Ikea Hotels? Swedish Furniture Chain Branching Into Budget-Chic Lodging

 @MarkJohansonIBT on August 15 2012 11:22 AM
IKEA
Reuters

If you've ever dreamed about spending the night in one of Ikea's model rooms, now you can -- sort of. The Swedish store, known for its affordable DIY home furnishing, is branching into a new arena: the hotel business.

Inter Ikea, the company that owns the intellectual property rights of Ikea, plans to build 100 budget hotels across Europe in its biggest push to join the property market.

"We will announce the first location for our budget hotel in Germany in the next few weeks, and we are in talks with hotel operators to rapidly implement our concept," Inter Ikea Business Development Manager Harald Müller told Sweden's Svenska Dagbladet newspaper, or SvD.

Inter Ikea also plans to open up additional hotels in Poland, the Netherlands and the UK, markets where it is already active in property.

The budget accommodation will not hold the Ikea brand, nor will the rooms be furnished with Ikea's trademark furniture, Müller said. It will instead be opened through an established hotel operator and offer guests all the necessary basics to cut down on costs.

"We will strip away everything unnecessary, such as the in-house restaurants, and, instead, go for a good breakfast, fast Internet, fast check-in and no check out," Müller noted.

The market for so-called budget design hotels, which offer boutique styling, fewer amenities and lower costs, is one of the travel industry's fastest-growing sectors. Munich-based Motel One, for example, has 39 hotels with more than 8,500 rooms in Germany. It's now looking to expand across Europe after it achieved a 70 percent jump in revenue last year with pretax profit up 25 percent. Its business model: The hotel offers simple, stylish rooms that start at just 50 to 60 euros ($62 to $74) per night.

Sales figures for budget hotels rose by 10 percent last year in Europe, representing a 41 percent share of the $162.5 billion industry. Motel One, along with B&B Hotels and citizenM (which will soon enter the U.S. market), is part of a new breed of hotels leading the charge, while established brands such as Whitbread's Premier Inn, Travelodge and Accor's Formule 1 fall behind.

In addition to its foray into budget hotels, the furniture giant plans to build student apartments in various university towns where there are shortages. Müller told Germany's Frankfurter Allgemeine Zeitung that the company would design the buildings and manage them for a limited period of time before passing them onto the respective universities.

The combined real estate investment is projected to be nearly 9 billion euros ($11 billion).

Ikea, which ranks No. 89 in the world's most valuable brands and is the second-highest in Sweden behind clothing label H&M, has ventured into the lodging market before. In 2007, Ikea Norway opened a temporary Ikea Hostel where customers could sleep overnight if they hadn't finished shopping. Ikea also set up a temporary lounge in Paris' Charles de Gaulle Airport from July to August of this year where travelers could relax between flights.

Moreover, there is already an Ikea Hotel, the Ikea Hotel & Restaurant Värdshuset, which sits just across the parking lot from Ikea's oldest store in central Älmhult. The hotel features 151 rooms, as well as a restaurant and conference center. The restaurant's lunch buffet, as you might imagine, features an array of Ikea favorites you may recognize from the store.

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