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The next time you’re searching IHG.com for accommodation in North America you may find that a number of properties you’ve been used to seeing in the past are no longer there. This isn’t a glitch or a temporary system error, it’s because IHG has just lost over 100 of it’s North American properties to a considerably smaller operator.
Back in July, “Service Properties Trust” (SVC) which owns 103 hotels that have been under IHG management, issued a notice to terminate all 103 agreements following what the company described as “IHG’s failure to pay SVC approximately $8.4 million of required priority return for the month of July 2020“. The notice to terminate gave IHG 30 days (until 24 August 2020) to come forward with the outstanding monies due (as well as accrued interest) and pointed out that a further $17.4 million was due on 1 August.
Well, 24 August has come and gone and yesterday SVC issued a statement to say that, following IHG’s failure to pay the $26.4 million due (that figure appears to include accrued interest), it will transfer the branding and management of all 103 of its properties from IHG to Sonesta International Hotels Corporation as of 30 November 2020.
81 of the properties in question are long-stay properties (the full list of 103 properties can be viewed on MilesTalk), but that still leaves 22 full-service properties that IHG looks to be losing and there are InterContinentals and Kimptons within that list of 22 as well a sa few key airport properties too:
- InterContinental San Juan
- InterContinental Toronto Yorkville
- InterContinental Stephen F Austin Hotel
- Kimpton Hotel Palomar Washington DC
- Kimpton Hotel Allegro Chicago
- Kimpton Hotel Palomar Chicago
- Kimpton Hotel Monaco Portland
- Kimpton Hotel Alexis Seattle
- Crowne Plaza Atlanta Airport
- Crowne Plaza Atlanta Perimeter at Ravinia
- Crowne Plaza Charlotte
- Crowne Plaza Columbus
- Crowne Plaza Denver
- Crowne Plaza Los Angeles Airport
- Crowne Plaza Miami International Airport
- Crowne Plaza Milwaukee West
- Crowne Plaza Redondo Beach & Marina
- Crowne Plaza San Jose Silicon Valley
- Crowne Plaza White Plains Downtown
- Holiday Inn & Suites Chicago OHare Rosemont
- Holiday Inn Anaheim Resort Area
- Holiday Inn Atlanta Airport South
Leaving aside just how big of a loss these properties will be to IHG (I have no idea as I don’t know what IHG’s financials look like) or how much of a blow it will be to some IHG loyalists to lose some of these properties as an option, the more interesting aspect of this move by SVC is it’s stated plan to move all these properties under the wing of Sonesta – a hotelier that’s incredibly small compared to IHG (it operates just 80 properties, mostly in the United States) and a hotelier that’s not exactly very well known. Does SVC seriously mean to rebrand all 103 properties as Sonesta properties? That would seem unlikely.
Sonesta already has a “suites” brand (Sonesta ES Suites) so I can see the Candlewood and Staybridge properties fitting in under that umbrella…but the addition of 81 former IHG long-stay properties to Sonesta ES Suites will see that brand grow by almost 200% – does Sonesta even have the resources to take on such a project?
Also, the InterContinental and Kimpton brands bring with them a level of recognition and brand-power which can be used to attract guests with sizeable disposable incomes. Rightly or wrongly, the name “Sonesta” doesn’t have the same level of caché as either of the IHG brands so I’m struggling to see how any of the IC or Kimpton properties are going to come out of this without taking a hit to their bottom line.
IHG has been noticeably mostly silent through all of this (at the time of writing there’s no reference to this on the parent company’s press page) but Hotel News Now managed to elicit these comment from an IHG spokesperson [HT: khabah via Flyertalk]
“As the industry continues to recover from the unprecedented impact of COVID-19, IHG is committed to remaining in sound financial condition by reducing costs and protecting cash flow, ensuring our management agreements are in line with this approach,”
“As we noted in our half-year results earlier this month, we are well capitalized and maintain a total available liquidity of $2 billion.”
That doesn’t really give us too much information but as there doesn’t seem to be any denial that SVC is owed the funds it’s demanding, it sounds like IHG simply decided not to pay what it owes as it looks to preserve liquidity. If I was a hotel owner whose properties were managed by IHG I’m not sure I’d be sleeping very well right now.
Assuming there’s no last-minute change of heart or deal, it looks as if IHG will be losing 103 of its North America properties from 30 November 2020. I’m yet to be convinced that SVC will rebrand all 103 of these properties under the Sonesta brand but I may well be wrong and that may well be exactly what happens. We’ll have to wait and see.
Featured Image: Kimpton Palomar Washington DC courtesy of IHG