• Retail advances into hotels

Beauty brand The Hut Group has expanded its hotel portfolio with the purchase of the Eclectic Hotel Group in Manchester.
The deal came as LVMH announced plans to bring its Cheval Blanc flag to London, as retailers eyed the sector.
The Hut Group’s purchase of Eclectic Hotel Group from founders Eamonn and Sally O’Loughlin saw it add boutique hotels King Street Townhouse and Great John Street Hotel in Manchester, which it plans to spend GBP10m upgrading. The company told us that it had also acquired the Eclectic brand name. The agreement takes The Hut Group to three properties, in addition to the Hale Country Club & Spa, which it acquired in July 2016.
The company said that the acquisition demonstrated the group’s “innovative approach to effective engagement with consumers in both the online and offline environment. As such, the hotels will form part of The Hut Group’s growing marketing infrastructure that delivers enhanced consumer experiences, influencer and brand-led events as well as content creation”.
Matthew Moulding, founder & CEO, The Hut Group, said: “We are delighted with this recent acquisition, which comes at an exciting time for The Hut Group. As a fast-growing, brand-led business we are always looking to develop innovative approaches to drive greater engagement with our customers and today’s acquisition is testament to that strategy. With consumer behaviour continuing to evolve away from the traditional high street setting, these two highly prestige hotels will be instrumental in showcasing our leading beauty and wellbeing brands.”
The Hut Group recently announced newly improved and extended group banking facilities, in excess of USD1bn to support investments in beauty, technology and infrastructure. Based in Manchester, its investors include Blackrock, KKR, Merian Global Investors and Belgian group Sofina. Last year saw the company report revenue of more than GBP1bn.
It recently invested GBP100m in building an operations and manufacturing hub in Poland, as well as investing heavily in its Manchester base, where the majority of its 5,000-strong workforce were located. The company described itself as Europe’s largest online retailer of premium beauty products – including MAC, Bobbi Brown, Estée Lauder and Lancôme – through lookfantastic.com. It also owns luxury beauty brands including; ESPA, Mio Skincare, Mama Mio, Eyeko, Grow Gorgeous, Illamasqua and Ameliorate.
Outside beauty, it owned technology companies including Language Connect, a translation company.
At LVMH the company has submitted plans for a site in London near Bond Street, due to open in 2022, under its Cheval Blanc brand, which currently has four hotels; two in France, one in the Maldives and one in Saint-Barthélemy in the Caribbean.
The 83-room hotel will be designed by Foster & Partners and will feature a subterranean spa and a 25-metre pool, two restaurants, an evening bar and roof terrace, and a cafe. It will also include six private apartments for sale and store which is expected to stock LVMH’s fashion brands.
LVMH acquired Belmond at the end of last year for USD6.2bn. CFO Jean-Jacques Guiony told analysts: “The priority is to develop the brand, to improve the profitability of these exceptional properties and to nurture collaborations with the other LVMH brands. The Belmond brand is emerging. It’s much better known than it used to be, but it’s a fairly new name in the industry.
“We see plenty of opportunities to increase revenues made with our exposure to unpenetrated clientele in Asia and the Middle East, further extend the hotel management agreements and extract value through yield management. And it’s very complementary to LVMH’s other activities as high-quality goods and services are increasingly becoming intertwined.”
He added: “The future of luxury will be not only in luxury goods as it’s been for many, many years but also in luxury experiences, and we want to be in both segments, which is as simple as that.”

Imran Hussain, director of THC/ Endeavour, told Hotel Analyst: “I think with any sort of brand extension – there always has to be a reason. A reason that makes it make sense, is logical and simple to follow and mostly – doesn’t make the consumer think the brand is cashing out.
“A retailer looking into the hotel space wouldn’t be blamed for thinking it was a simpler model than their own. Where, as a retailer, you pay rents/rates for real estate so you call sell your product in it, but all that comes after the cost of making the product itself – and of course the cost of sale. In the hotel bedrooms model, the real estate is the product – and investing in real estate is usually a safe thing to do. Of course all this gets more complicated for a retailer when it comes to yielding, maximising square feet, variable pricing, asset valuations, not to mention other vital details – such as food and drink – which is normally outsourced by retailers coming into hotels.
“But the retailer excels at branding and marketing, and has done so for years. And faced with their current struggles – from web to the role of high street changing, wouldn’t it make sense to look at a simpler model where the transactions have a practical element too, namely, ‘I need to sleep somewhere’.
“And with any simpler looking model transition there’s always complication. In this instance the retail has a great brand name, an engaged audience and each one serving as passionate stakeholders. But – they have passionate stakeholders who won’t put up with a brand cashing in on their own name. Turning their name into a hotel name, just so they can skip over the ocean of anonymity a new hotel might face when opening. What the public think of the retailer who gets into hotels is very much open to debate.
“I can’t think of many who have done so and retained their brand values, built on top of them and held onto their integrity.”

HA Perspective [by Katherine Doggrell]: Retail brands getting into hotels is nothing new; Bulgari and Marriott International have had a slow-moving deal since 2001, which currently has six hotels open and more on the way. Armani, Versace and Baccarat have also moved into the hotel market because, well, why not? There are only so many fashion collections per year, but there are 365 days in which fans of the brand can sleep over.
Thus far, it has been about transferring the cachet of the physical product into the experience of the hotel and, as Hussain notes, it’s about more than just cashing out. Hotels have to be the expression of that brand, no easy thing when that brand is a collection of handbags.
With retail needing something of a shot in the arm at the moment (less so luxury retail, which is throwing off the sort of cash with allows you to make USD6.2bn hotel acquisitions) there is some hope that adding in hotels won’t just be about putting the brand into a hotel, but adding some of the hospitality and experience which hotels can offer and using that to buff up the brand. Done well, the sum of the parts can be greater. But choose your brand wisely. Dunkin’ Donuts listed a home powered by coffee grounds on Airbnb, which was more marketing than long-term brand and, gimmick though it was, it told a cautionary tale: if you have a 25-year hotel contract, be sure that your brand can go the distance, preferably untarnished.

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