IHG loses control of 103 North American hotels to Sonesta

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.

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