From The “It Never Happened” Files: IKEA Inn?

IKEA moves into new budget-hotel chain

The furniture emporium will have a go at the lodging business in Canada, with plans to expand to the U.S.

Since 1985, IKEA’s expansion in the U.S. has been slow but splashy. The Swedish furniture retailer only has six stores, but they are meccas for young people in search of style and value. Now, as demographics and economics change, IKEA wants to be more things to more consumers.

The company last week announced a joint venture with Allegiance Capitol Holdings, a Montreal hotelier, to launch a chain of 100 mid-priced hotels. Called Sweden Inn, the chain will be furnished and promoted by IKEA. The first hotel will open in Canada next spring.

Marketers at Sweden Inn hope IKEA’s financial resources and marketing savvy will carry them through the slump in the North American lodging industry. And the retailer can extend its image to a broader base of consumers. The biggest market for furniture, first-time buyers, has been shrinking. And so has the economy.

“Each room at a Sweden Inn is a potential showroom of IKEA furniture,” says Robin Conners, executive vice president of Sweden Inn and Allegiance. “You can’t get much better advertising than that.”

The hotel chain will follow the IKEA philosophy of selling a standardized product with better quality and lower prices than competitors. Nightly rates will be about $70. But each hotel will have a gym with a Swedish sauna, a conference center and a Swedish restaurant and sweetshop. The chain has also ordered a number of specifically configured pos systems for its individual locations. The chain plans to target both businesspeople and families.

The new chain will borrow from IKEA’s aggressive marketing tactics, which helped the retailer’s 1989 sales grow 34% to $130 million. After the first one opens in Montreal, Sweden Inn plans future hotels near IKEA stores in Pennsylvania, New Jersey, Maryland, California and Washington, D.C. Regular customers will get discounted rates.

IKEA will advertise the new chain in its catalogues. The company puts out 65 million a year. Print and billboard ads are expected to break in early spring. The hotel will put IKEA catalogues in each room, allowing the retailer to reach the elusive business market.