Kimpton Hotels: Past, Present and Future
By John Tess President & CEO, Heritage Consulting Group | August 25, 2019
It is hard to overestimate the role of Bill Kimpton, founder of Kimpton Hotels & Restaurants, in redefining today's hotel market.
In the years just before Kimpton, the hotel industry was booming. Motels followed construction of the Interstate Highway system across the country, capturing critical and opportune sites at beltway interchanges. This new standardized product targeted vacationers and business road-warriors alike to provide a product that was clean, affordable, and consistent. At the same time, inner cities were being rebuilt through urban renewal. Tired pre-war properties were slowly transitioning into affordable privately owned housing.
Often with city financial and zoning assistance, large modern high-rise hotels with 500 to 1,000 rooms were appearing in most metropolitan areas. These concrete and glass skyscrapers formed the backbone of the burgeoning convention and meeting industry often pre-dating and serving as a precursor to convention centers. Excepting a few exceptional ersatz historic properties such as the Williamsburg Inn or The Greenbriar, the lodging industry fully embraced the tech-efficient, future-facing values of the Space Age while also placing efficiency and consistency ahead of guest services.
Amidst this industry boom, Kimpton saw opportunity. A one-time investment banker who helped Colonel Sanders take his Kentucky Fried Chicken public, Kimpton's background included helping Harry Helmsley raise $23 million in the 1970s to integrate the Villard Houses in mid-town Manhattan into a 55-story Helmsley Palace luxury hotel. A New York real estate magnate, it was only beginning in the 1970s that Helmsley began investing in hotels. Hemsley considered the Helmsley Palace to be the crown jewel of his real estate portfolio – both the building and its service ethic.
As Kimpton became familiar with the hotel industry, he saw a niche translating the "European"-style guest-centric hotel to the United States. That niche would link smaller distinctive historic buildings with modern accommodations and concierge-quality guest services. Lobbies were to be social centers and include guest social events. Hotel restaurants were not to be "hotel food," but dining destinations for locals and guest alike. On the last point, Kimpton elevated food and beverage revenue to a point where the restaurant, often headed by a celebrity chef such as Wolfgang Puck, was as important an asset to the property's bottom line as the guest rooms.
Exterior view of Hotel Monaco in Philadelphia, looking northeast at the south and west elevations
Kimpton was not the only entrepreneur to see this opportunity. In 1984, Ian Schrager and Steve Rubell adapted a smaller 1927 Manhattan hotel called the Executive into the Morgan Hotel. The Morgan Hotel concept paralleled Kimpton's and collectively created the "boutique hotel" industry – a direct counterpoint to the convention hotels and the suburban motels being built. But it was Kimpton who saw the opportunity for a national collection of boutique hotels.
His first venture was acquiring the Clarion Bedford Hotel in San Francisco and transforming it into the first boutique Kimpton hotel in 1981. In his words, Bill Kimpton felt "A hotel should relieve travelers of their insecurity and loneliness. It should make them feel warm and cozy." Based in San Francisco, the company's first expansion outside of the Bay Area was in Portland, Oregon with the Vintage Plaza Hotel in 1991 in one of its first historic adaptive reuse projects. Shortly after, it expanded to the east coast with the Hotel Monaco in Washington, D.C. and hence into most major metropolitan cities.
At the time of Bill Kimpton's death in 2001, his company owned or managed 34 hotels and 29 restaurants. Today that number is roughly doubled. Historic properties make up a significant portion, many under the Hotel Monaco sub-brand. These include landmark properties such as the original 1839 Post Office/Tariff Building in Washington, D.C., 1906 B&O Railroad Headquarters in Baltimore, and the 1913 Frederick & Nelson Department Store in Portland. Following Kimpton's death, the company continued to grow and prosper, expanding internationally, establishing new sub-brands including the Hotel Palomar, and implementing guest –friendly innovations including pet-friendly rooms, free bikes for guest use, and a nightly hosted social hour. It also was an innovator and industry leader in environmental and sustainable initiatives.
Exterior of Gray Hotel, looking south from north at main entry
Typical of the Kimpton product is the recently opened Gray Hotel in Chicago. Kimpton acquired the New York Life Building in 2014. The 14-story, 240,000 square foot renovation project involved one of the first steel-frame buildings in the United States. It was designed by noted Chicago architects Jenney & Mundie, started in 1894 – only nine years after the Home Insurance Building, considered the first steel frame building in the United States. Located at the corner of LaSalle and Monroe Streets, the New York Life Building was an important piece of Chicago's West Loop-LaSalle National Register District and a City Landmark. Yet, despite its historic importance, as recently as the mid-2000s, the building had been threatened with demolition – to be replaced with a 50-story office building. For that reason, Preservation Chicago identified it as one of Chicago's Seven Most Threatened Buildings in 2006.
