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Over the past three decades, hospitality, whether in the form of restaurants, bars, cafés, or hotels, has evolved from a brand-building side project into a strategic pillar for non-hospitality brands across various sectors. What began as bold experiments by luxury fashion houses has transformed into a multi-industry movement, as companies seek to deepen emotional engagement, increase traffic and customer dwell time, and unlock new revenue streams. Hospitality now serves as a customer acquisition tool and can transform into a profit centre. As the lines between retail, lifestyle and experience continue to blur, hospitality has evolved not just as a trend but as a long-term strategy, one that requires brands to demonstrate creativity and operational excellence.

Hospitality has been an integral part of the department store business since its inception. Almost two centuries after Le Bon Marché opens a reading room free of charge to husbands waiting for their wives, department stores up the hospitality ante to better serve customers and compete with their brand partners’ own hospitality engines.

No longer a vanity sideline, hospitality is becoming the front door to brand ecosystems and a credible profit driver. Department stores that curate these experiences can turn lattes, food and maybe room keys into the next generation of retail loyalty.

A selective 30-year history of hospitality at non-hospitality brands

Luxury fashion at the forefront…

Hospitality ventures by non-hospitality brands began in 1998 with a luxury brand. Giorgio Armani unveiled plans for the first hotel, an idea realised in Dubai and Milan a decade later and widely viewed as the proof-of-concept for luxury fashion hospitality. The following year, Ralph Lauren opened RL Restaurant in Chicago, showing that restaurants could amplify a lifestyle label’s aura without leaving its home market. The early 2000s marked the first wave of upscale experiments: Versace debuted Palazzo Versace in Australia in 2000 and in Dubai in 2016. In 2004, Bulgari launched its Milan hotel. Soon enough, non-luxury brands entered the hospitality game.

Luxury fashion’s second wave occurred between 2014 and 2020. In 2014, Prada took an 80% stake in Milanese pasticceria Marchesi 1824. Dior launched Café Dior in Seoul in 2015, Fendi installed Zuma on its rooftop in Rome in 2016, and Gucci Osteria earned a Michelin star two years after opening in 2018. In the 2020s, the movement matured into scale plays and mixed-use flagships. While planning a hotel to open on Paris’ Champs-Élysées in 2026, Louis Vuitton opened its first in-store Le Café V in Osaka in 2020 and Paris in 2022, as part of the LV Dream exhibition. That same year, Dior Paris’ Avenue Montaigne flagship store reopened, flanked by a café and a restaurant by renowned French chef Jean Imbert. Exploring other hospitality options, Louis Vuitton then opened a lounge on top of its Doha airport store in 2023. The space includes designer furniture pieces, as well as a 3-star Michelin restaurant.

… Followed by other industries…

By the mid-2000s, other industries had joined in, including the automotive, beauty and banking sectors: BMW introduced fine dining at Munich’s BMW Welt in 2007. The momentum accelerated in the 2010s with a second wave of ventures. With six different restaurants, Ferrari World in Abu Dhabi (2010) proved that theme-park F&B could drive sales, while beauty label L’Occitane combined cafés and spas from 2011 onward. Financial services moved next: Capital One Cafés debuted in 2012, and American Express rolled out its Centurion Lounges in 2013. In 2016, Samsung opened its NYC flagship store, including a Stand Coffee.

… And premium and mass retail

In 2001, French lingerie brand Etam opened a now-closed 4,000 sqm flagship store in the former Samaritaine Sport building, featuring a restaurant supervised by renowned chef Alain Ducasse. Urban Outfitters’ first Terrain garden café launched in 2008. The first Muji hotel opened in 2018, followed by Maisons du Monde (which opened two hotels in 2019, in Nantes, and 2021, in Marseille) and IKEA (in Grand Canaria in 2025). In 2023, Tokyo saw the first Maison Kitsuné café. That same year, Zara opened its first café in Dubai’s Mall of the Emirates, refining the concept through 2024 with the opening of Zacaffé in Madrid, part of its premiumisation strategy.

This concise three-decade history highlights brands’ expanding ambitions—from single-brand one-time initiatives to global, data-driven ecosystems that boost customer lifetime value, foster loyalty, and deliver EBITDA margins sometimes exceeding those of their core product lines.

Between halo and headwinds: hospitality’s retail reality

Beyond the buzz: when hospitality fails

Hospitality is not a perfect world. On top of potential rising operating costs and economic downturns that refocus customers on commodities, several risks are attached to hospitality:

- Concept and customer fatigue: for example, Lexus restaurant in New York’s Meatpacking District shut permanently in January 2022 after struggling to fill seats outside the launch buzz. This shows that even a best-in-class collaboration (with Danny Meyer’s Union Square Hospitality Group) cannot offset footfall gaps if the brand story isn’t locally resonant. This also highlights the potential struggle of partnering with a different industry.

