly, crazy.  For a start Regent Hotels only had SIX properties.  One of those, Singapore, was not even under its control and recently announced it is moving its management to Capella Hotel Group.  The others are not exactly in major hot spots – Beijing, Berlin, Chongqing, Porto Montenegro and Taipei.

There is also brand confusion due to the Regent Seven Seas Cruises business which has an identical logo but which is totally separate.

If you are 50+ you may remember when Regent Hotels was a luxury sector leader, but the name means nothing to most people.  Four Seasons bought it and then sold on the Regent name to Carlson after rebranding the existing properties and the pipeline.  Carlson later sold the brand to a Taiwanese group, hence the hotel in Taipei.

Regent is slowly being reinvigorated but has virtually no brand cachet.  In fact, the one decision to date – to deflag the iconic InterContinental Hong Kong and rebrand it as Regent (its original brand when built) – actually makes IHG weaker and not stronger.  No-one has even tried to pretend that they have any clue how Regent and InterContinental will differentiate themselves.

As shotgun marriages go, it looks pretty rocky.

But IHG may have a second chance

On Thursday, the board of Belmond announced that they were open to offers for the company.

Any buyer will need to find around $2.5 billion including debt.  The vast majority of this is actually underwritten by freehold and long leasehold property.  IHG or another suitor would only need temporary access to such a sum as the property could be sold, leaving just the hotel management contracts.

All of the major hotel groups have experience of selling major property assets in recent years and I doubt many would be put off by needing to do this.

It makes sense for IHG to take another look.  The Belmond brand is weak so they could use Regent Hotels on these properties, which would also help justify the Regent deal.

InterContinental would become ‘luxury business’ whilst Regent would become ‘luxury leisure’.  All sorted.

But don’t count Hilton out

One thing I heard multiple times from Hilton staffers when I was over at their HQ recently is that they don’t have enough luxury hotels.

Hilton believes that luxury hotels have an important halo effect.  You are more likely to stay at a small town Hampton by Hilton if you think it will earn points to put you nearer to a luxury hotel redemption.  The problem is that Hilton is low on luxury properties where you can do this.

(Marriott used to have a similar problem, which it solved by buying Starwood.  Staying in a down-trodden Marriott now has more appeal, and Hilton – and presumably IHG – knows that.)

And of course there is Accor …..

French hotel group Accor has made so many piecemeal acquisitions over the last five years I can’t even remember half of them.  Some are already written down.  They appear to have exceptionally deep pockets however and another few billion may not make much of a difference.  They bought Fairmont, Raffles and Swissotel to recreate a high end grouping and Belmond would add to that.  Accor also owns the Orient Express brand which, of course, Belmond used to use on its hotels – the old name could return.

There is also Hyatt, in desperate need of an acquisition – although this is really too small to move the needle.  Their last minute lunge into the NH Hotels sale process recently, which was in reality too low end for the group, shows the pressure they are under.

Whatever the outcome, it is likely to be good news for the travel loyalty sector given that Belmond properties are not currently part of any major scheme.  A free stay at the Hotel Splendido in Portofino may be back on the cards …..

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Comments

  1. I find the whole issue of “luxury”, and the perception of such in hotels and hotel groups, very interesting. My first stay in a Hilton hotel, decades ago, was at the old Hilton Bournemoth (formerly The Palace Court). I was expecting “luxury”, but was very dissapointed, as it was like staying in a poorly maintained WW2 bunker! It put me off staying in Hilton properties for years. It also made me much more aware of trying to do some research before just booking a property. I use Hilton a great deal now and have done so for many years. However, I do slip up from time to time and recently stayed at the Hilton Croydon, which, IMHO, was awful.The rooms still have fading, old, dark wood veneered 1960’s furniture in the rooms and old carpets. It is exactly what a hotel in dire need of renovation is like and, should I have stayed there as a first taste of Hilton, it would have put me off, as did the old Bournemouth property. I’m not having a dig at Hilton here, but it’s just an example of what you can “feel” about hotel groups if they get it wrong in just a few properties.

