Starwood Capital's sale of a luxury/upscale portfolio represented a good opportunity for InterContinental Hotels to expand its luxury footprint in the UK. CEO Keith Barr obviously thinks there's plenty of room for growth in the sector.
InterContinental Hotels Group will take over operating 13 luxury and upscale hotels in the UK after Starwood Capital agreed to sell a selection of its hotels to French real estate company Foncière des Régions.
An unspecified number of the hotels will come under IHG’s as-yet unnamed upscale brand as part of Fonciere’s agreement to have IHG manage the hotels. The deal will also see the first Kimpton hotel open in the UK. The brand only has one hotel in Europe, in Amsterdam, and the rollout in the UK will likely be the start of greater expansion.
IHG said it would also use the InterContinental brand but has yet to commit to a full naming strategy for the portfolio.
Under CEO Keith Barr, who took over from Richard Solomons last June, IHG has placed a greater emphasis on growing the luxury side of its business. Earlier this year, Barr said the company was looking to buy one or more luxury brands and in March announced a deal for 51 percent of Regent Hotels.
“We are focused on continuing to expand our leadership in luxury and upscale, which are both high-value segments with significant growth potential,” Barr said.
“Bringing Kimpton to such an important market as the UK is a key part of our plans, as is the introduction of our new upscale brand, which will provide an exciting, differentiated offering to both guests and owners.
“Together with the recent addition of Regent Hotels & Resorts to our portfolio, we are building real momentum behind our plans to deliver industry-leading net rooms growth,” he added.
The end of Principal?
While the deal will see IHG expand in the UK, it is unclear what the future holds for Starwood Capital’s Principal hotel brand.
Since the economic downturn, Starwood Capital has bought a range of hotel assets, bringing them together under the Principal and De Vere brand names.
Starwood Capital launched Principal in November, 2016, and it includes 12 hotels, two of which are yet to open. The sale includes all of the Principal hotels (although IHG will only operate 11) as well as two of the De Vere hotels. Starwood is still reportedly looking to sell its remaining 13 De Vere hotels.
Starwood Capital will net $1.2 billion (€976 million) from the sale.
“This landmark transaction represents a major milestone in our remarkable journey with The Principal Hotel Company,” said Cody Bradshaw, Managing Director and Head of European Hotels for Starwood Capital Group.
“Five years ago, we embarked on an investment strategy aimed at consolidating more than 50 hotels across four different U.K. hotel companies to form a leading platform. With this sale to Foncière des Régions, we will have realized 35 asset disposals in total since our acquisition.”
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Photo credit: The Principal Manchester. Starwood is selling a selection of its hotels to French real estate company Foncière des Régions, which reached a deal with IHG to operate them. Principal Hotel Company