• Brand-licence fracture: Versace walked away from its 15-year branding deal on Australia’s Palazzo Versace. The resort was renamed Imperial Hotel in 2023. Even with the right partner, licence renewals can hinge on one side’s changing strategy.
• Market oversaturation: when you’re not Starbucks, how many lattes can a brand sell? Rapid café rollouts can dilute exclusivity. South Korea’s coffee shop count fell for the first time in decades, down 743 outlets YoY in Q1 2025, making it more difficult for brands to find their way in the hospitality business.
• Brand dilution: a mediocre execution can undermine the halo effect brands seek. Additionally, even successful brands in the hospitality business face challenges. Maison Kitsuné, for example, has opened 25 Café Kitsuné, which represent around 10% of the company’s turnover. While they have played an essential role in the growth and development of brand awareness, cafés are now somehow more successful than the RTW products.

From dwell time to data: hospitality as a retail growth engine

Hospitality can help non-hospitality brands exploit under-served white spaces in the customer journey (such as banking wait time or car showroom friction). For fashion retailers, hospitality touchpoints can nurture loyalty and transform into high-frequency visits between low-frequency purchases, such as those between 18 to 24-month handbag purchases. Moreover, hospitality can lead to increased customer spending. Harrods’ director of restaurants and kitchens mentioned in 2023 that they had “almost 10,000 bookings made for the Dior café in the first four days of opening. If we take the Gen Z customer, they are telling us they want to spend their money on luxury, fashion, and dining. This combination is gold.” The restaurant and café business is also a data goldmine, providing retailers with new customers and additional information, such as dietary preferences, that can feed CRM personalisation engines. Customer acquisition costs are also unrivalled compared to digital ads, as a €5 café voucher can result in new customer data and future conversion.

In the case of IKEA, restaurants represent a sophisticated retail strategy that leverages food at break-even or slight loss to drive traffic, increase dwell time, and ultimately boost sales. IKEA is essentially subsidising food costs to generate higher-margin furniture sales. Restaurants extend store visits and increase impulse purchases. The traditional shopping journey, “browse → select → purchase”, transforms into an enhanced model: “dine → browse → rest → browse → purchase → maybe dine again.” IKEA restaurants have a strategic psychological impact, too. In a somewhat overwhelming shopping environment, they reduce shopping fatigue through strategic breaks, create positive associations with the brand and transform utilitarian shopping into a leisure experience1.

Overall, brands can leverage hospitality to extend lifestyle narratives, capture higher dwell times, generate significant turnover, and build high-margin revenue streams, as restaurants can achieve approximately a 23% EBITDA, significantly above core RTW margins.

Temporary, tactile, tactical: the rise of ephemeral hospitality

A coherent hospitality concept should make the intangible brand universe sensory: scent, music, menu curation and service rituals translate logos into lived experiences. While many brands have turned this ambition into a series of café openings, how to differentiate from the crowd? Onitsuka Tiger succeeded in that mission on the occasion of their red concept opening in London’s Covent Garden in Spring 2025. Instead of opening a permanent in-store café, the brand decided to partner with a local pub, the neighbourhood staple Crown & Anchor, blending a Japanese night feeling and a British pub atmosphere. The pub was transformed for a limited time into the “Onitsuka Tiger Tavern”. The classic British watering hole was reimagined through a Tokyo nightlife lens, completed with heritage posters and a karaoke session. The usual wood-panelled pub interior was given a crimson red Onitsuka twist. Bartenders served Japanese Suntory whiskey, Wagyu tartare plates, and a Japanese take on traditional fish and chips. Instead of a permanent café, the Onitsuka Tiger Tavern will resume only for significant moments such as brand events or product launches. Communication will go through the brand’s Instagram account. Not only does it allow the brand to blend into the local environment and community, but it also avoids heavy investments in CAPEX and staff as well as potential customer fatigue.

Similarly, to better anchor itself in Paris, the Italian brand Pucci partnered with a laid-back institution in Saint-Germain-des-Prés, Bar de la Croix Rouge. The café’s awnings and terrace are adorned with one of the iconic, colourful prints until the end of July 2025. A one-night-only aperitivo hosted local celebrities and friends of the house, mixing Italian and Parisian flair.

Another interesting and unprecedented hospitality offspring initiative comes from IKEA. During July 2025, they opened their ‘Billy-othèque’ (a pun mixing Billy, the name of the iconic bookcase, and the French word for bookcase) in Paris. On the Seine bank in front of Paris’ biggest library and shrewdly positioned just 15 minutes away from their latest Paris store, a 30-metre-long open-air Billy bookcase displayed thousands of books of any kind with a simple idea based on sharing and community-building: participants gave out a book they love and left with another book that has caught their attention. Reading advisors were available to assist the public in selecting their books. Readings for the younger generation were organised every day at 4.30 pm. This initiative demonstrates how alternative hospitality formats are evolving and becoming increasingly relevant in terms of standing out from the crowd.