    • Hilton still has the original Hilton National Hotels which are generally in need of renovation. I’ve stayed in Milton Keynes several times, which whilst very tired is okay as long as the price is right.

      • Agree with the MK comment. Recently stayed here for a bed run and the price for July was really good for B&B. We were treated really well and yes, rooms dated but price was GREAT!

        • Rooms at MK are universally bad and there are no good ones, so zero chance of an upgrade. Five mins drive to DT at the MK Bowl and it’s another in.

          No reason to pick the Hilton at all. And that would be true even if I hadn’t had a bad experience there. (5 calls over 2 hours and room service never did arrive. Gave up and went out.)

    • I think the only hotels part of a large chain that are actually luxury hotels are Park Hyatt but even then standards have slipped dramatically since they’ve started outsourcing housekeeping. I also feel quite strongly that luxury hotels and points don’t mix with the possible exception of Park Hyatt. A few years ago we went to Conrad Maldives and it was literally crawling with people on points stays. As a result all the little extras that luxury hotels usually offer were scaled back. We were on a cash stay in one of their largest overwater villas and really noticed it. The next year we went to O&O Reethi Rah and the difference was like night and day. Free champagne drinks receptions, afternoon tea every day and the service/F&B on a completely different level.

      • Andrew (@andrewseftel) says:

        Reethie Rah is about twice the price though isn’t it? Not sure it’s a fair comparison.

        • Agree. Reethi Rah is generally seen as the best Maldives resort – although we were not fans 10 years ago – which given the competition means you can’t compare to a Conrad.

        • Sorry for the late reply. Our overwater villa at the Conrad was ~$2500 per night and the Reethi Rah was ~$1750 per night. F&B at the Conrad was about the same price as Reethi Rah. I think there is a comparison to be made.

        • Reethi Rah food was the same as West London prices a decade ago when we went.

        • Yes – Reethi Rah and Conrad both have high food and accommodation prices – thus the comparison!

      • “Crawling with people on points stays”…Are you David Cameron?

        • There was a great Flyertalk post years ago about someone who did a similar points stay and actually brought a portable stove and cases of tinned food to avoid having to pay resort prices. I quote:

          “We purchased an electric burner from Best Buy. We brought the burner, pans, cups, silverware, drink packets, a voltage converter, and 50 lbs of food. We purchased box meals, chips, canned chicken/ham, peanut butter, jelly, tortillas, english muffins, mac/cheese, rice packets, turkey sausage links, soup, hot sauce, vegetarian food, protein powder, and other various items to be able to eat on the cheap while we there.

          We ended up eating in for every meal except three while being there a week. (Honey is not allowed) We did purchase limes, cheese and loafs of bread from Tiare Market. We spent less than $150 on food while we were there. That includes the market and the few times we ate out.“

  2. OT. Had a points stay with Hilton, got the credit etc., but no miles and more bonus. It was in the booking.

    • I got it despite joining M&M and registering for the promo 1 hour before checking out.

    • Just a thought Lee, it may be worth just double checking that your 15 digit M&M account number is inputted correctly into your Hilton profile.

    • Did you make the booking before or after making your M&M your preferred partner? If before did you change it in the booking and/or confirm with hotel that they had it down as your desired airline partner?

  3. Belmond have, for far too long, overpriced their mediocre hotels. Belmond La Residencia is ridiculously overpriced for the product – I would much rather give my money to Park Hyatt in Mallorca even though they’re part of a chain. The Italian properties are even more ridiculous – the hard product is just outdated and yet they still think they can command a high price. I thought things weren’t well at Belmond when I heard that the Northern Belle had been sold off. I can’t think of one of their properties that has been refurbished or invested in recently.

    It will be interesting to see what happens to the Cadogan when (if) it eventually opens. The date seems to have been pushed and pushed. Now they’re saying 1 January 2019.

    • Because Cadogan Estate owns the hotel I would guess they are funding the refurb. Cadogan has a history of working with niche players to improve variety across Chelsea – see 11 Cadogan Gardens.

  4. Afternoon tea at the Mount Nelson is a great experience if anyone finds themselves at a loose end before an evening flight home. Much less stuffy and starched than you’d get in a London hotel, but still good service.

