RH’s “food, wine, art and design experience” in Yountville, CA – Photo: RH
Do boutique hotels and housing make sense for RH?
RH, formerly known as Restoration Hardware, last week announced plans to invest $105 million in real estate in the ritzy mountain town of Aspen, CO. The project will result in a hotel, restaurants, residences, spa and retail.
To support its “emergence as a luxury brand,” RH in recent years has opened a number of restaurants and wine bars across the country, and this year will open its first GuestHouse boutique hotel in New York City.
RH will become part owner of the Aspen project, which will include its first residential complexes and represent its first “ecosystem.”
The site will feature:
- A RH Bespoke Gallery (store) offering two floors of retail along with interior design, architecture and landscape architecture services. The space will feature a transparent glass rooftop restaurant with views of Aspen Mountain, a Wine & Barista Bar, plus two private dining rooms with fireplaces and retractable roofs.
- An RH GuestHouse hotel featuring suites with fireplaces, a live fire restaurant, wine vault, private rooftop pool and dining terrace with views of Aspen Mountain and the brand’s first RH Bath House & Spa.
- Fully-furnished RH Residences in two locations: four bedroom homes located at Boomerang Lodge and six bedroom homes on Red Mountain.
“We believe Aspen represents a singular opportunity to elevate the RH brand by exposing the world of RH to the world’s most affluent and discerning customers in a single, walkable market,” said Gary Friedman, RH’s CEO, in a statement. “Additionally, we believe the education RH will gain from a real estate development and ownership perspective will be immeasurable as the brand builds its global ecosystem of products, places, services, and spaces.”
Mr. Friedman has said ownership of hotels and residences will differ RH’s approach from such retailers as West Elm, Bulgari and Shinola that operate hotels structured as licensed arrangements. RH’s elevated aesthetic is expected to drive success.
“Our vision is to move the brand beyond curating and selling product to conceptualizing and selling spaces by building an ecosystem of products, places, services and spaces that elevate and establish the RH brand as a global thought leader, taste and place maker,” he said.
- RH Becomes A Partner Of The Premier Real Estate Portfolio In Aspen – RH
- RH Third Quarter 2020 Financial Results And Shareholder Letter – RH
- RH commits $105 million to Aspen real estate ‘ecosystem’ – Aspen Daily News
- RH bets $105 million on an Aspen wonderland – Business Of Home
- Inside The Dazzling New RH New York – Dujour
- Will opening hotels help West Elm sell more furniture? – RetailWire
Discussion Questions
DISCUSSION QUESTIONS: Will RH’s move into boutique hotels and residential housing likely help support its luxury positioning in the home space? Is retaining some ownership critical to success?
Poll
BrainTrust
Steve Dennis
President, Sageberry Consulting/Senior Forbes Contributor
Dave Bruno
Director, Retail Market Insights, Aptos
RH’s strong design credentials and its lifestyle positioning mean that expanding its reach into experiences makes a lot of sense. These new additions should, in theory, be able to support themselves – especially as they will be premium offerings with reasonable margins. As a mechanism for showcasing RH’s products and retail offering, I think this will work, especially given the clientele that visits Aspen. Quite how all of this converts into actual retail sales remains to be seen, but overall the investment and approach is sound and shows that, once again, RH is thinking outside of the box.
The first time I walked into an RH Gallery store I thought I was in a hotel lobby. This is an interesting concept and I think it is a good one.
This is an interesting concept. They are turning retail into an experience. RH’s flagship store and restaurant in Chicago was just a start, and the hotel idea takes it to a much different level. Using the merchandise throughout the hotel (including rooms) will be a beautiful showcase of RH’s offerings. Done right, this can become a desired destination that garners great publicity and reputation.
This is definitely a bold move by RH, as the brand extension is a big leap from selling furniture. This also comes at a time when hotels and restaurants are struggling due to the pandemic. Hopefully, the economy will be recovered and safety concerns will be reduced by the time RH’s plan comes to fruition. I like the creativity and the luxury location and hope that the strategy creates incremental value for RH. This will be interesting to watch.
It’s impossible to answer the question definitively without a deep dive into their customer data, but I’d lean strongly toward yes. Particularly for higher-end brands, people buy the story before they buy the product. RH is merely telling the story of their remarkable brand in new and different ways that allow customers to more clearly be reminded, as Seth Godin says, “people like us, do (or buy) things like this.” It’s also a reminder that physical spaces (be they more traditional retail stores or what RH is doing here) are becoming hybrid in nature, serving as both brand advertising (irrespective of how or where customers ultimately transact) and places to buy stuff.
I like it – it is an extension of their brand that they are turning into part of the RH experience. Utilizing what they sell to sell their brand and hope that customers will buy it. This will be interesting to watch.
RH has done a masterful job of repositioning the company. After ditching the catalog and moving upscale, they’ve enjoyed terrific free publicity for their marketing efforts. It has been exciting to watch, and rewarding for their customer base.
