REG - Interco. Hotels Grp - IHG Hotels & Resorts acquires Ruby

Intercontinental HotelsAnnouncement

18/02/2025 07:15

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RNS Number : 4277X  InterContinental Hotels Group PLC  18 February 2025

18 February 2025

 

 

IHG Hotels & Resorts acquires Ruby, its 20(th) brand, and targets global
expansion

 

 

InterContinental Hotels Group PLC (IHG) has acquired from Ruby SARL the
Ruby(TM) brand and related intellectual property for initial purchase
consideration of €110.5m (~$116m(1)). Ruby is a premium urban lifestyle
brand for modern travellers in must-visit city destinations and provides hotel
owners with space-efficient designs and an attractive, flexible concept that
IHG expects to rapidly expand globally.

 

Established in 2013, the Ruby brand currently operates 20 hotels (3,483 rooms)
in major cities across Europe and has another 10 pipeline hotels (2,235
rooms). There are 9 hotels open in Germany (across Cologne, Dusseldorf,
Frankfurt, Hamburg, Munich and Stuttgart), 3 in the UK in London, 3 in Austria
(Vienna), 2 in Switzerland (Geneva and Zurich), and 1 in each of Italy,
Ireland and the Netherlands. The pipeline hotels are set to open over the next
three years across more European cities including Edinburgh, Marseille, Rome
and Stockholm.

 

Ruby hotels offer a stylish yet relaxed charm, blending soulful design and
authentic stories rooted in the cities they call home. The brand's 'Lean
Luxury' approach includes signature touches ranging from a great bed and
shower in guest rooms created with restoration and relaxation in mind, to
unique cocktails in destination 24/7 bars, all coming together to connect
guests with sought-after cities at the right price.

 

As our 20(th) brand, Ruby will extend IHG's appeal to modern,
lifestyle-focused travellers, and offers hotel owners a cost-efficient and
highly adaptable premium hotel concept, in an industry segment characterised
by high barriers to entry and space constraints, often referred to in the
industry as 'urban micro'. Efficiencies for owners are delivered through
space-saving designs and a high degree of operational standardisation and
automation, including self-service kiosks for speedy check-in.

 

Ruby is already well-established in Europe and has proven to be successful for
both new build locations as well as being highly conversion-friendly,
including for adaptive re-use across a range of commercial property types,
with several successful office conversions. Reflecting this, the Ruby brand
has achieved a net system size compound annual growth rate (CAGR) of 26% over
the last five years. The seller of the brand anticipates growing their
portfolio of Ruby-branded hotels substantially further, and IHG expects to
grow the brand with other hotel owners in Europe and globally. This builds
upon IHG's proven track record of successfully internationalising brands that
it has organically developed and acquired. IHG expects to have the Ruby brand
ready for development in the US by the end of the year.

 

Joining forces with IHG allows Ruby hotels to draw on a powerful enterprise
platform of distribution and technology systems, as well as one of the world's
biggest and most powerful hotel loyalty programmes, IHG One Rewards. IHG
expects the urban micro sub-segment to continue experiencing strong demand
from travellers around the world, and this in turn would support ongoing rooms
supply growth at higher rates than the global hotel industry. IHG is targeting
the Ruby brand to grow to more than 120 hotels over the next 10 years and
accelerate to more than 250 over 20 years across owners globally.

 

 

Elie Maalouf, Chief Executive Officer, IHG Hotels & Resorts, said:

 

"We are delighted with the acquisition of Ruby, which further enriches our
portfolio with an exciting, distinct and high-quality offer for both guests
and owners in popular city destinations. This acquisition demonstrates our
focus on building our presence in large, attractive industry segments and
using our experience of integrating and growing brands and hotel portfolios.
The urban micro space is a franchise-friendly model with attractive owner
economics, and we see excellent opportunities to not only expand Ruby's strong
European base but also rapidly take this exciting brand to the Americas and
across Asia, as we have successfully done with previous brand acquisitions."

 

 

Michael Struck, Founder and CEO of The Ruby Group, added:

 

"We have carefully selected IHG as the right partner to take the Ruby brand
and our international expansion to the next level. IHG's distribution
powerhouse, the fact that Ruby perfectly complements IHG's portfolio, and its
proven track record of successfully preserving identity and culture when
integrating brands gives us great confidence as we embark on this next chapter
together. Combining the global reach and resources of IHG with the efficiency
advantages of our operational and construction model will drive superior
returns for our investors and real-estate partners, alike. Also, the timing
could not be better. Our unique solutions for efficient adaptive re-use of
office space are in high demand, positioning us for strong growth."

