Non-Hotel Businesses are Getting into Hotels: Why?
By Dean Minett, Director and Founder of Minett Consulting
Those of us who have been in the hotel business for years (or even weeks, for that matter) know how unglamorous it can be. There are messes to clean up, unhappy guests to reassure, and occupancy rates to worry about. Of course, if you and your staff are doing the job well, the external "sheen" of the hotel is spotless, both in terms of physical space and guest services. But beneath the surface, there is always gritty work to be done.
Given the glamorous side of hotels, it makes a certain amount of sense that f ashion and retail brands are pushing into the industry. Our first reaction might be one of dismissal. The German fashion designer Karl Lagerfield, for example, with his iconic white ponytail and black gloves — what does he know about the hotel business?
Probably more than we realize, given the scope of his forthcoming hotel chain. One of the tag lines on the teaser web site — "see the world through Karl's lens" — epitomizes the unabashed fusion of glamor and hospitality.
Two other compelling examples — US-based retailers west elm and Restoration Hardware — are tracing a lower-key path into the hotel industry. As specialists in contemporary furniture and chic retail spaces, hotel design is not a drastic leap for either firm. Tapping into existing inventories and supply lines is furthermore expected to save these companies no small amount of cash as they build out branded hotels in the American market.
But why is this trend gaining steam, and what does it signify for those of us who have worked in the hotel industry for a long time already?
Industry in flux
So many recent conversations in our industry have led back to a certain San Francisco-based company, and there's good reason for that. When you look at how hospitality has changed over the last decade, AirBnb keeps emerging as the culprit. But let's be honest: If it hadn't been them, it would have been someone else.
The real story is a paradigm shift in hospitality, a questioning of values, and a movement toward a future set of values that are constantly in the process of being defined and refined. In such a climate, there is opportunity and incentive for new players to throw their hats in the ring and say, "I have a set of values that will work in this industry."
A culture of cool, a focus on service
Zappos, a branded footwear and clothing retailer owned by Amazon, has no official plans to build hotels — but the company continues to make rumblings to the effect that hotels are in its future. When asked on Twitter what the company would look like in 2019, Zappos CEO Tony Hseih tweeted "No idea what Zappos will look like in 2019… Maybe Zappos Airlines or Zappos Hotel w/ service/culture/community focus?"
It reads like an obvious reference to Virgin — a behemoth that started in music and built a reputation for being cool and service-oriented. Brands with these attributes (especially when they build up assets) are more malleable in terms of what industries they can and cannot enter.
Meanwhile, brands with standout retail spaces (especially those that sell furniture, such as west elm and Restoration Hardware) bring their own strength and appeal to the industry. The very idea that you can stay in a west elm Hotel is barrier-breaker. This is a unique partnership between retailers, financiers and hoteliers and It sends a message that AirBnb, although a catalyst for change, is only the beginning of the change.
Shifting the conversation
As the hotel industry absorbs these new players, the conversation will naturally shift again. They might be successful, and they might do interesting things in terms of service and amenities. Or they might end up hitting the wrong notes and losing a lot of money. The fact that experienced management companies are behind these ventures means that everything from furnishings to service policies will be carefully considered. There is no way for existing hotels to react in a sweeping way to industry developments like this, and in terms of the global hotel market, these new players are still just a drop a bucket. (It should be noted however that Ikea had already moved into this space albeit through their partnership with Marriott to create Moxy Hotels. Slowly gaining traction, this Millennial-focused brand is taking the traditional route to growth.)
But it's worth getting into their heads, trying to understand their reasoning. What do these young guns think they can offer? How do they think they can change the game? Will they really be able to deal with the "unglamorous" side of the hotel industry?
A new and fresh idea is inspiring. Glamour can be an asset. Name recognition doesn't hurt. But a flashy name and refreshing concept is useless without a strong focus on people and service. Ours is a nuanced industry. Fortune favours those who innovate, but only if they deal handily with the gritty, daily, unglamorous aspects of operating a hotel — because it's here that great guest experiences are truly forged.
Director - Minett Consulting