IHG adds Iberostar resort brand

IHG has added its 18th brand by finalizing a long‑term commercial agreement with Palma de Mallorca, Spain-based resort and all-inclusive operator Iberostar. The agreement gives IHG a license to the Iberostar Beachfront Resorts brand and both parties plan to work together to further grow the brand.

Through this strategic alliance, Iberostar will retain 100% ownership while gaining access to IHG’s enterprise platform, including its distribution channels and the IHG One Rewards loyalty program. Up to 70 hotels (24,300 rooms) will be added to IHG’s system under the Iberostar Beachfront Resorts brand. Of these, 27 properties (8,200 rooms) still require additional approvals from third parties to join IHG. The total of up to 70 properties would be equivalent to a growth of 2.8% on IHG’s global estate of 880,300 rooms at the start of 2022. The first rooms are expected to come into IHG’s system in December this year, with these representing approximately half of the total rooms subject to the overall agreement.

Iberostar Grand Paraiso, Riviera Maya, Mexico

The 70 properties are all beachfront resorts and exclude Iberostar’s other operations such as its smaller portfolio of urban hotels, and also exclude Iberostar’s interests in Cuba. The approximate geographic split of revenues from the selected portfolio of 70 hotels in 2019 was: Mexico 22%; Dominican Republic 13%; Jamaica 8%; Brazil 5%; Spain 40%; other EMEAA region locations 12%. These add to IHG’s existing 260 resort properties but come in destinations where it has fewer than 20 resort properties.

A pipeline of six further Iberostar Beachfront Resorts properties, representing ~3k rooms, is also expected to be added to IHG’s pipeline.

The first properties are set to join the IHG system this December in Mexico, the Dominican Republic, Jamaica, Brazil and the Canary Islands (Spain). Further properties in Spain and other resort destinations in Southern Europe and North Africa are anticipated to join IHG’s system over the course of 2023 and 2024.

The agreement has an initial term of 30 years and the option to renew for additional terms of 20 years upon mutual agreement.

The total gross revenue of the existing portfolio of 70 hotels was approximately SU$1.3 billion in 2019, equivalent to growth of over 4% on IHG’s US$27.9 billion of total gross revenue. Under the agreement, IHG will receive marketing, distribution, technology and other fees in a manner similar to its existing asset-light model.

IHG and Iberostar sign strategic alliance (from l: Sabina Fluxá, vice chairman, CEO, Iberostar Group; Keith Barr, CEO, IHG Hotels & Resorts; Miguel Fluxá, chairman, Iberostar Group; Gloria Fluxà, vice chairman, CSO, Iberostar Group.

IHG’s fee structure will ramp up to 2025 as the hotels increasingly integrate into IHG’s platform. By 2027, representing year five of the agreement, annual revenue recognized within IHG’s fee business is expected to be in excess of US$40 million, with a broadly similar amount additionally recognized within System Fund revenues.

Reflecting integration investment, the net impact on IHG’s operating profit from reportable segments is expected to be modestly negative in 2022 and 2023. It is then expected to turn positive in 2024, before ramping up significantly from 2025 with the final step up in the fee structure and the anticipated shift in the distribution channel mix.

The Iberostar Beachfront Resorts brand will be included in a new Exclusive Partners category in IHG’s brand portfolio, which will sit alongside its Suites, Essentials, Premium and Luxury & Lifestyle categories.