InterContinental Hotels Group PLC (IHG) acquired the Ruby brand and related intellectual property for an initial purchase consideration of €110.5 million (~$116 million) from Ruby SARL. Ruby is an urban lifestyle brand for modern travelers in city destinations that provides hotel owners with space-efficient designs and a flexible concept that IHG expects to expand globally.
Established in 2013, the Ruby brand currently operates 20 hotels (3,483 rooms) in European cities and has another 10 pipeline hotels (2,235 rooms). There are nine hotels open in Germany (across Cologne, Dusseldorf, Frankfurt, Hamburg, Munich, and Stuttgart), three in the United Kingdom in London, 3 in Austria (Vienna), two in Switzerland (Geneva and Zurich), and one in 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’s “Lean Luxury” approach includes signature elements ranging from a shower in guestrooms created with restoration in mind to cocktails in destination 24/7 bars.
As its 20th brand, Ruby will extend IHG to lifestyle-focused travelers and offers hotel owners a cost-efficient and adaptable hotel concept, in an industry segment characterized by high barriers to entry and space constraints. Efficiencies for owners are delivered through space-saving designs and operational standardization and automation, including self-service kiosks for check-in.
Ruby is already established in Europe and works for both new build locations and conversions, including for adaptive reuse across a range of commercial property types, with several office conversions. The Ruby brand has achieved a net system size compound annual growth rate (CAGR) of 26 percent over the last five years. The seller of the brand anticipates growing the portfolio of Ruby-branded hotels further, and IHG expects to grow the brand with other hotel owners in Europe and globally. IHG expects to have the Ruby brand ready for development in the United States by the end of the year.
Joining forces with IHG allows Ruby hotels to draw on an enterprise platform of distribution and technology systems, as well as IHG One Rewards. IHG expects the urban micro sub-segment to continue experiencing demand from travelers around the world, which 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 to more than 250 over 20 years across owners globally.
Elie Maalouf, CEO, 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, 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 €110.5 million (~$116 million) for IHG to acquire the Ruby brand and related intellectual property consists of an upfront payment of €109.9 million that has been paid on completion of the transaction and a fixed deferred payment of €0.6 million 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 $8 million 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 $15 million.
- 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 IHG brand royalty fees and System Fund fees.
- To incentivize further growth in the brand by the seller, potential additional payments ranging from €nil up to €181 million ($190 million) 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 €9 million 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 grow 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 March 31, 2026. This would increase IHG’s global system size by approximately 0.3 percent. The current pipeline of 10 hotels when open would add a further ~0.2 percent to IHG’s system.
- Integration operating costs for IHG of approximately $10 milliom 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.