 

Further details on the acquisition agreement and financial overview:

 

·      Initial purchase consideration of €110.5m (~$116m(1)) for IHG
to acquire the Ruby brand and related intellectual property consists of an
upfront payment of €109.9m that has been paid on completion of the
transaction and a fixed deferred payment of €0.6m payable upon approximately
half the hotels joining IHG's system.

·      As part of the master franchise and development agreement with
Ruby, initial franchise fees receivable by IHG from the current 20 open hotels
and the current pipeline of 10 hotels (which are all expected to open by the
end of 2027) are anticipated to be approximately $8m in 2028, which would be
the first full year when all 30 hotels would be in IHG's system.

·      Taking into consideration further development by the seller to
open more hotels beyond their current pipeline, together with IHG's plans to
expand the Ruby brand with other hotel owners globally, franchise fees by 2030
are anticipated to be in excess of $15m.

·      The seller's operating company is not being acquired by IHG and
will continue to operate the current open hotels and any future hotels that
the seller develops under the brand.

·      Open, pipeline and all future Ruby hotels operated by the seller
will enter into individual franchise agreements with IHG and pay to IHG brand
royalty fees and System Fund fees.

·      To incentivise further growth in the brand by the seller,
potential additional payments ranging from €nil up to €181m ($190m(1)) may
become payable in 2030 and 2035. Future payments are contingent on the number
of Ruby-branded rooms operated by the seller at the end of the preceding year.
A payment of €9m ($9m(1)) would be paid to the seller if they grew to
operate in excess of 10,000 Ruby-branded rooms. This scales up to the maximum
potential total if they grew to in excess of 20,000 rooms, a scale that is
approximately six times bigger than the current open hotels. IHG's planned
growth of the brand with other hotel owners is excluded from the calculation
of any potential additional payment to the seller.

·      The integration of all 20 currently open Ruby hotels into IHG's
system is expected to commence later in 2025 and be completed by 31 March
2026. This would increase IHG's global system size by approximately 0.3%. The
current pipeline of 10 hotels when open would add a further ~0.2% to IHG's
system.

·      Integration operating costs for IHG of approximately $10m are
expected to be incurred in 2025. Including further one-time costs, in 2026 a
broadly breakeven contribution to IHG's operating profit is anticipated, with
growth in profitability forecasted thereafter.

 

Notes:

 

(1) Converted at an exchange rate of €1:$1.05, using the approximate rate as
at 14 February 2025

 

------ ends ------

 

About IHG Hotels & Resorts:

IHG Hotels & Resorts (https://www.ihgplc.com) (tickers: LON:IHG for
Ordinary Shares; NYSE:IHG for ADRs) is a global hospitality company, with a
purpose to provide True Hospitality for Good.

 

With a family of 19 hotel brands and IHG One Rewards
(https://urldefense.com/v3/__http:/email.investis.com/ls/click?upn=T-2Fn3OVRavEvfp-2BcwHA4A99imKpoqIJxvmXwKaaQPh-2F0-3DygFb_ojq2lu66bX8JNKV7VmBiOZ2gLVi27eAYFqE40NVToEeeHiYKncxdBspif1mQlBK7ih-2B5rzYsrNnDqgQn1wszyhe5xRGUvld0NWW3KwpUnWtxiJsqB0ttFTF4eNwtEIP6Oq8lyDW5KoQFtyJe-2Bm18YjgiHAhr23RBEd1PKOwFYY8z7PScBuJSe1ztaC6p56jTzGST-2Fvc-2BetCMz1pPnnGDUjyivzqA2pH29Vmiz8T-2BmmunkBHoR5LSxI1VjgVEsv7cApWyuKiG8-2BGNJnO5ejYTcA-3D-3D__;!!EOxaMA!CjjXZ7KAZ7idANJdcoLB7daWoS810tckeGbds16Y8bqw50-1iPUaVwYwmb01-ewc$)
, one of the world's largest hotel loyalty programmes, IHG has over 6,600 open
hotels in more than 100 countries, and a development pipeline of over 2,200
properties.

 

-     Luxury & Lifestyle: Six Senses Hotels Resorts Spas
(https://www.sixsenses.com/) , Regent Hotels & Resorts
(https://www.regenthotels.com/) , InterContinental Hotels & Resorts
(http://www.intercontinental.com/hotels/gb/en/reservation) , Vignette
Collection (https://www.vignettecollectionhotels.com/) , Kimpton Hotels &
Restaurants (https://www.ihg.com/kimptonhotels/hotels/gb/en/reservation) ,
Hotel Indigo (http://www.ihg.com/hotelindigo/hotels/gb/en/reservation)

-     Premium: voco hotels
(https://www.ihg.com/voco/hotels/gb/en/reservation) , HUALUXE Hotels &
Resorts (https://www.ihg.com/hualuxe/hotels/gb/en/reservation) , Crowne Plaza
Hotels & Resorts (http://www.ihg.com/crowneplaza/hotels/gb/en/reservation)
, EVEN Hotels (http://www.ihg.com/evenhotels/hotels/us/en/reservation)

