Hotel Mergers Enable Chains to Claim Market Share, Add Unique Properties

A combination of low interest rates (making it attractive to issue corporate debt) and a soaring travel market has led to very significant levels of hotel chain mergers and acquisitions. Large chains want to acquire smaller chains for any of several potential reasons. These may include building market share, moving into underserved parts of the world, purchasing unique and innovative companies that are well positioned for future growth, or simply growing the total size of the parent company. Large hotel chains often target boutique hotel businesses for acquisition.

For example, hotel giant IHG agreed to acquire Kimpton Hotels & Restaurants at the end of 2014. This gave IHG ownership of one of the most innovative and talked-about boutique, upscale chains in America. The purchase price was $430 million in cash. At the time, Kimpton operated 62 hotels and had another 17 in the pipeline. Kimpton’s expertise in converting existing properties into fun, hip hotels is extraordinary. While its hotel rooms have relatively expensive rates, it offers a design that appeals perfectly to younger travelers seeking a place to stay while on business, or an exciting place for a wedding. Kimpton operates a unique loyalty program that offers a lot to frequent travelers, and it features amenities such as cocktail or wine events in its lobbies each day. It is also 100% dog friendly. Its restaurants and bars are careful to feature locally sourced food and drink. For example, its downtown Portland, Oregon property features wines made nearby in the Willamette Valley.

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Hotel Mergers Enable Chains to Claim Market Share, Add Unique Properties, Business and Industry Trends Analysis

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