Unlike some of my colleagues on this panel, I am very skeptical that the concept will work financially. Yes, it is a good idea to be able to give one’s potential customers a hands-on feel for the products that RH sells. But hotels, boutique or not, are a whole other business than showrooms or pure brick-and-mortar retail. Best of luck and prove me wrong.
If the application of the RH brand to hotels is to sell furniture, it will not work. If the application of the RH brand is to build a chain of luxury hotels like Bulgari, Peninsula, Shangri-La or Le Grand, and other exclusive, expensive, over-the-top chains, they will fit nicely into the list and the returns these types of properties make.
On the outside this looks like a fluff move driven by personal interest however, today there is little difference between a home, boutique hotel and showroom. Many home owners get their design ideas from hotels. Additionally, with the mass move-outs of cities to second homes or full relocation due to COVID-19, the opportunity for new clients is exploding in Aspen. Here is a snippet from a Wall Street Journal article published in October: “Aspen is attracting affluent buyers from both coasts and Texas. July home-sales contracts jumped more than fivefold over that same month a year earlier, a surge that appraiser Jonathan Miller called unprecedented for Aspen in a recent report.”
RH will sell to all of them!
As someone, somewhere likely said, “It’s all about the brand, baby!” and RH clearly gets it. This investment will allow consumers from their key demographic to immerse themselves in their brand while simultaneously enjoying themselves on vacation. Consumers get to experience the RH brand brought to life, RH gets to curate highly refined experiences for a highly targeted audience, collect all that consumer data and build brand equity. Seem like a very sound marketing investment to me, regardless of the profitability of the resort.
This is so much more than a hotel like Marriott featuring furniture by RH. To encompass the lifestyle brand for the people most likely to buy it when they get home is brilliant. RH is one of my top five retailers who understand who they are and who their customers are and more importantly who they are not. It is an enviable rock-solid brand so I expect nothing but success.
I’m a great believer in expanding and elevating a brand’s awareness through associated partnerships. This may include mattress brands being promoted in luxury hotels such as the Four Seasons or product placement on network television shows like HGTV.
This allows the consumer to experience these products in their own environment while also promoting the brand simultaneously. A win-win!
RH is going far beyond these brand associations by expanding into hospitality, food and beverage. As well, they are investing heavily in real estate to achieve these lofty ambitions.
In my book, great real estate locations are never a bad investment. However delving into areas beyond a company’s own expertise does seem risky.
Specialization and experiential retail are more important now than ever. Will RH’s expansion outside its home furnishings category elevate the brand? Perhaps, but there are many risks associated with this type of expansion outside one’s own expertise, which may have a deleterious effect in the end.
I wish RH luck with this expansion. Will it elevate the brand? Definitely. I hope that it’s a well-executed launch, provided there is no misplaced hubris on the part of ownership.
I hope they are not doing this with the thought of selling more furniture. If so, they are thinking small. This should have nothing to do with selling one more piece of furniture and everything to do with using the assets of the company to grow.
Classic business strategy says the company has assets: brand name, technology, location, labor force, etc. Play dominoes with those assets and apply them to new businesses. This move by RH is a perfect application.
In this case, the RH brand has clear meaning. The question they should and probably did ask themselves is, “to what businesses can we apply the RH brand and make it have meaning and build a new business with it?”
Timing is everything, but what RH has done is, to me, the future of retail. Brand extension/lifestyle. Urban Brands is great at this as well. Physical retail needs to be the best, most interesting experience ever now — so removed from the function of simply buying that you’re compelled to go and check it out. And this idea really fits that bill. I commend them on their thinking and execution and, selfishly, ask them to please keep it up (at least till I can get up there!).
This all makes abundant sense. RH is in essence providing more showrooms exhibiting the execution of their brand promise. It’s a great opportunity to showcase the RH lifestyle.
RH is creating venues where consumer will pay to experience the RH brand, vision, products and services before (hopefully) investing, posting and advocating for them.
What’s the difference between “brand extension” and “overshooting”? Well, the former works and the latter doesn’t, but more to the point, it’s usually not obvious beforehand, and certainly not to those who aren’t intimate with all the financial details. And in answer to the question, I would say retaining “control” is essential; I’m less sure about actual ownership (the fact that this is not the norm suggests it isn’t).
This seems like a sensible, rather modest step, but it’s something of a gamble nonetheless. I wish them well.
Yes, they do!
About ten years ago, RH carried similar products and pricing as Crate and Barrel and Pottery Barn. Since then, RH has accomplished a difficult transformation upmarket, emphasizing exclusivity and sky-high prices. The company continued to evolve into experiential retailing with cafes and restaurants. The current move to a retail + real state ecosystem means RH will remain in the driver seat, setting expectations and raising the bar for any competitor considering entry into this luxury segment — an audience akin to a cross-section of Condé Nast’s Traveller and Architectural Digest.