-     Essentials: Holiday Inn Express
(http://www.ihg.com/holidayinnexpress/hotels/gb/en/reservation) , Holiday Inn
Hotels & Resorts (http://www.ihg.com/holidayinn/hotels/gb/en/reservation)
, Garner hotels (https://www.ihg.com/content/us/en/garner-hotels) , avid
hotels (https://www.ihg.com/avidhotels/hotels/us/en/reservation)

-     Suites: Atwell Suites (https://www.atwellsuites.com/) , Staybridge
Suites (http://www.ihg.com/staybridge/hotels/gb/en/reservation) , Holiday Inn
Club Vacations
(https://www.ihg.com/holidayinnclubvacations/hotels/us/en/reservation) ,
Candlewood Suites (http://www.ihg.com/candlewood/hotels/us/en/reservation)

-     Exclusive Partners: Iberostar Beachfront Resorts
(https://www.ihg.com/content/us/en/iberostar-beachfront-resorts)

 

InterContinental Hotels Group PLC is the Group's holding company and is
incorporated and registered in England and Wales. Approximately 385,000 people
work across IHG's hotels and corporate offices globally.

 

Visit us online for more about our hotels and reservations
(http://www.ihg.com) and IHG One Rewards
(https://urldefense.com/v3/__http:/email.investis.com/ls/click?upn=T-2Fn3OVRavEvfp-2BcwHA4A99imKpoqIJxvmXwKaaQPh-2F0-3DygFb_ojq2lu66bX8JNKV7VmBiOZ2gLVi27eAYFqE40NVToEeeHiYKncxdBspif1mQlBK7ih-2B5rzYsrNnDqgQn1wszyhe5xRGUvld0NWW3KwpUnWtxiJsqB0ttFTF4eNwtEIP6Oq8lyDW5KoQFtyJe-2Bm18YjgiHAhr23RBEd1PKOwFYY8z7PScBuJSe1ztaC6p56jTzGST-2Fvc-2BetCMz1pPnnGDUjyivzqA2pH29Vmiz8T-2BmmunkBHoR5LSxI1VjgVEsv7cApWyuKiG8-2BGNJnO5ejYTcA-3D-3D__;!!EOxaMA!CjjXZ7KAZ7idANJdcoLB7daWoS810tckeGbds16Y8bqw50-1iPUaVwYwmb01-ewc$)
. To download the IHG One Rewards app, visit the Apple App
(https://apps.apple.com/us/app/ihg-hotel-deals-rewards/id368217298) or Google
Play (https://play.google.com/store/apps/details?id=com.ihg.apps.android)
stores.

 

For our latest news, visit our Newsroom
(https://www.ihgplc.com/en/news-and-media) and follow us on LinkedIn
(https://www.linkedin.com/company/ihghotels&resorts/) .

 

Cautionary note regarding forward-looking statements:

This announcement contains certain forward-looking statements as defined under
United States law (Section 21E of the Securities Exchange Act of 1934) and
otherwise. These forward-looking statements can be identified by the fact that
they do not relate only to historical or current facts. Forward-looking
statements often use words such as 'anticipate', 'target', 'expect',
'estimate', 'intend', 'plan', 'goal', 'believe' or other words of similar
meaning. These statements are based on assumptions and assessments made by
InterContinental Hotels Group PLC's management in light of their experience
and their perception of historical trends, current conditions, expected future
developments and other factors they believe to be appropriate. By their
nature, forward-looking statements are inherently predictive, speculative and
involve risk and uncertainty. There are a number of factors that could cause
actual results and developments to differ materially from those expressed in
or implied by, such forward-looking statements. The main factors that could
affect the business and the financial results are described in the 'Risk
Factors' section in the current InterContinental Hotels Group PLC's Annual
report and Form 20-F filed with the United States Securities and Exchange
Commission.

 

About The Ruby Group

 

The Ruby Group under the leadership of founder and CEO Michael Struck is
breaking new ground with its Lean Luxury philosophy. With a lean
organisational structure and concentration on the essentials, Ruby succeeds in
creating a contemporary, accessible form of luxury for modern, cost and
style-conscious customers. Founded in 2013, the group operates 20 Ruby hotels
across Europe, with an additional 10 hotels currently under construction or in
the planning phase. Ruby also offers Ruby Workspaces - perfectly equipped
workplaces and a creative atmosphere with access to an inspiring office
community. Financially strong shareholders support Ruby's expansion: ECE
Group; the Austrian Soravia Group; Franger Investment, a German family office;
Ocean Redstone, a private equity fund; the entrepreneur Michael Hehn; and
Michael Struck jointly hold the company shares.

 

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