Skift Take

The hotel company that started the boutique hotels movement in the U.S. wants to set a precedent for scaling up — without losing its soul in the process. But can it succeed?

Kimpton Hotels & Restaurants CEO Mike DeFrino first started working for Kimpton in 1992, when company founder Bill Kimpton hired him to the be the general manager of The Alexis in Seattle.

And ever since, DeFrino has been with the company that played a pioneering role in the modern boutique hotels movement in the U.S. and has since been acquired by one of the world’s largest hotel companies — InterContinental Hotels Group (IHG) in 2014.

DeFrino recently sat down with Skift to discuss the progress Kimpton has been making since the deal, as well as the future of boutique hotels, loyalty, and hospitality overall.

Since IHG’s acquisition of Kimpton, the brand has now begun to expand internationally while still maintaining its sense of independence from the larger corporation. This extends to the hotel company’s loyalty program, although next year it will be combined with IHG’s program.

As DeFrino continues to lead Kimpton, he said he’s committed to ensuring that Kimpton’s independent streak remains, and that the company can keep focusing on what it does best: running boutique hotels and restaurants.

Skift Editor’s Note: DeFrino’s comments have been edited for clarity and length.

Kimpton’s Growth

DeFrino said thanks to IHG, the brand is expanding globally.

“We opened our first hotel two weeks ago in Amsterdam. It’s our first hotel out of the United States or out of, I should say, North America, because we’ve had hotels in Canada before,” DeFrino said. “But it’s really exciting and it’s sort of a tribute to the whole Kimpton-IHG relationship because we had gone nearly 35 years without being able to spread our footprint across either ocean.

“Now we were able to put something on the map and show sort of the products of this relationship. There’ll be more to come. We opened in the Caribbean as well and we have a signing and planned opening in Paris in a few years. It took a little while for people to understand, outside of the U.S. what Kimpton is, but with IHG’s reach and their penetration in the global markets, it sort of started to bear fruit right away, so we’re pretty excited for that.”

While opening its first property outside North America, Kimpton is not neglecting the U.S.

“We’re also continuing to do what we do here in the United States. We have seven additional openings in 2017. All in U.S. cities from Denver to LA and Palm Springs and Charlotte and Nashville. All of them are new builds and we’ve never had that before.”

“We also had this hotel open last year in Grand Cayman called The Seafire and it’s done really well. People love it and it’s a beautiful hotel and it’s on some island beach. So, all of a sudden, we’re finding a lot of interest for Kimpton in resort locations and especially in the Caribbean where we sort of proved that we could pull it off and, so we have a hotel opening next year in Grenada and we think that we’ll have a few other takeovers within the next year or so. So, you know, we’re doing what we do, but we’re starting to do it in different ways and different places.”

About the Incoming IHG CEO

DeFrino said that when Keith Barr replaces Richard Solomons as CEO of IHG later this year, the transition should be a smooth one — and that Barr knows Kimpton well.

“So, the incoming CEO, Keith Barr has been part of the Kimpton acquisition and integration since day one. He’s been with IHG forever and he had such a prominent position prior to the CEO post that I don’t see a blip in that radar,” said DeFrino. “I mean, Richard [Solomons] was very happy to have Kimpton in his portfolio; he’s been a leader for us frankly, obviously for them, too, and we really enjoyed working with him. But Keith, as his sort of commercial agent has been a real business partner and thought partner and he’s in the mix. You know, he’ll probably be less in the mix with his new job, but he really got to know Kimpton well, which was kind of fun and he’s super smart and very capable and very commercially focused, so he’s got a good, a really good head.”

On Loyalty

For now, Kimpton and IHG operate two separate loyalty programs, but plans are for the two to be combined by next year.

