These days you just can’t escape IKEA flat-packs. If it’s not the flat-pack kitchen in your aunt’s bungalow, it’s the flat-pack hotel room on your Italian business trip. Yes, the news that Marriott has teamed up with the Swedish furniture giant to launch Moxy, its new brand of economy hotel, may result in lazy journalists everywhere assembling rickety flat-pack jokes, but the collaboration represents something of a coup for the American hospitality company.
"There’s been such huge interest in this new partnership," enthuses Amy McPherson, president and managing director, Europe, at Marriott International. "Even a week after the announcement, I’m still doing back-to-back media."
Strictly speaking, the new partnership is between Marriott and IKEA’s parent company, Inter Hospitality, which was formed in January 2012 to invest in and develop hotel and student properties across Europe. Its major investment, Moxy, launches its first hotel in Milan next year.
Talks were initiated between the two parties almost two years ago, largely thanks to hotel management firm Nordic Hospitality, which operates Swedish properties for Marriott and also has a relationship with Inter Hospitality.
Opportunities for Marriott to enter the economy hotel space must have been prevalent over the years, what made this one so attractive?
"You’re right; we obviously know that the budget space is huge, almost half of all room supply, and that all the big players are in there," says McPherson. "Opportunities for Marriott have been there in the past, but what was attractive with this is that we would only do it if we could open a brand with significant size and scale."
Anyone who’s ever spent their Sunday queuing for meatballs and a Dimebar cake at an IKEA store canteen will vouch for the fact that the company has successfully imposed its brand on the popular consciousness over the last decade – and it’s a success that has given it considerable know-how and financial clout.
"They are a committed capital player, which is what we were after," says McPherson. "They have significant financial capability and knowledge of developing a product that is cost-efficient. They’ve also got a proven track record of acquiring sites, from retail stores to student homes, and understand how to develop them.
"It is essential that we found a capital partner that is amazing at designing efficient but stylish spaces, and they are putting a lot of money behind this," she adds.
Exact figures – at least the ones released to the public – put IKEA’s initial investment at $500 million.
Room for improvement
However, despite having 18 brands across 74 countries (not to mention revenue of around $12 billion), Marriott has yet to enter the economy space – and the youthful appeal of the IKEA brand was a large part of the attraction.
"We did our homework, as you would expect, and did wide consumer research with both Generation X and Generation Y, and we found that they don’t just love brands, but brands with style," says McPherson. "The IKEAs and H&Ms of this world give style and value, and the combination of that is missing from the economy sector in Europe today."
Both McPherson and Marriott brand leader Ramesh Jackson say that delegates were blown away by the mocked-up hotel room at the Berlin Hotel Conference in March.
"With a lot of hotels in the market, you can tell it is an economy room as soon as you walk into it," says Jackson. "There is going to be nothing economy about the product in Moxy – every room will have a 42in flatscreen TV, a double bed, sizeable space and a lounge chair to relax or work on."
Will IKEA aficionados be able to identify the Folldal bed beneath the covers or a Benzy cushion atop them?
"Not at all," says Jackson. "Inter Hospitality is the owner of the building and it pretty much stops there. Once you are in the room there is nothing in the furniture or design from IKEA. Everything you see in the hotel has been specifically designed for Moxy hotels."
Room rates will sit between €65 and €95, depending on market demand, but how is Marriott able to keep prices so low? Part of the secret lies in a real IKEA skill set – the art of prefabrication.
"Inter Hospitality has great experience in modular and prefab construction and in using elements of design to allow it to be delivered in a cost-efficient way," says McPherson. Costs per room have been kept as low as €45,000, adds Jackson.
Inter Hospitality brings a wealth of specialised site and construction knowledge, but what particular skills will Marriott – a company that has operated higher up the market for almost half a century – bring to the economy sector?
"Marriott brings the ability to deliver and build a brand to different customer expectations; not just younger generations, but those who are young at heart," says McPherson. "Then there is our revenue engines and global infrastructure."
Still, with room rates so low, it surely can’t live up to expectations customers will have of other Marriott properties -something has to give? In fact, while there might be a glaring lack of IKEA bookshelves and lamps, the company’s famous cost-cutting DIY model will be very much present.
"We will have 24-hour room service available, but it will all be self-service," says Jackson. "You can pick it up yourself and heat it in the microwave. It means that a 150-room hotel can be staffed by about 25 people. So from both an investment and operational perspective, we are going to keep the costs really down to make sure it is a profitable venture."
Check-in will be via mobile phone and the properties won’t include a staffed kitchen – breakfast will be available, but that service will also have a do-it-yourself vibe.
Global reach
Room numbers will vary between 150 and 300, and the first Moxy hotel is set to launch near Milan’s Malpensa Airport next year, with further sites scheduled to be rolled out in Germany and the UK.
"We’re aiming for 150 hotels in the next ten years," says Jackson. "We want this to be all over Europe and to then become a global brand."
Major markets in Western and Northern Europe are the most obvious locations to launch a new major brand and the hunt is on for suitable locations.
"We are looking at airport locations, transportation hubs, city centres and other good sites close to destinations," says Jackson.
Nordic Hospitality is currently signed up as founder franchiser and will operate the first Moxy hotels; however, going forward, it won’t be an exclusive partnership. "As we grow we will bring in other partners," adds Jackson.
In light of Marriott’s announcement that it plans to double its 40,000 hotel rooms by 2015, is the target still achievable and will Moxy go some way to helping the operator hit its numbers?
"When we announced that goal in 2010, we said it had taken us 45 years to get the first 40,000, so aiming to add another 40,000 in five years was ambitious," says McPherson. "However, we are already halfway toward achieving it. The first Moxy is due to open in Milan in a year with 300 rooms, but it won’t be a significant contributor to that 80,000 total come 2015."
All of this equates to exciting times for Marriott, Inter Hospitality and the fledgling Moxy, and if the media response to the announcement is any guide, expectations will be high for IKEA’s first foray into the hotel world, however little interior-design input it is set to have. Now, it’s down to Marriott to deliver on those expectations.
"From our standpoint we have been doing this a very long time and having the right partners is essential," says McPherson. "We’ve got a great capital partner and a great first franchiser, so all the ingredients are there for success."
