IHG Hotels & Resorts Acquires Ruby, Its 20th Brand, And Targets Global Expansion

IHG Expands with Ruby Acquisition

InterContinental Hotels Group PLC has acquired the Ruby brand and its related intellectual property from Ruby SARL for an initial payment of €110.5 million (around $116 million). Ruby represents a premium urban lifestyle brand for contemporary travellers in significant cities. It provides hotel owners with space-efficient designs, a concept that IHG expects to expand globally.

Founded in 2013, the Ruby brand currently runs 20 hotels with 3,483 rooms in prominent European cities, alongside an additional 10 hotels in development, adding 2,235 rooms. In Germany, there are 9 operational hotels located in Cologne, Dusseldorf, Frankfurt, Hamburg, Munich, and Stuttgart. The UK has 3 hotels in London, Austria has 3 in Vienna, Switzerland features 2 in Geneva and Zurich, and there is one each in Italy, Ireland, and the Netherlands. The upcoming hotels will launch in more European cities over the next three years, including Edinburgh, Marseille, Rome, and Stockholm.

Ruby Hotels combines design with narratives from their host cities. Embracing a philosophy of 'Lean Luxury', they emphasize features like beds, showers in guest rooms, and cocktails served in their 24/7 destination bars. These elements collaborate to provide an immersive experience that showcases each city's unique charm while ensuring value.

With the launch of Ruby as our 20th brand, IHG aims to attract lifestyle-oriented travellers. This brand provides hotel owners with a premium yet flexible hotel model that caters to the challenging 'urban micro' market, known for high entry barriers and limited spaces. Owners benefit from designs that maximize efficiency and space and robust operational standardization and automation features, including self-service kiosks for rapid check-ins.

Ruby has established a strong foothold in Europe, demonstrating success in new development projects and exhibiting great flexibility for conversions across multiple types of commercial properties, including several prominent office renovations. As a result, the Ruby brand has reported a compound annual growth rate (CAGR) of 26% in net system size over the past five years. The brand's seller aims to expand the Ruby hotel portfolio significantly, while IHG seeks to enhance the brand further in collaboration with other hotel owners in Europe and worldwide. This strategy continues IHG’s commitment to internationalizing its organically developed and acquired brands. By year-end, IHG intends to position the Ruby brand for entry into the US market.

By partnering with IHG, Ruby Hotels can utilize a robust enterprise platform with cutting-edge distribution and technology systems and access to IHG One Rewards, one of the most prominent hotel loyalty programs worldwide. IHG expects a surge in demand from global travellers in the urban micro sub-segment, which will drive room supply growth at a rate exceeding that of the worldwide hotel sector. Ruby's objective is to grow to over 120 hotels in the next decade and further accelerate that expansion to more than 250 hotels over 20 years with international owners.

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 give 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. 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:

• The initial purchase consideration of €110.5m (~$116m¹) 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, IHG anticipates receiving approximately $8 m in franchise fees from the 20 currently open hotels and the 10 currently in the pipeline (all of which are expected to open by the end of 2027) in 2028, the first full year all 30 hotels will be in IHG’s system.
• Considering further development by the seller to open more hotels beyond their current pipeline and IHG’s plans to expand the Ruby brand with other hotel owners globally, franchise fees by 2030 are anticipated to be more than $15m.
• IHG is not acquiring the seller’s operating company and will continue to operate the current open hotels and any future ones 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 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 ($190m1) may become payable in 2030 and 2035. Future costs are contingent on the number of Ruby-branded rooms operated by the seller at the end of the preceding year. A payment of €9m ($9m1) would be paid to the seller if they grew to operate more than 10,000 Ruby-branded rooms. This scales up to the maximum potential total if they grow to more than 20,000 rooms, a scale that is approximately six times bigger than the current open hotels. IHG’s planned brand growth with other hotel owners is excluded from calculating any potential additional payment to the seller.
• Integrating all 20 currently open Ruby hotels into IHG’s system is expected to commence in 2025 and be completed by 31 March 2026. This would increase IHG’s global system size by approximately 0.3%. When open, the current pipeline of 10 hotels would add a further ~0.2% to IHG’s system.
• 2025, IHG is expected to incur integration operating costs of approximately $10m. Including further one-time costs, a broadly breakeven contribution to its operating profit is anticipated in 2026, and profitability growth is forecasted thereafter.