Kimpton's Boutique Strategy
Michael Depatie, president and CEO of Kimpton Hotels & Restaurants, is at the center of the boutique hotel trend. In April, Kimpton announced it had closed on a $246-million institutional real estate fund, Kimpton Hospitality Partners II. The fund plans to acquire more than $800 million worth of hotels over the next three years and build new boutique hotels in select urban markets and resort areas. Matt Valley, editor of Lodging Hospitality's sister publication National Real Estate Investor, recently spoke with Depatie about trends in the boutique hotel sector:
NREI: Who are the fund investors, and what returns can they expect?
Depatie: Ninety percent of the investors in the fund are college endowments, and about 10 percent are individuals that have been investing with us for about 25 years. As we look at individual assets to buy, we are looking for leveraged return on equity of anywhere from 15 to 25 percent, depending on the risk of the asset that we're buying. A development project is going to have a higher return. A seven- to 10-year hold would be a typical hold period.
NREI: What are Kimpton's hallmarks?
Depatie: Our model in the past typically has been to take an older, underutilized building in a major urban area — such as an office building, department store, warehouse — gut the inside, and put in its place a 4-star or 4.5-star highly designed boutique hotel paired with a chef-driven restaurant. That model has worked really well. Now the model has morphed to include new development and adaptive reuse of underutilized hotels.
NREI: What makes Kimpton unique?
Depatie: Two guys on a cellphone can go out and buy a piece of land, hire a designer and build what they think is a boutique hotel, and maybe get someone to run a restaurant next door. What really makes Kimpton unique is the programs we offer, from being eco-friendly to pet-friendly. We have a 24-hour wellness channel with things like Pilates, yoga and meditation. We have a free wine hour every night. We have a caring group of people that run our hotel operations, who have a way of connecting with our customers in an authentic and meaningful way.
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