“What we hope to do and what we’re planning on doing is maintaining the ethos of that loyalty program, that Kimpton Karma program and marrying it with the currency of IHG’s reward program, so our goal is to have the best of both worlds and be able to provide that individual treatment and sort of specialization, which I think people expect in boutique hotels, perhaps a lot more than they do from the big brands,” DeFrino said. “So, together with Kimpton Karma and IHG currency, we’ll have a tremendous reach. IHG has something like 100 million people in their loyalty program.”

IHG’s global scale will help Kimpton grow even more, said DeFrino, especially after the two loyalty programs become one.

“The thing is, since Kimpton has never been outside the United States, people don’t really know Kimpton in China or know Kimpton even in Europe very well, and we think that this will give us some street cred outside of North America,” he said. “And so, when people are booking from Shanghai and they see that it’s an affiliate, that Kimpton is affiliated with IHG, they’re going to feel good about booking that. We also think that those travelers, especially inbound travel from China is going to be more and more interested in staying at lifestyle boutique hotels or whatever we’re calling them today. So, we think we’re in the right place with sitting on a strong credible loyalty program and currency and with the Kimpton point of view and style and design and restaurants and bars, we think that sort of is the one-two punch we need.”

On Why Loyalty Programs Won’t Go Away

“I think that many travelers belong to many loyalty programs,” DeFrino explained. “So, to say that your loyalty program has a certain number of people gives no assurance that that person isn’t also in every other loyalty program. That’s one thing. For hotels, the main advantage of a strong loyalty proposition is to get more bookings on your own channel because that’s the least expensive way to book. It’s significant; it’s not just a little bit cheaper, it’s a lot cheaper. I think there’s an underlying fight with the OTAs [online travel agencies] and loyalty and, if you listen to any of the loyalty guys speak about it, they’re very transparent about that. We’re trying to serve up better offers and better, sometimes better rates or discounts I mean, whether it’s not clicking around or all the different programs that have been put forth.”

“For example,” DeFrino said, “Hyatt considers itself much more of an up and upscale brand and has less of its inventory at that midscale level. The midscale traveler whose staying at whether it’s Holiday Inns or Courtyards or whatever you’re go-to midscale brand is, those guys have to stay a lot of nights to earn a night and if they’re road warriors, they will and that’s important to them.”

DeFrino wonders about the future of loyalty, especially in the upper tiers of the hotel industry.

“What I always wonder is, as people, as rates get higher and higher and people have more freedom to book where they want, how much of their decision making is going to be loyalty based, on whether they’re getting loyalty points. Four Seasons and the super luxury hotels, they don’t do loyalty, so there is, at some point, there’s a place where people don’t care about it. And what they care about ultimately is being treated well, being recognized, being recognized for their spend with that company. I think that’s important to people. But, [loyalty programs] definitely are here to stay and there’s definitely sort of a war, but you have to stay a lot to earn a room and that’s the nature of it, and you have to book on their channels, on our channels and not on the OTAs. But the OTAs now have combatted that with their own loyalty programs, so I don’t know.”

On Keeping Kimpton’s Culture Alive

“It’s definitely a dance,” he said, talking about Kimpton being owned by such a large hotel company now. “We’ve been lucky because IHG has left Kimpton sort of independent, so we’re still sitting in our offices in San Francisco. We have a full sort of senior leadership team that report through me. We all have a counterpart in IHG that we sort of have a line of communication with, but we are really very much, other than the fact that we don’t buy real estate anymore, we are very much the Kimpton of old. A lot of my team have been around a really long time.

“We are refining the way we’re doing it. We realize that if this expansion takes root, which we’re starting to see, we’re going to need to figure out mechanisms and ways to scale Kimpton. It’s really hard to do what we do, since we’re very one at a time, every restaurant’s different, every hotel’s different. We want to maintain that that’s a really, really important part of what we do.”

