IHG/Kimpton Lose Massive Capacity in San Francisco After Properties Exit The Chain

IHG Hotels seem to have lost the majority of their Kimpton Hotels in San Francisco. As of right now there are only two properties left that can be booked.

Unfortunately out of the vast nine hotels portfolio, only The Buchanan and the Sir Francis Drake Hotel are remaining at the disposal of the customers. That is too bad!

I’ve been looking this up since I’ll be visiting California in two months time and I really love the Kimpton Hotels as they provide a refreshing break from the ‘run of the mill’ business hotels of the big chains. I was confused and curious where all these properties went so I did some research. Apparently the loss of these hotels was not all voluntarily.

Let’s keep in mind, IHG just purchased Kimpton back in 2014 (John wrote about it here). So why all these changes and cut in capacity?

I’ve found an article from Hotel News Now (access here) that shines a lot of light on it.

Seven Kimpton Hotels & Restaurants properties located in San Francisco exited the InterContinental Hotels Group system due to union issues, according to Richard Solomons, IHG’s CEO.

The properties combined represented an annual fee revenue of $6 million, according to a news release….

In response to one analyst question in which it was mentioned that the San Francisco exits of the Kimpton acquisition totaled approximately 10% (actually, 11.3% of the 62 properties in the original buy), Solomons said the deal always had involved a lot of moving parts.

“We did take the perspective when we bought Kimpton as to whether all the Kimpton properties would remain, and the San Francisco ones were ones we identified as those that would possibly leave,” Solomons said. “It is localized. It is not representative of the broader business,” added Paul Edgecliffe-Johnson, IHG’s CFO.

The seven exits include the San Francisco’s Hotel Monaco and Hotel Palomar, which on 16 and 28 July, respectively, left the Kimpton portfolio.

From this I take that the local San Francisco Union that represents the hotel workers (UNITE HERE Local 2) is not happy with some of the decisions and actions undertaken by IHG management and their partners (property owners).

I was able to discover a press release of the Union on BusinessWire (access here).

During the past five weeks, LaSalle Hotel Properties, Pebblebrook Hotel Trust, and InterContinental Hotels Group have taken extraordinary steps to evade contractual commitments pertaining to hotel employee organizing rights in San Francisco. This has created a climate of uncertainty and disruption at seven prominent San Francisco hotel properties. …

On June 17, 2015, UNITE HERE Local 2 requested that IHG uphold its contractual commitment to remain neutral in the event of union organizing drives at seven hotels newly managed by the company through its recently-acquired subsidiary, Kimpton Hotels & Restaurants. Three weeks after sending the request, Local 2 learned that operation of these hotels – three of which are owned by LaSalle and four by Pebblebrook– was to be transferred to new management companies. Among the affected hotels are the first Monaco-branded and the first Palomar-branded properties in the Kimpton chain. …

The union has learned that numerous employees have lost their jobs due to the actions of these three companies. In addition, the combined efforts of LaSalle, Pebblebrook and InterContinental have undermined an established standard that has promoted labor peace in San Francisco hotels.

Where will the parties go from here? Well at least as far as these properties are concerned I’d say they are gone for good, which is a shame because some of them were really nice. Maybe IHG/Kimpton will be able to sign new properties at some point in the future.

Conclusion

I’m not living in California anymore but I still remember that the highly unionized employment situation in the hospitality industry made plenty of headlines with strikes and picketing every left and right.

I don’t want to put a personal notion on it in how far IHG and their partners did right or wrong in this case but at least the statements as quoted provide us with some background on why these seven Kimpton hotels have vanished. I’m curious to see if any acquisitions will be made in the near future.