Selling the House

In the emerging world of luxury hotel retail, it's about more than just pushing brandname bags and designer duds on your guests — it's about selling hotels.

IT USED TO BE THAT hotel gift shops were the realm of souvenir T-shirts and travel-size tubes of toothpaste. Visit the gift shop at the SLS Hotel in Beverly Hills, though, and you'll find an inventory more befitting of Barneys — including a sleek wooden iPad docking station, a python skin flask and a 2003 limited edition Helmut Newton Swatch watch that'll set you back a cool $10,250.

Called Regalo — Spanish for gift — the SLS shop is more museum than boutique, consisting of a series of illuminated vitrines that were conceived by designer Philippe Starck to be a "shop without walls."

"I don't call this a hotel gift shop at all," says Arash Azar-barzin, president of SBE Hotel Group. "A hotel gift shop is necessities and a few knickknacks. This is anything but."

Though it may not be typical, the SLS — which has partnered with online curio retailer AHALife to curate and run Regalo — is one of a growing number of hotels shifting its retail focus from the sale of sundries and simple souvenirs to designer fashions and unique, niche items.

"What you're seeing is the spread of personalization of hotel shops," says Bruce Baltin, a hotel industry consultant, who first noticed the trend about 10 years ago, with individual hotel operators seeking to maximize profit and buzz by creating more targeted, branded shops — often bringing in high-end retailers to run in-house stores or partnering with famed designers to create exclusive collections. At the Delano Hotel in Miami Beach, the upscale Base boutique sells an eclectic collection of luxury fashions. The Fairmont chain recently partnered with perfumer Le Labo for an exclusive scent. And the Cosmopolitan Hotel in Las Vegas is a veritable luxury mall, with an entire collection of curated shops including U*Tique, an automated boutique where customers make selections via touchscreen.

"Anything that can be done to up-sell, to give brand recognition to a hotel — whether it be a chef or a retailer or a product line — it helps," says Baltin.

W Hotels learned about the vast potential of hotel retail when it launched its first shop in 2000 at the W New York. "We were going for a reinterpretation of the traditional hotel shop," says Eva Ziegler, the chain's global brand leader. "We were aiming to attract design savvy, fashion savvy trendsetters."

To woo that clientele, the W partners with luxury retailer Wink, which either manages or leases 11 of the hotel chain's 17 stores, keeping the shops stocked with brands more typically associated with high-end boutiques and department stores (think Marc Jacobs and Diane Von Furstenberg), along with commissioning of limited edition handbags and accessories. In 2009, the chain went one step further, hiring a global fashion director to attend fashion shows around the world, scouting designers like Rebecca Minkoff and Deepa Gurnan to create collections exclusively available in the hotel's shops and online stores.

"To the designer, it's exposure. For the hotel, it's the panache of the designer's brand or name," explains Baltin. "As a country, we're so big on branding."

And the shops have helped W build its brand as a fashion driver, says Ziegler. "It allows us to showcase what's new and next to [our guests]."

Other boutique and luxury hotel lines have followed suit, carefully selecting retail partners that reflect their personas, catering specifically to their locations and clienteles. So where the urban, design-focused SLS Beverly Hills might feature an Akillis diamond-studded bullet pendant, the more beachy Shutters, across town in Santa Monica, sells branded beach bags by Joie and specially designed Fairway & Greene golf shirts.

"When we make a new hotel, we're looking to curate an experience for guests that not only inspires them, but that keeps our creative flames lit, as well," Alex Calderwood, co-founder of Ace Hotel, says. For its Manhattan outpost, Ace joined forces with Opening Ceremony and Project No. 8, two quirky, eclectic boutiques that match the unique, bespoke feel of the Ace chain. "They have a playfulness mixed with deep regard for the products they work with, and we identify deeply with that form of celebration," Calderwood says.

Where the right retail partner can offer cachet to a property, setting up shop in a hotel offers retailers access to an appealing client base. "From the retailer's point of view, the advantage is that the guests at high-end hotels have high incomes," says Bjorn Hanson, divisional dean of the Tisch Center for Hospitality, Tourism and Sports Management at NYU.

"The consumer is becoming more and more busy," says Shauna Mei, CEO of AHALife, which is partnering with the SLS on Regalo. "Travel is becoming more about how we live our lives. How do we capture that audience? Go where the people are already going."

Retailers often benefit, too, from flexible lease structures that vary depending on revenue, which reduces risk relative to a standard fixed-cost lease. "If the hotel generates traffic for the shop, there's more rent. If there's less traffic, the rent is lower," says Hanson.

More often, there is no lease — with hotels and retailers instead working out profit-sharing deals. At the Andaz West Hollywood, where there's little space for a traditional store, general manager Philip Dailey recently started bringing in local luxury boutiques to set-up temporary pop-up shops in the hotel's lobby. "It's a minimal revenue share. It's their employees, so they're incurring all of the expense," says Dailey. "We hope they're busy and things crank, but we're not looking to make a ton of money offit."

Other hotels share a similar philosophy on the shops. Though some W Hotels shops are high performing, Ziegler admits that their main function is to build a reputation in fashion and design, "not making major financial gains." The primary revenue driver for W Hotels' retail arm is online sales of sheets and bedding.

But while the stores themselves may not always directly lead to profit, the partnerships can still have an effect on the bottom line. "I don't think it's going to generate new business," says SLS's Azarbarzin of Regalo, "But hopefully it makes my existing business stay longer, spend more money and come back."

With more and more hotels getting into the luxury shopping business, experts don't predict a return to the stodgy hotel gift shop of yesteryear any time soon. "It will just continue to evolve because it makes sense," says Bal-tin. "It works for both the hotel and the brand." And you'll be stuck buying your T-shirts and toothpaste from where they belong — the nearest pharmacy.