BERLIN (Reuters) - Intercontinental Hotels Group (IHG.L) is interested in smaller deals to expand its portfolio, but won’t be growing for the sake of it, its chief executive told Reuters on Monday.
Consolidation in the hotel industry heated up late last year, with Marriott (MAR.O) announcing plans to purchase Starwood HOT.N and France’s AccorHotels (ACCP.PA) agreeing a deal for FRHI, the owner of luxury hotels such as London’s Savoy.
“We are very big, one of the biggest in the world even after consolidation. So we have sufficient scale,” Richard Solomons said on the sidelines of the IHIF hotel investment fair in Berlin.
Solomons said IHG would probably be interested in doing further smaller deals, similar to its $430 million purchase of boutique brand Kimpton, agreed at the end of 2014.
“For us, we’re quite likely to look at other deals like a Kimpton-type deal, which is small. We can add value quickly, rather than just adding a business because we want to be bigger,” he told Reuters.
IHG runs over 5,000 hotels under brands such as Crowne Plaza, Holiday Inn and InterContinental and Solomons pointed to industry data showing that IHG has 5 percent of the world’s hotel rooms and 15 percent of the development pipeline for new hotel investments.
He said IHG was not worried about becoming a takeover target itself. “If somebody comes along and wants to make a bid, the board will look at it. We’re certainly not seeking it but as a public company that’s the world you live in.”
Analysts have said IHG lags rivals in terms of net room growth because it removes more rooms from across its brands in comparison with rivals.
Solomons said IHG was more interested in the quality of its portfolio, not quantity. “We could grow faster, but we won’t compromise quality,” he said. “It’s not about a dash for growth.”
Shares in IHG and rival Accor, which have performed strongly over recent weeks, dropped on Monday after Citi downgraded the two companies, citing a slowing global economy.
Solomons said he remained bullish on China in the medium to long term and said hotel companies would continue to grow because travel demand was growing.
Attacks and disasters were something the industry was used to dealing with, although Paris was still suffering from lower demand following attacks there last year.
“Business is performing well, Europe has been very strong,” he said.
Reporting by Victoria Bryan; Editing by Harro ten Wolde, Greg Mahlich