Remember the last time you checked into a hotel? For me, it was just last week, when I stayed at The Roundtree in Amagansett, New York. The 15-room boutique property opened last May, with the centuries-old barn and cottages onsite getting a minimalist, thoughtful update. Our two-room, cedar-shingled cottage had Grown Alchemist bath products and a cool Upang sterilizer for the room key and TV remotes. With our morning breakfast delivery, coffee came in branded thermoses, and the towels—detailed with a delicate piped cotton edge—were the softest I’ve ever touched, from Matouk.
After a year of not traveling, returning to a hotel felt like stepping back into a beautiful alternative life, where everything that surrounded me was pristine and perfectly designed. And everything in this shiny new life can be purchased.
This is experiential retail—a way of shopping that lets you try out products in their native environment. Plenty of brands have utilized experiential retail to market their goods—at the 20 thousand square foot Lululemon in Chicago, for example, you can drop in to a yoga class and try out any of the fitness brand’s gear at no additional cost, and at the House of Vans in London, test out a skateboard in the on-site concrete skate bowl. But perhaps no industry is a better fit for experiential retail than hospitality. Sleep on a mattress, pour your coffee from the thermos, smell the shampoo as you lather your hair in the shower. Hotel guests use these things just as they would in their normal lives.
The COVID-19 pandemic led to the worst year on record for the hotel industry, according to 2020 year-end data from analytics firm STR. Adding a retail revenue stream could be a way for brands to diversify revenue, and, as some have already discovered, improve their customers’ experience, and more intentionally market their brand.
After a tumultuous few months last spring, by the summer many hotels were starting to reopen. Around that time, says Marc Hostovsky, founder of native retail platform Minoan, the startup began seeing a flood of interest from hotels that were starting to reopen, but not yet back to full capacity.
“They were wanting to find ways to create incremental revenue streams,” Hostovsky says. “And also, whenever you have an event like that … they were shook.” As with most industries, the pandemic prompted many in the hospitality sector to reexamine existing norms, and some concluded they should be diversifying.
Minoan officially launched last December. A Walmart and Jet alum, Hostovsky had grown frustrated with the disconnect between the online retail experience and reality. He and his team would test products before choosing which products to bring into their inventory. But he says, “by the time my customers are experiencing this product, that really rich sensory experience I had is now being dulled down to a couple of pictures and some copy.” And it’s not much better in a retail store, where optimization is focused on dollar per square foot instead of for the guest experience. “We’re putting products in boxes—you can’t actually touch them.”
After spending a weekend at a boutique lodge in upstate New York, where he and his partner fell in love with everything from the minimalist teak furniture to the Aesop shampoo, Hostovsky got the idea to partner with boutique properties, giving them a platform to make any of their products shoppable, from hair dryers to candles and coffee table books. Instead of tracking down a product they discover at the hotel, guests can purchase and have it shipped to them seamlessly from the Minoan platform (a website usually accessible via a displayed QR code), while sparing the property from the back end legwork.
“There’s a whole unsexy side of retail,” Hostovsky says, noting things like the payment processing, order fulfillment, and merchandising. “They shouldn’t deal with these things because it’s a huge distraction. But this is what we do.”
The hospitality industry’s foray into retail isn’t new. Westin has been selling its Heavenly Bed mattress since 1999, some of the thousands of luxury hotels that make their beds with Frette sheets are now selling the luxe Italian linens directly. After introducing a customizable bed in 2014, the Four Seasons launched Four Seasons at Home in 2019, selling items like branded cashmere throw blankets and spa robes.
“For decades, Four Seasons guests have been asking how they can recreate a luxury hotel experience at home with the same Four Seasons products they enjoy when staying at our properties around the world,” says Dennis Chan, the brand’s director of retail product, noting the online retail program has continued to grow as a result of overwhelming demand. “We know that beyond the walls of our hotels and resorts, consumers are looking to enjoy Four Seasons products in their homes and as part of their everyday lives.” And hotels are also going beyond mattresses and linens now. The boutique hotels that use the Minoan platform are selling much of what the guests encounter during their stays, from furniture to audio systems.
As Hostovsky understood, experiential retail, or what he calls native retail, can be more effective than traditional retail for myriad reasons. In his book Demand-Side Sales 101, Bob Moesta notes that when it comes to buying decisions, one of the frictions a buyer encounters is the worry over whether or not a product will work. Where better to alleviate that friction than in a hotel, testing out the product where and when it’s meant to be used?
According to Joann Peck, marketing professor at Wisconsin School of Business and an expert on haptics, the science of touch, hotels are actually a better retail environment than a store, from the consumer perspective. “What I found in many studies is simply touching a product gives you this emotional connection,” she says. In one study, Peck put up signs in a store encouraging touch, which led to a dramatic increase in the level of unplanned purchasing. “In a hotel, you get to use the product, and you feel a sense of ownership. And you’re much more likely to purchase—and be willing to pay more for—the product.”
In other words, this type of retail could offer hotels an added revenue stream, but it could also be a boon to brands. The Lokal, a bespoke hotel group with properties in Philadelphia and New Jersey, owned by Chad and Courteney Ludeman, joined the Minoan platform earlier this year. Chad Ludeman says they had the idea from the beginning to sell products from his properties, which are highly focused on local makers, in part to support the local economy and local brands. But the hurdles—including storing the products and fulfilling orders—made them pause their plans. Minoan solved those problems, and now guests of the Lokal Cape May can purchase a beautiful oak bathtub caddy from Philadelphia-based Peg and Awl, an ethically-made throw pillow, or a Yeti cooler.
“You can sleep on the mattress and the sheets, and take our beach bag to the beach for a couple days and see if you like it,” he says. In the few months they’ve been using the platform, they’ve sold dozens of Casper mattresses and Parachute sheet sets.
Besides offering hotels and hospitality brands another revenue stream, selling the products guests encounter in their spaces is a strong marketing opportunity. “If we get some co-branded product in their homes, it becomes more of a marketing campaign than a profit center,” Ludeman says.
It has been for Ace Hotel, another hotel group on the forefront of the experiential retail trend. After opening in Seattle in 1999, Ace was selling products in its lobbies before launching an online shop, according to Julie Saunders, Ace Hotel Group’s head of brand. The shop’s well-curated selection has always gone well beyond bathrobes, and currently sells Journeymen natural deodorant, watch caps, and sweatshirts made in collaboration with LA-based clothing company Hiro Clark. In an indication of Ace’s brand strength, guests shopped even while they were quarantined over the pandemic.
“It was humbling to see so many people who love staying at Ace wanting to bring a piece of the hotel home with them—a lot of our signature pieces sold out through the year,” says Julie Saunders, Ace Hotel Group’s head of brand. “A whole year stuck at home seems to have given people a new appreciation for the little luxuries that surround them all day.”
If Minoan has anything to say about it, shopping these little luxuries at hotels is the future. And in a clear sign the model is working, says Hostovsky, “We have not gotten a single return.”
I bought those Matouk towels, and I love them.
Subscribe to Fortune Daily to get essential business stories straight to your inbox each morning.
