Strategy: Ikea Diversifies into Hotels

Let's face it. Nearly all of us associate Ikea with flatpack, affordable furniture. The Ikea brand has become a global success and, as we reported on the business blog recently, the Ikea format is well-positioned to achieve further success in key emerging markets.However, Ikea's business portfolio is not just about furniture retailing.In March 2013, Ikea announced that it is to partner with Marriott International to open a chain of three-star hotels. The chosen brand name for this joint venture between Marriott and Ikea is Moxy Hotels.

The joint venture has set an objective of opening 150 Moxy Hotels across Europe in the next 10 years, starting in Italy, Germany, Austria, the United Kingdom, Ireland, Belgium, the Netherlands, Denmark, Finland, Norway, and Sweden.

The Moxy Hotel product promises to offer:

"contemporary stylish design, approachable service and, most importantly, an affordable price".

If you are a potential customer, then you might also want to know that:

"guest rooms will be functional and well-designed, with upscale bath amenities … The colour palette features calming neutral tones reminiscent of rich brown leather, combined with natural materials to evoke an organic, comfortable and restorative feel."

As this article in Businessweek explains, Ikea has some experience when it comes to diversification away from the core furniture retailing market.

Ikea's involvement in the Moxy project is as a property investor, using the financial might of the store group to help fund the ambitious plans for Moxy. Marriott International brings their expertise of operating hotels into the joint venture.

According to Peter Andrews, managing director of Ikea's property arm:

"This gives us a great opportunity to use our development expertise to build a high-quality hotel property investment portfolio".

This Bloomberg video provides more explanation of Ikea's investment in Moxy Hotels: