Make yourself at home
These are some of the terms being used to describe the opening of Japanese lifestyle brand Muji's hotel properties in Shenzen and Beijing.
Across the globe in Almhult, Sweden, Ikea opened their own branded hotel a few years ago. Both cases, are examples of a growing trend: "Homeware hotels". This is where homeware and furnishing brands are increasingly investing in hotels and hospitality businesses.
This trend though not entirely new, has been picking up pace over the past year, and we consider potential reasons why:
Being able to touch and feel the product, is a key differentiator for bricks and mortar furniture stores over online competitors. Living with and using the product, in the case of these new hotels, takes this one step further. The Boathouse, launched in partnership with MADE.com last year is a boutique hotel and event space in West London that highlights the best of MADE.com's products, not only highlighting the design but also the flexibility. Similarly, Danish brand Vipp, a design company that retails designer kitchenware, has been launching unique one-bedroom hotels, where you can 'test drive your kitchen before you buy it', in locations including Copenhagen and Lake Immeln.
These concepts, though revenue generating are mainly promotional, highlighted by the fact they are only one-bedroom venues. However, the opportunity and the rationale lie in the marketing, which is to create awareness amongst new customers, but also conversion, whereby individuals testing in a such a manner maybe be more inclined to purchase.
The disparity in scale between different initiatives suggests a variation in objectives, whilst some maybe promotional, others less so. In the US, home decor and furniture brand West Elm are debuting a hotel in Indianapolis next year, after which 5 new locations will be opened, including Oakland and Detroit. In China, Muji have the added benefit of their stores being in their hotels allowing customers to make additional purchases soon after testing their products, with goods for sale include oak chairs, toothbrush stands, duvets, feather pillows and clear plastic shampoo bottles. Expansion of full-scale hotels in this manner is suggestive of the brands' belief in "homeware hotels" bringing further growth and revenue to their businesses.
The launch of these initiatives requires substantial investment alongside significant operational knowledge and consideration. The impetus to do so however likely stems from the stagnant growth within their respective industries. Between 2013-2018, the global homewares and home furnishings markets grew at 0% and 0.3% CAGR respectively, whilst at the same time we have seen increased competitive pressure in the space, as indicated by the struggles of Sofa.com or the acquisition of the Home Retail Group.
Conversely, the global lodging and hotels industry grew by 3.2% and 2.6% CAGR respectively over the same period. The growth of "homeware hotel" could therefore be a partial result of the need to diversify revenue streams to insulate against market shocks. Recently, we have seen luxury brand Laura Ashley expanding its own hospitality arm, and given such cases, it is likely that the homeware foray into hospitality is set to continue.
The complementarity between the homeware and hospitality industry is apparent, and this goes beyond the relationships described. Whilst furniture and hotel companies have seen opportunity in the hotel industry, hotels and hospitality business have seen opportunity in the reverse direction. The Westin Hotel group, for example, has become synonymous with its comfortable bedding and furnishings, and has consequently seen an opportunity to retail this to its customers. In a similar move, global membership club Soho House has launched range of furniture and homeware, called Soho Home.
With the continued blurring of lines between the homewares and hotels sectors (across both the luxury to value spectrum), we anticipate this trend will continue with new concepts and new innovations going to market within the near future.