Over the next two years, Kimpton spent over $120 million to create a 293 room hotel, restoring the dramatic marble ground floor lobby, updating ground floor commercial tenants, and installing ballrooms and meeting rooms on the top floor. Integral to the hotel is Vol. 39, the Kimpton Gray's upscale 2nd floor bar. It acquired its name from the building's address, 39 S LaSalle St. and the numerous refurbished laws books lining the room's bookshelves. The law volumes were found in the building's basement during The Gray's renovation and are available for guests to peruse. At the roof level is Boleo, a South American small plate lounge featuring curated live music under a retractable glass roof.
The final product was stunning. As described by Preservation Chicago's Executive Director, Ward Miller, "Kimpton came in at just the perfect time with the idea of preserving the building as a whole, without gutting it, without destroying it or having to rebuild things." At the time, Kimpton already operated four hotels - three historic - in the City. But for Nabil Moubayed, general manager of the Gray, "When we saw the beauty of the building, the historic significance of the building and knowing that we were in the main financial district of downtown, we said to ourselves, 'We can't let this opportunity get away." To that end, Katherine Keene in writing for the National Trust for Historic Preservation, noted in "A Chicago Landmark Reimagined," "As Chicago's downtown flourishes, the New York Life Insurance Building has been reborn as a testament to the history of construction and design and the importance of adaptive reuse for urban communities."
Interior of the Gray Hotel in Chicago, first floor lobby, looking west from east entrance
It was during construction of the Gray that Kimpton began charting its course into the future. Historically, the company operated as three distinct groups: real property development, hotel operations, and restaurant operations. In 2014, IHG acquired the hotel and restaurant operations for $430 million. At the time, Kimpton was the world's largest independent boutique hotel operator with 62 properties, 16 hotels in the pipeline and 71 hotel-based destination restaurants and bars. For its part, IHG managed the Hotel Indigo and EVEN hotel brands with 200 open and pipeline hotels in 19 countries. The merger anticipates the rapid growth of the Kimpton brand in the near term.
Under IHG, Kimpton maintains its proprietary brand supported by an experienced operations team in building, hotel and restaurant management and operations.
While IHG acquired the operational components of Kimpton, the development arm became KHP Capital Partners, an independent entity that develops its own properties generally under the Kimpton brand but occasionally under other brands when appropriate, such as Hyatt Unbound or the Marriott Autograph Collection. Formed in 2015 by Mike Depatie, Joe Long and Ben Rowe, the company took over management of Kimpton's KHP series of private equity funds. Based in San Francisco, the company has the goal of seeking long-term value for its investors through targeted investments in hotel real estate.
Much like its predecessor, KHP Capital often invests in the redevelopment of historic and vintage properties, but also new, ground-up construction, as well as renovating and repositioning existing hotel properties. Where it makes economic sense, projects will utilize historic preservation incentives, such as federal and state historic tax credits, in the adaptive reuse of vintage buildings. This approach has several significant challenges. The hotel development market has been bullish for the last decade.
At the same time, there is continued enthusiasm for downtown living and increasing interest in office products such as WeWorks. These factors have combined to make locating target properties difficult. KHP typically looks at well-located larger urban buildings, typically 150,000 to 250,000 square feet in size. Good properties are increasingly difficult to find. And as relates to the historic incentives, historic design review – particularly issues such as corridors – can make redevelopment more challenging.
Investments are primarily full-service boutique hotels, primarily in urban markets, and primarily in a controlling equity position. Since the inception of the first KHP fund in 1997, just under $1.3 billion has been invested in 48 projects with roughly $361 million currently in development.
Despite all the changes, the heritage of Kimpton remains very much the same. The company was born in realizing a market niche. That niche was smaller unique hotel properties embracing local flavor and superior guest experiences. Four decades since Bill Kimpton began that journey, major hotel brands have developed soft sub-brands intent on capturing that market while the next generation of hotel guest, the millennial generation, embraces its values. For its part, Kimpton continues to remain true to its originating values, using its new found corporate structures to better leverage growth and expansion without changing its DNA.
HotelExecutive retains the copyright to the articles published in the Hotel Business Review. Articles cannot be republished without prior written consent by HotelExecutive.