Consumer brands that see the passion of travelers are taking a leap. These brands are becoming hotel proprietors in greater numbers to reach out to millennials, who see travel as a lifestyle experience. Expect more retailers to invade the hospitality space.
Consumer companies in categories such as luxury goods, clothing, and even fast food are repositioning themselves as lifestyle brands with a growing presence in the travel industry.
The strategy underscores the allure of the travel sector as a way for these everyday brands to engage with new customers — particularly millennials, those in their late 20s and early 30s who are traveling in greater numbers. Millennials prefer lifestyle brands and non-cookie-cutter hotels that they can show off on social media sites such as Instagram, Twitter, and Pinterest.
“As lifestyle brands mature, and they look for new opportunities to engage with customers, hotels are a natural extension option as they offer relatively low barriers to entry and high potential impact,” said Chekitan Dev, a professor at Cornell University’s School of Hotel Administration. “Hotels in crowded and brutally competitive markets co-brand with lifestyle brands to give them that extra oomph to stand out from the crowd.”
Fitness company Equinox, luxury goods giant Bulgari, luxury watch manufacturer Shinola, crystal maker Baccarat, and Japanese retailer Muji are examples of brands that have opened boutique hotels. Luxury group LVMH Moët Hennessy Louis Vuitton this year completed its acquisition of Belmond, which owns or manages 45 luxury hotels, restaurants, trains, and river cruises.
The power of these consumer brand-hospitality mashups is evident. Reservations for rooms at the pop-up Taco Bell Hotel and Resort in Palm Springs, California, sold out within minutes in August.
There will be plenty more opportunities for collaborations or crossover between retailers and hospitality companies. Just look at how luxury brands such as Fendi and Prada turned airports into places to showcase — and sell — their goods.
Luxury sales in airports jumped 7 percent in 2018, according to research by Bain & Company. Department store sales, meanwhile, dropped 4 percent.
K.C. Conway, chief economist at real estate organization CCIM Institute, said in a recent report that by 2025, retailers will have to team up with the hospitality industry and other sectors such as transportation centers to maintain their success.
“The attractiveness of leveraging hotels is strong,” Conway wrote. “The hotel real estate option provides brand exposure, offers product interaction in high-traffic areas, and requires less physical real estate space and labor, which can improve margins to mitigate the rising costs for fulfillment.”
HOTEL AS BRAND DESTINATION
Clearly travel is the place to be for these brands in the coming years, which can still maintain the integrity of their aesthetic and values even while experimenting in other industries. Hotels, in particular, can serve as experiential spaces where the companies can build community and loyalty.
Equinox, known for its upscale gyms, opened its first hotel at the new Hudson Yards retail and entertainment complex in New York City in July 2019. The company plans to build more hotels in Chicago, Houston, Los Angeles, Seattle, and Santa Clara, California.
Chris Norton, CEO of Equinox Hotels, said extending into hospitality makes “good business sense” because people have shifted their priorities into mental and physical health.
“It connects to the basic wisdom about experiences becoming more important than the purchases of product only,” he said. “If you think of incentive travel, there’s no greater gift than giving someone an experience you never forget versus giving someone a thing. On top of the list of experiences, you always have travel. A huge part of travel is, of course, where do you sleep and eat, and it is some of these experiences that hotels have provided for a long time that manifest themselves more today.”
Jennifer Arnoldt, a retail engagement executive at Taco Bell, said the pop-up hotel was a new and different way for the company to engage with its customers.
“Our design and aesthetic drew on Taco Bell’s vibrant palette to create a unique and flavor- filled destination that was the ultimate expression of the brand,” Arnoldt said. “From hot-sauce-packet-inspired key cards fans got at check-in to a resort-inspired menu served poolside and salon manicure services inspired by iconic Taco Bell menu items, every detail was created for our fans.”
The hospitality industry also benefits from partnering with such lifestyle brands. Fragrance brand Lola James Harper entered into an agreement last year with Accor to debut a hotel in Paris.
“This is an example of a perfect match,” Cornell’s Dev said. “Accor gets to expand its brand footprint into a new fashionable space and at the same time, avoid the impact that comes from branding new hotels adjacent to an existing one, which can sometimes cannibalize the business of existing hotels.”
In the overbranded hospitality world, too many brands lack a unique point of view to differentiate themselves from competitors. Aligning themselves with a lifestyle brand even in the amenities that they provide can make for a more memorable stay.
Andrew Leber, vice president at Bedrock Hospitality, which developed the new Shinola Hotel in Detroit, said the brand doesn’t just sell watches. It sells experiences.
“People don’t just want to experience the same product that you can get in any market or any city,” he said. “That’s why all the big brands, the Marriotts, Hiltons, and Hyatts, are either developing or buying out lifestyle brands in order to reach a consumer they haven’t historically reached.”
Shinola is also trying to build a community by partnering with local organizations. The Detroit Symphony Orchestra and the Detroit Opera House have sent performers to sing on Sunday afternoons in the Shinola lobby.
The consumer brands have to be careful about how they present themselves in the hotel industry, though. Running a hotel is quite a feat, and a bad hotel could end up damaging the brand. There will be casualties, of course. But these new entrants with fresh ideas will push hotel incumbents to be more savvy about offering services and products that can capture guests.
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