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Furniture retailer West Elm is worried about following other chains down the rabbit hole of opening too many stores. So the company has another plan to sustain its growth: launching a chain of boutique hotels.
West Elm will design, furnish and market the hotels, the first of which will open in Detroit and Savannah in late 2018, and its partner DDK, a hospitality management and development company, will operate them. Guests will be able to buy the room furniture and other décor online.
“Where many retail brands have put the nail in their coffins is by opening too many stores,” said Jim Brett, West Elm’s president. The chain has about 100 stores and Mr. Brett said he doesn’t envision opening another hundred.
The hotel project thrusts West Elm, part of Williams-Sonoma Inc., into a fast-growing, but crowded field. Most of the major hotel chains have launched boutique hotel brands in recent years as travelers have come to crave unique experiences rather than the standardization that was once their biggest selling point.
Companies from outside the hospitality industry are jumping into the space, including Restoration Hardware Holdings Inc., which is planning to open a hotel in New York City, and Equinox Holdings Inc., the gym operator, which has launched a hospitality brand and will open its first hotel in 2019.
Industry experts say there is room for more entrants. Despite growing 24% over the past six years, the number of boutique hotel rooms still represents just 2% of the total supply, according to STR, a data and analytics company.
“There was a time when standardization was very desirable and now it’s almost a negative,” said Bjorn Hanson, a professor of hospitality and tourism at New York University. “People want an experience that reflects the local culture.”
Mr. Brett has embraced that idea in his retail stores where managers are treated like independent shopkeepers and industrial and midcentury furnishings are mixed with ceramics and crafts made by local artisans.
“Managers can buy from our designs depending on what is right for their local customers,” said Mr. Brett, who has run the chain since 2010. “They can display the merchandise as they like, and we give them money to buy goods from local craftsman.”
Sales at West Elm nearly quadrupled to $821 million in the year through January, compared with the year ended January 2009. Digital and store sales excluding newly opened or closed locations have increased more than 10% for 26 consecutive quarters, including a 15% lift in the most recent period.
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