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Why are brands opening hotels?

It seems like more and more brands are opening hotels. Marketing Assistant, Annabelle Mayor, looks at why this stretch into the hospitality space makes sense.

Brand extensions aren’t decisions to be taken lightly. The potentially heavy investment and risk of failure mean a lot of thought goes into launching a new product. They have to make sense financially and branding-wise. Opening a hotel often does both. With the travel and tourism industry being worth $2.3 trillion worldwide, it’s easy to see why a move into hospitality is an attractive option. Hotels provide an additional revenue stream that could prove extremely lucrative if successful. It’s also a good brand-building opportunity.

The ambition for many brands today is to become a ‘lifestyle brand’ – one that presents customers with a lifestyle they can aspire to and embodies their values, interests, or opinions. Opening a hotel is a tangible way for brands to show customers the lifestyle it’s trying to convey. Brands can essentially invite guests into its world and envelop them in the brand.

For some brands, expanding into hotels seems like a natural extension. Muji’s hotels, launched last year in China, double as showrooms for its products which can be purchased at the on-site shop. Hotels as retail spaces aren’t a new concept. Many hotels have retail outlets in their lobbies, stocking their own or other brands, and some even have e-commerce sites where people can purchase hotel bedding, pillows, and other related merchandise. But beyond being a liveable retail space, Muji’s minimalist hotel perfectly reflects the Muji lifestyle.

Muji hotel
© Muji

For other brands, a move into hospitality may raise an eyebrow, but it doesn’t seem like too much of a stretch. Luxury gym brand Equinox plans to open a line of hotels, beginning with one in New York’s Hudson Yards development launching later this year. The brand polled its members and found 95% would be interested in staying at an Equinox hotel. Staying true to the brand and its values, the hotels will have a fitness focus but one that extends beyond what the clubs currently offer. In addition to on-site gyms or access to nearby locations, the hotels will feature healthy dining options, pools, and spas to give customers a more holistic fitness and wellness experience.

Setting up a hotel can help to position a brand within the lifestyle realm or further cement its lifestyle image. Shinola began making watches in 2011 in a factory in Detroit and has since expanded into bicycles, leather goods, and other products. Based in the brand’s hometown, the Shinola Hotel recently opened its doors to guests and locals – the space aims to be ‘Detroit’s new living room’.

Shinola hotel
© Shinola

The hotel’s design reflects the brand’s sense of style and love of quality craftsmanship. As well as being outfitted with the brand’s own products, the hotel stays true its heritage by including locally-made furniture. There’s also a retail space on-site showcasing global and Detroit-based brands and some of the dining options spotlight Midwest cuisine.

Opening a hotel can also just be a way to offer customers an immersive new experience they’ll enjoy. While it won’t quite rival the scale of Disney’s parks, Cartoon Network’s first hotel aims to delight fans of its cartoons in a similar way. Located in Pennsylvania near an amusement park, the hotel will have amenities younger guests can enjoy such as a play area, arcade, and a pool. To bring the brand to life, the rooms will have interchangeable theming that guests can choose according to their favourite show and the hotel will be staffed by some of the network’s popular characters. Guests will also be able to watch cartoon episodes before they’re released to the public – talk about an exclusive experience.

Beyond extra revenue and retail space, branded hotels are experiences that can deepen connections and bolster relationships with customers. Brands get to immerse guests in its world and show them how it caters to their lifestyles. And if guests have a good stay, it only reflects positively on the brand.

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