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When InterContinental Hotels Group (IHG) announced on February 13 it would purchase luxury wellness hotel brand Six Senses for $300 million in cash from private equity firm Pegasus Capital Advisors, no one could have been happier about the deal than Six Senses CEO Neil Jacobs
“We’re really excited about it,” Jacobs told Skift this week, primarily because of IHG’s strength in distribution and information technology, as well as development.
And although IHG’s Six Senses acquisition is just one of many in a string of high-profile purchases that massive hotel conglomerates — IHG included — have made in the last five years, Jacobs is convinced it’s one where the Six Senses brand can remain, more or less, as it is.
“The commitment from senior leadership at IHG is very much to let us continue doing what we do,” he explained. “They have been very clear about not wanting to change the DNA of the company or have us go into other areas; they want us to stay focused on what we’ve been doing for the last six or seven years: to get all those hotels open that are under development, and grow the company the way we’d always planned to grow it. I see that as really positive.”
Likewise, on the day the deal was announced, an IHG spokesperson told Skift: “We intend to maintain Six Senses’ unique and special culture, just as we did with Kimpton. We will preserve the DNA of the brand and retain key talent, adding our scale and systems to drive future growth. As was the case with our acquisition of Regent, our deal for Principal Hotels in the U.K., and our acquisition of Kimpton, we are mindful to combine the best of IHG with the best of the Six Senses brand.”
It’s not only a relief for Jacobs and his team at Six Senses, but for other industry observers, too.
“IHG’s brand mantra for stewardship of Six Senses must be: Don’t screw it up,” Chekitan S. Dev, professor of marketing at Cornell University’s School of Hotel Administration in the SC Johnson College of Business. “I am not as concerned about this [as other hotel acquisitions] as IHG has a recent track record of acquiring brands and letting them thrive with a light touch.”
The Kimpton Model
Dev also pointed to IHG’s purchase of Kimpton as a prime example. “The Kimpton acquisition is a good example of this.”
When IHG announced it would buy Kimpton in 2014, the Kimpton brand was only present in the U.S. and had a portfolio of a little over 60 hotels. Today, the number of Kimptons worldwide is approximately the same, with 66 hotels by the end of 2018. However, its pipeline is much deeper, with 27 deals in progress. And not only that, but the Kimpton brand is now global, with properties opening in the Caribbean and in Europe.
When Skift spoke to IHG CEO Keith Barr in January about his strategy for mergers and acquisitions — including a potential purchase of Six Senses — Barr said he couldn’t discuss any deals in particular, but he summarized IHG’s M&A strategy as the following: “We want to make sure that we’re buying great brands that are well positioned in the market that we can then scale up and that are a good fit for our portfolio.”
He added, “The Kimpton model is a good example because we were a little bit slower [in growing the brand] than we wanted, but we’re realizing the business case we made now. I mean, Kimpton could have never gone to London, Paris, Tokyo, or Bali [without having been bought by IHG in 2015].”
Barr said that during a recent phone call with Kimpton CEO Mike DeFrino, DeFrino told him, “I’m really seeing the benefits of being part of IHG now, in terms of we are being asked to bid on deals that we would have never been asked before because of the power of the enterprise.”
And Barr said he and IHG are committed to letting Kimpton remain the boutique brand it’s always been since inception, even if that’s something a larger hotel company like IHG isn’t used to doing.
“That’s hard for us to do because we love scale,” Barr said. “Let’s be honest about it. With Avid [IHG’s newest select service brand], for instance, it plugs into the enterprise, and it works that way. Kimpton’s not that way. They’re still based in San Francisco.”
In terms of what has been integrated with Kimpton, Barr said it’s been limited to “back office” affairs, but “nothing customer facing.”
“We put them into our systems and channels, but they control the marketing and tone of voice,” Barr explained. “So, what we try to do is give them the power of the IHG enterprise, but not try to make Kimpton just another part on the shelf. We recognize the unique way of selling it, the unique way of running it. If I just treat Kimpton like it’s another one of the brands, we’ll sell it. But there’s an esprit de corps to that team, there’s a culture in that group. You have to maintain and protect that.”
As for the hotel owners of Six Senses-branded properties are concerned, Jacobs said that each and every one of them has been pleased with the deal thus far.
“Without exception, all of our owners of all the different hotels — even some of whom I thought would be concerned — all see it as positive,” Jacobs said. “We’ve talked to every single one. As long as the people remain intact and the DNA of the company intact which is really what you’re talking about, they’re happy about it.”
Jacobs also said that all senior leadership at Six Senses is being retained and has entered into new agreements with IHG.
In total, Six Senses has 16 hotel properties and 18 under development, including its first North American hotel, set to open in New York City’s Chelsea neighborhood. Six Senses also has a total of 37 spas.
A Smart Buy
Dev applauded IHG’s decision to buy up Six Senses before anyone else did.
“Six Senses is a smart and timely addition to IHG’s brand architecture with tremendous growth potential,” Dev noted. “Six Senses has a unique point of view, fills a gap in the IHG brand portfolio, and does not cannibalize IHG’s other brands.”
Moreover, he said, it’s “brave, relevant, authentic, novel, and distinct.” In other words, it stands for something.
“It is among a handful of hotel brands that bravely positioned itself as a brand that does good and does well. Its relevance comes from offering ‘new luxury,’ which includes wellness and sustainability. With the increasing interest in wellness globally, the growth potential for Six Senses under IHG’s stewardship is unlimited,” Dev added.
Wellness tourism, according to the Global Wellness Institute, represents a $639 billion industry, and is poised to continue to grow. And IHG isn’t the only major hotel company to see the importance of wellness as a space for expansion: Hyatt has also invested heavily in wellness brands, buying up Miraval and Exhale in 2017 to augment its wellness offerings.
What Happens Next
Jacobs said that, at the moment, the integration process is just beginning, but already he’s seeing the potential synergies between both brands.
“They’ve already introduced us to a few deals and developers,” Jacobs said. “They sent over the leads and we talked to some people. We’ve also come up with some deals we wouldn’t do necessarily but perhaps that could work for one or two of the IHG brands. There are synergies that work both ways relative to growth as well.”
No process is ever perfect when it comes to the merging of two companies, especially when a smaller independent is bought out by a much larger, more corporate entity, and the hotel industry has seen its recent share of challenging integrations. Still, Jacobs said that so far, he remains optimistic about Six Senses finding a new home within IHG.
“There’s a humility about them and an understanding about them. They are very respectful in how they interact with us and they are very mindful of not coming across in any way as heavy handed. It’s just not in their nature. We are all feeling pretty good.”
UPDATED: This story was updated to reflect that Six Senses’ new New York City hotel will be in Chelsea, not Hudson Yards.