On Monday, Modern Furniture Retailer West Elm announced the company will expand into the hotel business. Does their bet make sense? What is the thinking behind this bold play?
West Elm Switches From Showrooms To Hotel Rooms
The Williams-Sonoma owned modern furniture retailer is making a bold bet on the future of shopping. Instead of having customers shop in their showrooms, West Elm wants customers to sleep in the showrooms. The company is launching a chain of boutique hotels, with each hotel reflecting the local city’s culture and ambiance.
While it’s a bold bet, is it a smart one? The hotel industry is packed with recognizable brands. And home-rental companies such as Airbnb and Homeaway, are competing for hotel business regularly.
Short answer …
West Elm is not the first retail company to expand into hotels. Restoration Hardware and Equinox Gyms both announced plans to launch boutique hotels in New York City. And while both companies aim to expand their brands, neither is the same scenario as what West Elm is doing. West Elm is putting a little twist on the hotel rooms: everything is for sale. West Elm believes consumers are far more likely to purchase furniture after using it themselves while on vacation.
It’s a pretty smart play.
More and more consumers are purchasing everything online rather than in stores. Hotels offer another source of revenue not dependent on shoppers, while allowing hotel guests to experience the luxury of West Elm products combined with a (hopefully) wonderful and happy emotional experience. By connecting that feeling and experience with the West Elm brand, the company can then influence sales by encouraging positive emotional buying decisions.
The first hotels will open in late 2018 in smaller US cities where real estate is more affordable. Given West Elm’s talent at staging rooms, creating hotels to reflect each city shouldn’t pose much of a challenge. However, running the hotels will fall to other hands. West Elm is wisely partnering with hotel management group DDK to oversee hotel operations. Each property will have between 100 and 250 rooms, ranging from $175 for a standard room to $400 for a suite.
West Elm isn’t looking to take over the hotel industry. They’re looking to grow the brand in new way which can connect with fans. A new chain of boutique hotels is a good way to do just that, and to make new fans along the way.
West Elm (trading under parent group Williams-Sonoma WSM) won’t open the hotels for at least one more year. Shares shouldn’t be affected much til then, but when the hotels go up, so does WSM..
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