Hotels Clean Up On Soap, Shampoo Freebies

May 9, 2002 -- In an era when swiping the bathrobe from your hotel room is frowned upon — not to mention charged to your credit card — one of the perks of staying at a luxury hotel is loading up your suitcase with free shampoos, soaps and other amenities.

But actually, of course, they aren't free. What most hotel guests don't realize is how much those chic bath products can add to the cost of a hotel room — as much as $50, depending on the products being used.

While most guests do not choose hotels on the basis of their bath products, the products do add to the cachet of a hotel. But they are also hidden costs, much like flowers on a restaurant bill.

As more and more luxury hotels are faced with an increasingly competitive market, they need to identify ways that give them an edge over their rivals. Name-brand soaps are one such way. The problem is that name brands cost more.

"Carrying Hermès products is a selling point, and it puts us in a different category of hotel," says Jeff Klein, owner of the Manhattan hotel the City Club, and heir to pest-control company Assured Environments. "It sends a strong message about who we are. When people hear we have Hermès, they think, 'Oh, if they have Hermès, they must be good.'"

A Form of Targeted Advertising

Such thinking is clearly good news for the cosmetic companies that are deemed chic enough to find their way into $3,000 hotel suites.

For companies like Kiehl's, Crabtree & Evelyn or Aveda, their presence in a top hotel is a form of targeted advertising or direct sampling that is so valuable, they're willing to forfeit a profit — or if they do make a profit, it's a small one.

Crabtree & Evelyn, based in Woodstock, Conn., has been partnering with hotels for 15 years. "While we want to make money from this program, we do it primarily for branding reasons," says James McArdle, vice president of sales. "Sometimes a hotel stay is someone's first exposure to the product."

Spokeswoman Catie Briscoe put it more bluntly: "When we put our products on an airline or in a hotel, you have a captive audience. If they know the brand, they're happy to see a name they recognize."

The end result, of course, is that Crabtree & Evelyn hopes that these travelers will purchase their products.

Sorry, Motel 6

How successful is this strategy?

"We get calls every day from hotel guests who have tried the products and want to purchase them," says Mark O'Berski, vice president of consumer marketing at Minneapolis-based Aveda. A subsidiary of Estée Lauder, Aveda supplies the W Hotels — part of the Starwood Hotels & Resorts chain — as well as 150 others.

Estée Lauder doesn't break out separate sales figures but claims that Aveda is one of its most successful lines. "Sometimes [the hotel guests] will even walk into a store carrying the hotel shampoo bottle and say, 'I want this,'" O'Berski adds.

PricewaterhouseCoopers hotel analyst Bjorn Hanson is a bit skeptical of the cosmetics companies that moan about their low profits by selling to hotels.

"Selling products to a hotel is a distribution outlet that's done at a lower cost, because there are large volumes of purchases which are done in individual orders," he says. "It's a less expensive form of distribution, which allows the products to be sold at a lower price."

Other hoteliers hoping to carry Hermès aren't as lucky as the City Club's Klein. William Reith, director of fragrance for Hermès, says he receives two to three phone calls a day from hotels looking to carry Hermès and ends up partnering with only one hotel out of about 50.

"If someone called me from Motel 6 in Kalamazoo, I wouldn't be interested," says Reith. "But if it's the Mandarin Oriental group, sure I'd talk to them."

Healthy Profit for Hermès

If Reith thinks a property would be a good fit with Hermès, the next step is to arrange an anonymous visit to scope out the hotel and determine if it's an ideal environment to showcase the products.

As Klein described it, "Hermès stayed here undercover to see if we were worthy. It was total French snobbery and I loved it." If a hotel is deemed worthy, then Reith will inquire about intended guests and price.

Unlike many other brands, Reith says Hermès does indeed make a healthy profit from its hotel amenities program. "It's our fastest-growing angle of the fragrance business," he says.

One reason that Hermès is making money is that, as Klein puts it, "If you want Hermès products, you pay Hermès prices … and if it costs me $5 to carry it, it supports why I can charge an extra $50 on the room."

Rooms at the City Club start at $225 per night. If one were to subtract the cost of fancy soaps from the price, the rates would begin at $175, a bargain for New York.

Paying For More Than A Room

When faced with the choice between paying a premium for name-brand soaps and saving $50, what would the average guest do? More important, should guests be given the option of staying in an Hermès room or in a less expensive Ivory room?

Reith says only about 25 American hotels carry Hermès, including the Emerson Inn and Spa in the Catskills, the Bellagio in Las Vegas and the Halekulani in Oahu.

Hermès will sell its products to a hotel at a lower rate than what it would sell to, say, a department store like Neiman Marcus, since hotels do not have commissions and middlemen to cut into profits.

For Hermès, the advantage is clear. Being in top luxury hotels means targeted advertising to a very select clientele who think nothing of paying $300 or more per night for a hotel room — ideal potential Hermès customers.

Because Hermès does not advertise its bath products, and has a very limited distribution in the U.S., "with the hotel program, we're introducing the product without doing it in a commercial or vulgar way," says Reith. "I can't tell you how many times a customer will walk into a Hermès store requesting a soap or shower gel she just tried in a hotel."

Kiehl's Plays Hard to Get

Another company that does not advertise but relies on word-of-mouth and sampling is cosmetics company Kiehl's, which was bought by French cosmetics giant L'Oreal in 2000. With only two U.S. stores, in New York and San Francisco, Kiehl's became a cult classic among beauty editors and customers in large part due to its generous free-sample program.

Of all the luxury bath brands being wooed by hotels, Kiehl's is playing the best game of hard to get: Its products are only in eight hotels, including the Soho and Tribeca Grand hotels in New York, XV Beacon in Boston and the Hotel Bel-Air in Los Angeles. (Kiehl's is also stocked on Air Force One because Hillary Clinton was a fan, and then George Bush's daughters convinced him to keep the line.)

Kiehl's spokesperson Abbie Schiller says that the company receives "tons" of requests from hotels, but their partnerships are only done on a "relationship basis." Schiller says that Kiehl's only breaks even from its hotel amenities program.

"We're not making a profit from it, but we're not making a loss either," she says. "It's not an aspect of the company we're looking to grow."

Emanuel Stern, owner of the Soho and Tribeca Grand hotels, says that Kiehl's was his first choice for in-house bath products, in terms of quality and design (it didn't hurt that Kiehl's owners were also family friends). "When I opened the Soho Grand, I wanted something that had the industrial feel of the neighborhood," says Stern. "Kiehl's epitomizes downtown New York from the lotion-and-potion point of view."

The benefit of placing Kiehl's in a hotel such as the Soho Grand is "targeted sampling," says Schiller. She says that so many of their guests are introduced to the products, they will often walk a few blocks to the Kiehl's flagship store to stock up. But before they wander up the street, since they're already paying for the Kiehl's products in their rooms, they may first want to grab as many of them as possible.

For more, go to Forbes.com..