A Hong Kong luxury hotel development group with ten properties around the world was seeking to extend its hospitality services to retail; enabling...
What retailers can learn from the hospitality industry
Living in the experience economy, many retail businesses now seek inspiration from the hospitality industry on how to improve their own strategies, which in turn have become a threat to the traditional high street.
The retail industry faces the constant pressure to turn an ordinary space into an experience, on top of having to compete with the strengths of e-commerce. All businesses in the field also struggle to keep up with the fluctuation of consumers’ tastes, loyalty and spending power, causing a challenge for retailers and hospitality players to adapt in speed to the ever changing behaviours and expectations.
Over time, hotels have now transitioned into a multi-purpose space – bearing an opportunity to bring the experience economy alive and having an upper hand to what retailers lack. Many retail businesses now seek inspiration from the hospitality industry on how to improve their own strategies, which in turn have become a threat to the traditional high street.
The engaged audience
While customer acquisition is an expensive venture, hotel guests make a valuable customer base due to their long dwell time from their stay. For this, many retailers favour partnering with hotels for its ease of accessibility to introduce its products to a new audience segment, and also viewed as a low-acquisition model rather than having to increase marketing spend.
Globalisation has also become much more prominent, where businesses now accommodate to new demographics from different places and cater to the rising middle-class population with an appetite for creative and innovative offerings. But in revealing today’s growth of staycation trends, local consumers are now the key target due to their high discretionary income levels and increased chances of repeat visits.
Fauchon L'hôtel Paris offers an in-suite dinner with a completely custom-designed menu just for the guest. Photo credit: Hedonistit
Quality hotel services are known to go the extra mile, supposedly knowing the guest with enough details to deliver personalised services. Customisation begins before the potential guest even becomes a customer. Data and traffic tracking now enable businesses to target specific groups of customers based on behaviours and can decipher their intent and interests for highly accurate recommendations. Not only by doing so enhances the customer journey, but the guest will also value their custom experience and organically be advocates of the brand rather than just seeing their hotel stay as a transactions.
Becoming a brand
Long gone are the days of hotel gift shops selling souvenirs plastered with city names across magnets, postcards, t-shirts and the lot. Nowadays, hotel operators have branched out into the retail scene with boutiques selling curated indie designer goods, artisan food products, and luxury apothecary items. A handful of luxury brands from Armani to Versace have also ventured out building their own hotel property decked out in its branded products as a living and shoppable catalogue.
Championing individuality and service all in one, boutique and lifestyle hotels are on the rise as hotel groups design more niche spaces to manifest the ideal customer segment that seeks to resonate with the brand. Retailers now seek to work with hotels that have a unique environment fit for their brand, further paired with service and style, to provide a unique offering that cannot be obtained from a typical retail flagship experience.
In reverse, many designers purposefully seek to leverage a hotel’s branding and aesthetic to design capsule collections for its hotel guests, which also entices loyal fans into overnight guests in order to purchase exclusive goods – much like designer brands and airline partnerships.
Luxury Italian footwear brand Aquazzura partners with Mandarin Oriental for limited-edition slippers. Photo credit: Mandarin Oriental
A space to sleep and shop
The convergence of retail and hospitality has bred a new hybrid of hospitality. Hotels mimic a mall developer and utilise its property for mixed-use as it sees the potential from the additional publicity and revenue generated.
Traditionally, hotels only focused on room and banquet hall rentals as the main revenue source. Hotels now look “outside the bedroom” and seek ways to optimise revenue per square meter by working with complementary brands either by leasing out its vacant spaces for retailers to set up shop, or run on a commission-basis selling their goods for additional revenue as well as expanding its services (e.g. fitness, spa, barber) to external residents.
The House Hotel Jeddah CityYard is a lifestyle destination for entrepreneurial networking, local community and pop-up events. Photo credit: The House Hotel
Creating synergy with partnering brands, pop-ups now frequently appear at hotel lobbies as well as a rotation of F&B collaborations. Good branding in place also elevates a hotel’s position in becoming a lifestyle label of its own as it eventually becomes a destination place for consumers to dine, shop and lodge. Equally, a virtual pop-up can also appear within a hotel’s webshop by curating third-party brands during certain seasons or exclusive launches.
The hospitality sector holds an advantageous position over retailers from having the opportunity to build a “third space” for guests to live, work and socialise. Moreover, hotels already have an existing group of audience with high intention to visit (footfall) and purchase (bookings) - with the ease of customer acquisition and an engaged audience, brand loyalty can be easily achieved as the friction and challenges normally faced in retail are removed from the luxury of convenience during a hotel stay.
Operators need to craft each touchpoint to not only streamline operations internally but to also digitally optimise the consumer’s experience and create opportunities to generate revenue beyond the bedroom through personalisation.
Enveloping the customer in the full ecosystem from the stay to experiences and merchandise helps guests envision a lifestyle they are inclined to own. Offering a one-stop-shop service will help transform a hotel from just being a lodging establishment into an aspirational destination space for both guests and locals to explore.