Is leisure and hospitality the new frontier for retail?

Frasers Group today announced that it had taken a minority stake in UK-based leisure firm We Do Play, which operates “experience-led brands” such as indoor trampoline park Flip Out, live-action gaming venue Activate and golfing brand Putt Putt.

In the same week that Retail Week revealed that the retail giant is looking to take a 50% stake in Manchester’s Arndale centre, it’s clear that one of the biggest brands in retail is no longer content just selling clothes and trainers.

“Today’s announcement marks a significant milestone in our strategy to diversify and create more dynamic consumer and leisure experiences,” Frasers chief aquisition officer James France said. “We Do Play’s innovative brands align perfectly with our vision for a modern, experience-led consumer ecosystem.”

It’s this ‘consumer ecosystem’ point that is most salient. With global headwinds battering retail and high street footfall, spend and consumer confidence all trending downwards, traditional retailers are increasingly looking at other sectors and categories to diversify their offerings. 

Beauty retailer Lush is one such brand. At the same time it reported deepening full-year losses and declining sales in April, which it blamed on Trump’s tariffs, it also floated the idea of opening a hotel, in collaboration with a British brand. 

The retailer said at the time opening a hotel would be part of its exploring “opportunities to build cash”, all while it kept its powder dry and waited for the global economy to settle down. 

Retail Week takes a look at the continued blurring of lines between retail and hospitality and what this could mean for the likes of Frasers Group and Lush when tapping into the increasingly popular world of ‘experiential destinations’.

Luxury no more

Retail brands moving into the hotel and hospitality space isn’t necessarily a new thing, but it’s historically been more the preserve of high-end, luxury brands. 

Armani, Bulgari and Versace all operate hotels around the global that are handcrafted to reflect their distinct brand aesthetics and appeal to their high end customer bases. Other brands like Fendi and Bulgari also have private suites in existing hotels or brand partnerships.

These are all aspirational lifestyle brands, focused on offerings customers a vision of high end luxury that goes beyond the products they sell. By comparison, Lush is a high street retailer perhaps best known for selling bath bombs.

However, while opening a hotel would be a first for the brand, it wouldn’t be the first step into more experiential retailing for Lush. It operates 19 spas across the globe, having launched the concept first back in 2009.

“Our spas provide customers with an immersive experience,” a Lush spokesperson says. “We want to bring this experience to a broader audience, in a more integrated environment,” they added on plans for a hotel.

Lush also wouldn’t be the first non-luxury brand to explore hospitality. Swedish furniture giant Ikea opened a hotel in the Canary islands in June, and homewares retailer Muji previously opened a hotel in China in 2018.

But could a hotel be the answer to its flagging retail fortunes?

“Lush moving into UK hotels is a savvy move,” says one health and beauty analyst. “The company has already been selling touch, scent and ritual through its spas and large experiential flagships, so a hotel is the next logifcal extension of sensory wellness.” 

LoyaltyLion marketing director Fiona Stevens agrees: “Lush’s £42.5m loss underlines how hard it is to grow in today’s beauty market, but the decision to launch a hotel shows the brand doubling down on experiences as a route to loyalty and retention.”

“In a sector where TikTok is now the fourth-largest beauty retailer in the UK and rivals like Sephora are expanding aggressively, the brands that win will be those that go beyond transactions and give customers memorable reasons to stay connected. A hotel isn’t just hospitality, it’s a way of deepening emotional loyalty to Lush by turning the brand into an experience people can live, not just a product they buy.”

Bullseye

On the surface of it, Frasers’ move for a stake in a leisure operator seems to make less sense than Lush moving into hotels. However, analysts say it provides the retailer with a lot of synergies when you take in its broader brand portfolio, and its increasingly large retail destination portfolio.

“We Do Play already runs its live-action gaming venue Activate, which you’d think would align quite nicely with a brand like Game, which Frasers owns,” a city analyst said. “But also, Frasers is much more than just a retail group. It already owns a number of shopping centres, and is looking to expand its footprint there as well.

“Being able to bring some, or all of, those We Do Play brands into a Frasers owned retail destination not only drives footfall and fills potentially empty space to generate revenues, but also complements some of the group’s other existing suite of brands.”

Frasers’ latest acquisition also plays into a wider consumer trend – that of “competitive socialising”. The number of such venues in the UK has jumped 40% to nearly 600 sites since 2018, according to recent data from Savills. The real estate firm expects there to be more than 800 sites across the UK by 2029.

Some of the brand’s in the We Do Play portfolio are already leaders in their fields. Flip Out is already the UK’s leading trampoline park operators, serving over 15 million customers worldwide, with a sprawling network of owned and franchised sites.

Frasers also reportedly really like the Activate brand, and have plans to launch more than 40 locations nationwide in the coming years.

So, while Lush and Frasers appear to be different cases, they are both examples of two retailers looking to solve the same problem, albeit in different ways. In a world where customers can buy a retailer’s products in a million different ways, brands are increasingly looking at leisure and hospitality to give those same customers a good reason to make the trip.