New brands join franchising field: InterContinental launches Hotel Indigo

Hotel & Motel Management, May 17, 2004 by Bruce Adams

ATLANTA -- Less than six months after InterContinental Hotels Group acquired its sixth brand, Candlewood Suites, the hotel company launched a new brand called Hotel Indigo.

"Hotel Indigo fills a critical void in our industry right now by addressing middle-market consumers who are trading up to higher levels of quality and taste, but still seeking value," Steve Porter, IHG's president for the Americas, said in a statement. "Defined more by a lifestyle than a price point, Hotel Indigo is our answer to travelers who desire an experience as much as a destination."

"Hotel Indigo is a lifestyle brand that is very inclusive, will constantly evolve and provide both an experience and a destination," said Kirk Kinsell, IHG's senior v.p. of franchising and business development for the Americas. "It is designed from a retailer's perspective."

Consumers want to stay somewhere that reflects who they are, in an environment that changes for them, Kinsell said. Hotel Indigo's price point will be between Holiday Inn and Crowne Plaza, although some might have higher rates than Crowne Plaza.

It will be a conversion-led brand in urban and suburban markets. Hotel Indigo properties will have about 120 to 180 guestrooms with limited meeting space and will focus on the guest experience, he said.

Jim Anhut, formerly senior v.p. and brand manager of Staybridge Suites by Holiday Inn, will lead the new brand as he takes on the new title of senior v.p., brand development. He will continue as brand manager of Staybridge Suites until a new brand manager is hired.

"Our intention is to constantly refresh and renew the hotel's customer-facing appearance," Anhut said. "We may do that through lighting, murals or paint scenes, more like a theater set than a hotel lobby. We want to be able to change it quickly, easily and inexpensively."

Anhut rejected the suggestion that Hotel Indigo will be a boutique brand, saying the company has started a new category with its lifestyle designation.

"Boutique hotels suggest exclusivity, and they can be inconsistent," he said. "They are sought by upscale and upper-upscale consumers who are looking for something different. We are looking for the broader consumer market that may be bored with what is out there and is looking to trade up.

"We want to challenge the notion that a fixed asset can't change without significant capital investment," Anhut said. "We are trying to appeal to a broader, wider market segment, and make it more fun and interesting to travel and make more people want to try hotels."

Anhut said niche products begin to surface as the industry matures. Brands that succeed are ones that identify a consumer niche that people identify with.

Hotel Indigo will be a full-service brand serving breakfast and dinner and offering seasonal menus. It will have a rooms-driven revenue stream with a limited amount of meeting and retail space. Although it will be led by conversions, there also could be new builds, Kinsell said.

"This brand meets a need voiced by the franchise community," he said. "There are a lot of hotel assets that are undervalued and there is a higher and better use out there, and this will provide that branding option."

First in line

The first Hotel Indigo is undergoing renovation in midtown Atlanta and is expected to open before the end of the year. It is owned by Diversified Peachtree Ltd., which is owned by Jack Ward and Bill Hodges of Hodges Ward Elliott, an Atlanta-based brokerage and investment-banking firm dedicated to the sale and financing of lodging properties.

"It is our dirty little secret that we own hotels," said Ward, president of Hodges Ward Elliott and co-general partner of Diversified Peachtree. "We started offloading our hotels as we focused on brokerage in the mid-1980s. We bought this hotel in 1983 and kept it."

"At one time, we owned all or part of 27 properties over the years," said Hodges, c.e.o. of Hodges Ward Elliott and managing partner of Diversified Peachtree. "We haven't bought any hotels since 1986. Today, we own three hotels. It is a potential conflict of interest to be both a broker and an owner."

Both men stressed that Hodges Ward Elliott is focused strictly on its brokerage business.

The Atlanta hotel was operating as a Days Inn until it closed in January for a $6-million renovation.

"We are doing a lot of infrastructure work, including electrical [and] plumbing [work] and gutting the bathrooms," Hodges said. "You could do an Indigo conversion for a lot less than $6 million."

Kinsell said the Hotel Indigo concept is borrowing a page from Kimpton Hotels & Restaurant's book by redeploying limited-service hotels in major cities.

"The buyer can get into these hotels from $15,000 to $50,000 per room and spend $20,000 to $50,000 per room on the renovation and get a $100 room rate for less than $100,000 per key," he said. "We are borrowing from boutique hotels as affordably cool and fashion forward."

Hodges said IHG has a solid plan.

"Almost every day, we come across an urban hotel that needs to be upbranded because the location has gotten better over time," he said. "We would have loved to make this hotel a Courtyard, Hilton Garden Inn, Hampton Inn & Suites or Residence Inn, but all those brands were taken or they don't do conversions. There is a tremendous void in the market for these types of hotels. IHG has a great idea to create value for building owners who can convert to a brand that has the backing of a strong hotel company."