Retail is continuing to go through somewhat of an identity crisis. Customers now have a range of online choices and are no longer impressed by cookie-cutter retail experiences. And whilst we’re seeing more and more retailers play in the “experiential” space, the question remains as to how brands continue to set themselves apart from the crowd and connect with consumers in an authentic way?
Could the solution lie in hospitality?
Over the past few years we’ve seen a number of retailers take personalisation to heart and launch entirely new experiences centred around hospitality.
Last year Muji began rolling out a chain of “Muji” branded hotels across China and Japan. Retailers West Elm and Parachute have also started rolling out similar concepts in the states; with other retailers Restoration Hardware and JD.com announcing plans to expand into hotels in the near future.
And the trend is not limited to furniture retailers. Earlier in the year Equinox, a brand best known as a luxury fitness chain of nearly 100 clubs around the world, opened a hotel within New York’s Hudson Yards development (at $25 billion dollars, it’s the most expensive real-estate development in US history).
“It’s not just going to the gym; it’s a lifestyle… Equinox has positioned the brand as a lifestyle brand, way beyond a club or a gym” said Christopher Norton, CEO of Equinox Hotels.
Retailers becoming hoteliers aren’t just an exercise in disruption or branding, but a natural extension of their identity.
The idea of retailers partnering with hotels and playing within the hospitality space isn’t a particularly new or original idea. Hotels have been been doing it for years.
Virgin Hotels previously partnered with Gap to enable customers to shop via their mobile app and have purchases delivered directly to their hotel. Similarly, boutique New York hotel WestHouse partnered with Net-A-Porter to provide same-day room delivery for products ordered either online or via in-room tablets.
However these are merely enhanced methods of ordering and delivery. Offers we’re seeing from the likes of Muji, WestElm and Parachute act as more brand extensions. If customers like products for themselves and their homes, wouldn’t they naturally like an environment curated by the brand?
Hotels are a natural fit and extension for so-called “lifestyle brands”. They offer the opportunity for brands to envelop their customers across multiple touch points. Not to mention they have the potential to act as testing grounds for new products. Muji hotels will allow designers and creators for the brand to develop and trial new products and ideas before rolling out across the global store network.
Is there an ROI?
As retailers continue to look to transform their traditional retail stores around ‘experiences’, branded hotels could well replace the traditional flagship store and operate as an active showroom for the brand.
This will require retailers to expand out of their traditional comfort zones. Additionally, the risks associated with entering the hospitality space are substantial and provide new levels of complexity to the business model.
But like flagship stores, they need to be viewed through the lens of a long-term strategy. Whilst they may only account for a small fraction of revenue and not be huge money makers (ie. they’re traditionally located in high-traffic, high-rent shopping areas), done right this new hotel concept can operate in such ways as to help raise a brands profile and marketing. Additionally, they offer retailers an opportunity to reach new markets and demographics previously not serviced.