IHG Adds Iberostar Brand in Licensing Deal That Expands Its Beach Presence

InterContinental Hotels Group (IHG) said on Monday that it had added Iberostar Hotels & Resorts as a new brand through a 30-year licensing deal that lets IHG market the all-inclusive hotels and resorts. "Up to 70 hotels," equal to about 24,300 rooms, will become bookable through IHG’s website and app under the Iberostar Beachfront Resorts brand — the 18th IHG brand.

IHG, based in the UK, and Iberostar, a family-run company based in Palma de Mallorca, Spain, didn't disclose the deal terms. Iberostar will remain the full owner of itself, but IHG will charge Iberostar fees. The total gross revenue of the existing portfolio of roughly 70 hotels was about $1.3 billion in the pre-pandemic year of 2019.

"This agreement increases IHG’s system by up to 3 percent, which helps to deliver on our ambitions for system growth," said IHG CEO Keith Barr in a statement. The additional properties will help the company meet IHG's planned target of about 4 percent year-over-year room growth for 2022.

The first properties will begin joining the IHG system by year-end, starting with ones in Mexico (representing 22 percent of the portfolio), the Dominican Republic (representing 13 percent), Jamaica, Brazil, and the Canary Islands (Spain). IHG will add the other resorts in Spain (representing 40 percent) and Southern Europe, and North Africa over the next two years.

The total gross revenue of the 70 properties was equal to a growth of more than 4 percent on IHG’s gross revenue of $27.9 billion.

Adding the 18th brand will generate a modest hit to IHG's profits in the short term, with undisclosed net losses expected for this year and next. The licensing agreement will start adding to IHG's margin in 2024 — if all goes according to plan — as IHG ramps up the marketing, distribution, technology, and related fees it will charge Iberostar. IHG forecasted that its fee business in 2027 will generate more than $40 million a year, plus an equivalent amount in the company's financial reserves for its loyalty program.

Adding properties over time could adjust the profitability predictions.

"By working together, we will grow our portfolio," said Sabina Fluxá, Vice-Chairman and CEO of Iberostar Group.

The marketing contract comes as more global hotel companies closely examine the resort and all-inclusive hotel segment. A year ago, Hyatt closed its $2.7 billion acquisition of Apple Leisure Group. In 2019, Marriott announced an $800 million multi-pronged push into all-inclusives.

Other potential all-inclusive resort and beachfront hotel companies that may become the targets include Playa Resorts and Sandals.