“IHG’s goal is to grow Kimpton significantly all around the world and it’s our goal to make sure in that process that it’s done our way. So, we don’t have a franchise model today. And we aren’t even working on one and we are finding that our new properties in many cases are pushing up against luxury more and more, so we call it ‘luxury without the attitude’ or I think Skift’s term was ‘lean luxury,’ which I love. So, we see ourselves in that niche, so we’re finding ourselves much closer to the traditional luxury pricing and brands than we used to be and our product is much more sort of reflective of that, like this hotel. So that’s a new position for us, but we like it. It enables us to play and maybe both the upper ups go in luxury pools, so it broadens our scope a little bit. We’ll continue to be an upper upscale group or brand, but as our product gets more and more refined, it commands a better and better rate.”

On Hotel Design

What about the hospitality industry’s increased focus on design? How does that affect Kimpton?

“I certainly think that there is a heightened design interest by big brands,” he noted. “The problem is big brands that try to do high design are a little bit tricky, because we think design should be individual. So, after we build one, we throw out the blueprints and start over with the next one. I mean there’s no Kimpton out of a box, so it’s hard to scale that. It’s hard to do 20 hotels a year or 100 hotels a year or whatever it is the big brands are doing. It’s hard to do that. But that’s our level of expectation for ourselves that every hotel will be individually designed with a cadre of maybe 20 different designers in our stable and every restaurant will be individually concepted and individually designed almost always by a different designer than the hotels so that they don’t look matchy-matchy.

“We feel strongly that there should be more than one restaurant in each property. There should at least be a cocktail bar or a rooftop or something else, so more and more often we’re doing multi-concepts. And then we think that every design should be different for its location. It shouldn’t be inspired by its location where you have pictures of the empire state building on the wall when you go into New York City, it shouldn’t be sort of dorky-inspired. It should be inspired by neighborhood or history or what’s happening in that particular time.”

“Our designs also change,” DeFrino added. “We don’t leave it for 15 years. We’re refreshing somewhat perpetually, so a little bit of time with this, but also current- our designs are also getting much more modern. I think designs went sort of a little bit eclectic and maybe homey. We’re consciously not your home away from home. We want to be better than your home. We want you to come to our place and go I want to do this in my home. I want to have this, I wonder if I cannot get one of these for my home or this would look in my home. Home away from home is not what we’re shooting for, but people should be comfortable and people should be inspired. I don’t know how you do that when you take the same design and roll out 100 times that’s a little tricky. But it’s certainly better than what it was before. It’s certainly a step up for the industry.”

On Hotel Food & Beverage

Restaurants have always been an integral part of any Kimpton hotel since the very beginning and that remains the case today for the company.

“I think there’s still a long way to go in the restaurant and bar world for the industry,” DeFrino said. “We’ve always done it so it’s been important to us for a long, long time. As hotels become more social centers, people are going to stay longer in the properties. I think having more to do in a property is going to be the trend. So, whether it’s multiple restaurants, or whether it’s spas or fitness centers, or activities that you were talking about, those are all things to keep people in and I think that’s certainly a trend we’re seeing.”

“Our point of view has remained pretty much the same on how important that is for the customer experience and how that — and now the expectation that if you’re staying in an expensive fancy hotel that you better have food and drink and not just the garden grill or whatever it’s been. I think a lot of hotel companies are resigning themselves to the fact that they cannot do it and they’re leasing out a lot of their restaurants, which is better than a crappy restaurant, right?

“I mean, it makes for a little bit of an inconsistent experience sometimes, but frankly that’s in the answer, so we’re seeing a lot more competition from our restaurant group, within our restaurant group from other restaurant groups as more and more of these restaurant companies are created, more options are out there. The competition in our restaurants is steep. In that industry in general, but you know, it’s never been an easy business. And it continues to not be an easy business.”

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Tags: boutique hotels, ihg, intercontinental hotels group, kimpton

Photo credit: Kimpton Hotels & Restaurants CEO Mike DeFrino sees plenty of growth for Kimpton under IHG. Kimpton Hotels & Restaurants

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