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IHG loses control of 103 North American hotels to Sonesta

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IHG suffered a big blow on Tuesday when it lost control of 103 hotels in North America.

This includes three InterContinental hotels – Toronto Yorkville (see below), Austin and San Juan – and five Kimpton hotels – Palomar in Washington, the Allegro and Palomar in Chicago, Monaco in Portland and Alexis in Seattle.

All 103 are owned by an investment fund called Service Properties Trust. As part of its contract to manage the hotels, IHG had guaranteed minimum payments to the owners irrespective of bookings. When it agreed the deal, IHG was clearly not expecting that bookings would ever drop as low as they did over recent months.

IHG stopped making the minimum payment of $13 million per month in July and the hotel owner filed notice. The hotels will leave IHG on 30th November.

They will apparently be rebranded as ‘Sonesta’. There are already 80 hotels under the Sonesta brand, which is parly owned by the property group which controls these 103 hotels. That said, I would be surprised if another major international brand didn’t jump in with an offer.

What I find a little surprising is that IHG was willing to sacrifice 103 properties. Losing three InterContinental hotels and five Kimpton properties – 7% of the Kimpton chain – is a big hit, and $13 million per month is not a huge sum in context. I assume that the $13 million was also offset by some income from the hotels, albeit greatly reduced, so the net loss to IHG is lower.

You can find out more in this article.

Comments (21)

  • ChrisC says:

    Rob you’ve got the wrong Toronto Hotel IC in your pic.

    Your showing the Toronto IC Centre (Front Street West) when the SVC property is the (current) IC Yorkville on Bloor Street West.

    I stayed at the Kimpton Allegro in Chicago a few years back, was a nice hotel. They gave me a rubber duck in a welcome pack and there was a bottle of wine in the room. And free WiFi as well. Had booked it via Expedia and had no status with them.

  • Mark says:

    A real shame, I visit Chicago usually at least once a year and have stayed at the Allegro twice and the Palomar once, both are really nice hotels. I’m glad that The Gray (another Kimpton in Chicago) is not owned by the same group as that’s one of my favourite places to redeem IHG points.

  • Chrisasaurus says:

    This was mentioned here a while back wasn’t it? The thought at the time being there was an undercurrent and that the 13m wasn’t the issue.

    Doesn’t the operator have a large stake in the new brand?

    • ChrisC says:

      SVC (who own the actual properties) own a third of Sonesta.

    • TGLoyalty says:

      Someone at IHG has obviosuly decided it’s not worth the effort.

      Surprised if the Kimpton or Intercontinentals don’t get picked up by someone else. However, strong the think Sonesta (who) is

  • Leo says:

    Interesting one – made an OB redemption with some small taxes paid cash. Had to cancel – which was easy to do – and got a voucher for pts + tax cash, to be used for future OB redemptions only.
    Thing is, pts would expire Dec 2020 but with voucher they are now till April 2022!

    • mr_jetlag says:

      Same here. Had points expiring 2019 in an OB booking that got vouchered – had I opted for a refund the same points would have evaporated.

  • Alex Sm says:

    Ah, what timing! My partner and I just booked flights to Sweden to save the expiring OB points. But we will perhaps keep these anyways

    • Lady London says:

      you only have to book before expiry, its fine to change the date after that flexibly until the actual ticket expires.

      I struggled to use OB points as the amount required for longhaul is many times more than for shorthaul flights and not doing enough flying to get beyond shorthaul usage. So 2 years running i booked the most likely required route 355 days ahead then just brought the date forward when I had a need. This because you can change the date but not the route.

      Did not use a couple of the tickets and they just expired. Fine with that as the option value of not getting gouged for pricing if I had an emergency need to travel on my route was priceless to me.

      • Alex Sm says:

        we don’t have that many points so we use them for shorthaul normally as taxes are not crazy either

  • Andy S says:

    Surprised to see LCY to Munich pushed back to late October., with Germany not being on the 14 day quarantine list.

    • Lady London says:

      I think 25 October is the start date of winter season so probably this is why that date keeps popping up as the projected start of things as many things must ‘renew’ then

  • Lady London says:

    Does anyone think there is more to this story on the IHG side? on the surface of it losing these hotels for the sake of a p1ddly $13 million (that can still be pursued) does not make sense. That, plus the ludicrous Accor aquuisition rumour. And IHG are financially smart.

    Has IHG discovered a black hole in its account? or is it controlled by interests or a family that would rather liquidate even at a discount now, either for family reasons or to invest in something else?

    • TGLoyalty says:

      Share price suggests the market thinks it’s in a great position back to near enough pre lockdown levels.

      Perhaps they reviewed the return from the hotelS and deemed losing £m a month For the foreseeable future wasn’t worth the potential future management fees they’d bring in?

      • Rob says:

        Apparently IHG has also lost a $100m deposit it made to secure the transaction – the debts being run up were huge. Since corona began this deal has cost it $120m+.

        • TGLoyalty says:

          One of those deals which seem like a great idea as 103 properties would never be affected all at once … there will be lessons learnt everywhere for this I imagine.

    • memesweeper says:

      > Has IHG discovered a black hole in its account?

      Perhaps they have a deeply pessimistic view of the long term future for business travel. That USD 13million needs to be continued for months and months to come. It would also set a precedent for negotiations with other hotel owners, you can be sure there’s plenty of that happening now.