Williams-Sonoma, Inc. (NYSE:WSM) is expanding into the hospitality industry with boutique hotels in what has been described by some analysts as an unnatural diversification. Though Williams-Sonoma started off mainly as a provider of high-end kitchen wares, the last two years have seen it significantly diversify its operations to include home furnishings and décor.
The diversification at Williams-Sonoma has been through strategies such as Pottery Barn, West Elm, Rejuvenation and Mark and Graham. Now it is Williams-Sonoma’s furniture unit West Elm that is expanding into the boutique hotels business.
Instead of following the industry trend of opening more stores to drive sales growth, West Elm has figured out that launching boutique hotels gives it a better opportunity to grow revenue or at least sustain growth.
Launching hotels in 2018
Williams-Sonoma’s West Elm has partnered with hospitality management company DDK to launch the boutique hotels, the first of which are expected to begin operations in late 2018 in Savannah and Detroit. West Elm will design, furnish and then market the hotels, while DDK will operate them.
Not only is West Elm seeking to grab a slice of the hotel rooms market, but management is hoping that the boutique hotels strategy will boost furnishings sales. Guests will have the opportunity to purchase furniture and décor they see in the rooms if they like them.
Williams-Sonoma’s West Elm is going into boutique hotels business at a time when the majority of major hotel chains have already endorsed the boutique hotel brand concept. Though standardization once used to be the name of the business in the hospitality market, demand for unique experiences in the places consumers travel to is fueling the growth of the boutique hotels market. West Elm feels it has a role to play and money to make in joining the trend.
However, the hotel industry is already crowded and West Elm will have to fight hard for its space. Williams-Sonoma is planning to beat the competition by offering guests competitive room rates. A room will start at $175 and cost more than $400 for luxury accommodation.
Williams-Sonoma stock retreated 0.32% to $50.40 in the last session.