  5. Andrew L says:

    I think we can safely say that free breakfast won’t be included if IHG get their hands on it….just the usual token free drink and bag of nuts at the bar! lol 😂

  6. “French hotel group has made so many piecemeal acquisitions over the last five years”

    It is the DNA of Accor from day one!

    Build new novotels, create ibis (a novotel minus 30% cost and rate), buy local chains or smaller competitors, discount the rooms, create the compliments loyalty programm, create the american express compliments card, close the compliments loyalty programm, close the american express compliments card, try to buy AF (oh no forget it) and keep going…

    • They nearly bought Hilton years back, did they not?

      • I do not remember they did, even only the non us company at a time.
        But they did maybe.

        What they are good at is to get the management of some hiltons or IHG hotels, and manage them under one of their accor brands.

  7. we stayed at mount nelson last year and thought i was wonderful.

  8. Very insightful article Rob, thank you. Reid’s Palace is a particular favourite of mine and I’ve also enjoyed some very memorable lunches and dinners on the British Pullman out of Victoria. I use Hilton a fair amount and am fortunate enough to have Diamond status so for selfish reasons, I’d prefer Belmond to to be bought by them although I guess the reasonably obvious home would be Accor to reunite the iconic name. It will be fascinating to see what happens. Thanks again.

  9. Graham Walsh says:

    Wonder how the hotels feel about things like AirBnB and Home Away etc, especially in the leisure side. There’re are plenty of great luxury properties that you can rent.

  10. There is just such huge variation among the Belmond properties. I rate Le Manoir extraordinarily highly, but others, notably the Hanging Gardens in Ubud have been very disappointing.

  11. Traveler says:

    For me, Belmond is a markedly stronger brand than Regent but that’s partly because Belmond is perhaps the leading luxury train chain, although obviously there are some independents which outclass Belmond in particular markets. If any purchaser drops the Belmond brand, they risk losing quite a lot of brand value. That’s particularly the case as there has already been a recent re-branding.

    The other difficulty is that if a luxury brand is added above the eponymous name of a chain, it risks devaluing the eponymous brand because it is no longer the aspirational brand within the group. Equally, if the association is made, the mundane eponymous brand is a drag on the luxury brand.

    I happen to think Marriott got that wrong. I think ‘but that’s just another Marriott brand” constrains Ritz Charlton, for example.

    I think Belmond is a difficult acquisition for many reasons.

    • Agreed – “Park Hyatt” says to me that it is just a Hyatt, so I expect no luxury.

    • philipb says:

      You are right, Traveler. Belmond is the leading luxury hotel group in the World, in my opinion. I travel only for leisure/pleasure and this year we have stayed at the Copacabana Palace in Rio, the Hotel das Cataratas at Iguassu, Reid’s Palace in Madeira and the Hotel Splendido in Portofino. All are outstandingly good ‘landmark’ hotels. The thing that differentiates them from other, larger, international chains is that Belmond allows each hotel to retain its identity. This is very important – many of the hotels have a history dating back 100 years or more. Service, housekeeping and attention to detail are exemplary, and we are always greeted with a warm welcome, and always with the words ‘welcome home’ at Reid’s Palace where we are regular visitors. Alll hotels have a high proportiom of local staff who take enormous pride in their jobs. There is none of this awful artificial ‘have a nice day’ attitude that pervades the larger international chains. We are not looking for ‘freebies’, but we often get upgraded and there are always flowers in the room and often a bottle of wine to welcome us. Little touches which are so nice. We get to know the management team at each hotel, and make a point of complimenting them at the end of our stay. We know that our loyalty and custom are highly valued. It will be sad to see the Group sold off to the highest bidder or, worst of all, broken up. In the meantime we shall continue to enjoy their lovely hotels. 2019 will see us at the Mount Nelson in Cape Town and back at Reid’s Palace.

      • Completely agree – Rob is a lover of big chains. They may be a joke in terms of international marketing, but from a guest experience they are second to none.

        Dont forget this forum is about points, not hotel quality.

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