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Brand new market

26 May 2005

Most of us remember the headlines last year when Tom Aikens accused a diner of pocketing a silver spoon at his Michelin-starred restaurant. But it's hard to imagine the same thing happening in a hotel. Most hotels accept that their guests will tuck certain items in their suitcase before checkout - although we're talking more the humble travel soap, rather than the entire contents of the minibar. After all, it's good news if your guests like the toiletries enough to take them home.

Now a growing number of hotels are extending the marketing benefits of the pilfered bottle of shower gel by launching their own product ranges to sell to guests, and increasingly, the wider public. Away from the core business of accommodation, hotels are breaking into new markets such as toiletries, food, wines and Champagne, clothing and even furniture.

As Stuart Harrison, principal of the Profitable Hotel Company, which advises hotels on marketing strategies, explains: "Brand extension isn't about taking away the overall hotel experience, but adding to it. If you're truly exceeding expectations in the first place, the guest will want to take away something associated with that."

One sector that has readily embraced the trend is boutique hotels. Babington House, a hip Somerset retreat for celebs like Kate Moss and Zo Ball, has recently launched its own Cowshed range of beauty products. Not only can hotel guests buy the products - catchily titled with names like Filthy Cow (soap) and Stroppy Cow (calming massage oil) - but the collection is now available to buy online, via an independent Cowshed website.

The brand has taken off to such an extent that Harvey Nichols and Liberty have started to stock it, meaning Cowshed now sits on the shelves just like any other retail brand. And a distribution centre takes care of storage, packaging and postage. According to Georgina Gibson, Cowshed's head of marketing, the Babington House links helped to establish the range. "The hotel obviously gives us a useful channel through which we can promote our products," she says.

The idea of a hotel being used as a shop window to sell selected wares is not new, however, particularly at the luxury end of the market. Four Seasons has been selling its hotel beds since 1984, and at the Four Seasons Park Lane, regular requests are made by guests keen to buy paintings hung in the hotel, as well as branded towels, linen and bathrobes.

The Ritz produces its own collection of jewellery, clothing and other luxury goods, and visitors to the Savoy hotel's gifts website can browse through a full selection of Savoy-branded goodies, including chocolates, alarm clocks and even tea bags.

So what exactly do hotels gain from diversifying? Aside from the additional revenue from selling the product, getting guests to take a branded product home with them is effectively free advertising for the core business.

For Sheryl Young, owner of the Lugger, a contemporary 21-bedroom boutique hotel in Portloe, Cornwall, who launched a spa product range 18 months ago, brand extension not only offers the benefit of an extra revenue source, but in a competitive marketplace, reinforces the original brand.

"As hoteliers, we need to keep our eye on the ball. Having a product keeps reminding people that you're out there. And it acts as a new business tool because it creates curiosity with people asking ‘where did you get that?'" Young says.

But despite the apparent benefits, the UK hotel sector has been relatively slow to exploit the potential in brand extension. For Harrison at the Profitable Hotel Company, this means hotels are missing out on a potential source of income. "We tend not to maximise the fact that hotels have a captive retail market," he says. "We don't see our buildings in terms of revenue per square foot, or address what could be termed lazy assets." One reason he states for this is that hotels still tend to recruit people with hospitality, not retail, backgrounds.

Pamela Carvell, chairman of the Hotel Marketing Association, agrees. "To take a product to market takes specialist skills and knowledge of the retail industry," she says. "More GMs are coming from sales or marketing backgrounds, but the majority are still home-grown within hospitality."

Of course, knowing your way around the competitive retail world will help to get things off the ground. Roger Saul, founder of the Mulberry design empire, opened Charlton House in Shepton
Mallet, Somerset, in 1997, and has established the country house hotel as a showcase for Mulberry fabrics and furniture, which are available for guests to buy either in the small hotel shop, or at the nearby dedicated factory outlet. "People come to the hotel to see how different fabric patterns or furniture work together," explains marketing manager Lesley Baker.

Last year, to complement the new spa facility, Charlton House also launched its own range of beauty products. "It's very circular," Baker says. "People come to the hotel, they use the spa, they like the product, they buy it, then they tell people about us." She points out that having an established name is important. "The spa product market is very crowded and it can be difficult to stand out. It has helped us enormously to build on a recognisable brand."

So, with a strong core brand in place, just how easy is it to launch an offshoot? Not very, according to Sheryl Young at the Lugger. "You can't just mix something in a bottle, or put something in a packet and sell it," she says. "Whatever you're selling, there are lots of regulations you must comply with and it's very important to deal with licensed manufacturers and designers."

Having spent two years developing the Lugger's spa range, Young believes thorough market research is vital. "It's very important to choose the right product for your brand. Our customers are well travelled and sophisticated, so it was vital to produce a high-quality item that matched their tastes. We didn't want it to look like a cottage industry product," she says.

With experience gained as a Wall Street equity analyst before opening the Lugger, Young is used to taking high risks involving large sums of money, but she concedes that getting her product range off the ground has been expensive. "There's a lot of investment in the early stages and you shouldn't expect to get a return on this for some time," she advises. Young admits her total costs will "exceed 100k" to get fully launched. Her advice to avoid a flop is to do something original rather than simply copy the hotel down the road, and do plenty of market research before investing any money.

Young also warns that it's important to get hold of the sales first, rather than the stock. "Rather than assuming the product will fly off the shelves at the beginning, just produce small quantities to start, especially if it's something perishable," she says.

So, you've got the idea, done the market research and convinced you're on to the next big thing. What's next? Be prepared for lots of trial and error, says Baker at Charlton House. "Once we had the prototype in our hands, we changed the ingredients and the design several times to get it right." Choosing a manufacturer who understands your business and your customers is key. "Find someone who's flexible enough to change with your ideas," says Baker. Packaging is important too, although much of it is common sense. "We knew we didn't want very thin bottles, for example, as they would shatter if dropped on the spa's stone floor," Baker adds.

In terms of selling, an internet site can provide the sales mechanism at a relatively low cost, particularly if the hotel has its own site up and running anyway. But don't forget about customer service. "A lot of people see the web as an easy option, but late or lost orders can be a PR disaster," warns Carvell at the Hotel Marketing Association. A PR and marketing strategy shouldn't be overlooked either, she says. "Most hotels won't necessarily have an in-house marketing person, but to make your product stand out and to get customers to pick it up off the shelf, investing in marketing may be necessary."

Giveaways and gifts can be effective to get things started. "This creates goodwill and builds up word of mouth, and can also attract new business, particularly with smaller retailers who are more receptive to direct approaches than big stores," says Young. "But you have to wholeheartedly recommend the product to everyone you know, so above all, you've got to really believe in what you're doing."

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