How hospitality reinvents department stores

Gastronomy and gross margin: when retail goes gourmet

One of the oldest examples of a retailer embracing in-store dining is the Walnut Room, which dates back to 1907 at Macy’s in Chicago. Now integral to any elevated retail experience, food offerings, and especially fine dining, have become a department store staple. The past few years have seen some interesting ventures. In 2022, El Corte Inglés became the first department store in the world to get a Michelin star for its RavioXO restaurant, opened at its Castellana store with renowned Spanish chef Dabiz Muñoz. The collaboration with El Corte Inglés continued with the opening of a second restaurant, located in the Serrano store, a few months later.

Hospitality feeds cross-selling models. Research by Harrods showed that when customers engage with their 26 restaurants and bars, they spend twice as long in the building and twice as much money. Additionally, when the Prada Caffè opened at Harrods in London in April 2023, a viral TikTok reel showcasing the cafe recorded 220,000 views within the first 24 hours of its posting, generating brand awareness and attracting customers in-store. In NYC, Printemps Wall Street’s recently opened store follows a similar strategy and dedicates a third of the space to F&B offerings. They have appointed renowned Haitian chef Gregory Gourdet as their culinary director, who has created five distinct concepts for the store, including an all-day casual café, a classic Parisian-inspired raw bar, and more. However, the most critical F&B option is undoubtedly the Maison Passerelle restaurant. It aims for a Michelin star and is considered one of the 10 most important restaurant openings in NYC in 2025.

In Summer 2025, Galeries Lafayette established an unprecedented partnership with Air France, transforming its rooftop into an aeroplane-themed dining destination, featuring Business Class menus created by three-star chef Régis Marcon and World’s Best Pastry Chef Nina Métayer. The restaurant, accommodating 20 covers both indoors and outdoors with two lunch services daily, recreated the intimate atmosphere of Air France’s airport lounges while offering panoramic views of Paris. The Air France rooftop restaurant builds upon a series of successful dining experiences. In September 2024, as it celebrated its 130th anniversary, Galeries Lafayette showcased its expertise in culinary ventures with an exclusive dining event under its iconic dome, setting a precedent for innovative food partnerships.

From retail to lodging: hotels as the ultimate brand touchpoint

Whether it’s Armani or Bulgari, luxury brands have been pioneers in opening hotels. Lately, building on its Art of Travel DNA, Louis Vuitton is adding full lodging to its now-usual “shopping + café” model. 103-111 avenue des Champs-Élysées in Paris will become a hotel again2. The 25,000 sqm block sits a door’s distance from Louis Vuitton’s current flagship at 101 avenue des Champs-Élysées. This will enable the luxury giant to open a mixed-use complex featuring an enlarged Louis Vuitton megastore on the lower floors and a luxury hotel spanning approximately 6,000 sqm. Every square metre will then become a loyalty touchpoint. If Paris succeeds, it could serve as a blueprint for further openings.

There is room and interest for department stores also to enter the hotel business, as profitability doesn’t compare, especially at a time when traditional retail is under pressure and customers are looking for experiences over shopping. FY 2024 adjusted EBITDA as a percentage of total revenue is around 29% for Host Hotels & Resorts (the largest U.S. lodging company), 30% at Hilton, and only around 8% at Macy’s Inc. Selfridges considers venturing in the hotel business. The dormant Old Selfridges Hotel occupies the block at 1 Orchard Street and 40 Duke Street, directly behind the Selfridges store on Oxford Street. The 294-key hotel shuttered in 2008 and has since been stripped back to a concrete shell used for fashion-week shows and art pop-ups. When Central Group and Signa bought Selfridges for £4 billion in December 2021, they announced that reactivating the hotel was the deal’s “significant value-upside” lever. There has not been any update on the project to date. In any case, hospitality can be an option for unused real estate and leverage new potential, as is the case with LVMH using a part of the Samaritaine store for a 5-star Cheval Blanc hotel.

Beyond VICs: when hospitality becomes a status strategy

Hospitality in department stores reached a new peak in June 2025 when Selfridges announced it would transform its 4th-floor executive offices into a members-only destination, marking a significant evolution in its customer engagement strategy. Named 40 Duke, the private club will feature an internal bar and lounge accommodating 80 covers, a private dining room and terrace with 14 covers, and an external dining terrace seating 50 people. Operating hours will extend from 8:00 am to 12:30 am, Sunday to Thursday, and until 1:30 am on Friday and Saturday, with the terrace available from 9:00 am to 11:00 pm daily. This strategic transformation of office space into a premium members’ venue reflects the broader luxury retail trend of creating exclusive experiences for high-value customers turned members, while maximising property utilisation in prime locations. Building on that perspective, IADS members could build a luxury department store network to offer hospitality membership perks to travelling VICs.

As it gives a renewed purpose to physical stores, hospitality is no longer an accessory but the new retail battleground for loyalty. The past thirty years illustrate a shift from one-off showcases to data-driven ecosystems that extend the brand narrative and drive additional business. Yet not every venture succeeds: brand dilution, oversaturation, and poor execution remain constant risks. The future belongs to retailers who can design resonant concepts that add meaning, not just margin. Whether through immersive restaurants, temporary cultural takeovers or full-scale hotels, brands that turn hospitality into a genuine extension of their identity will be best placed to capture customer loyalty and lifetime value.

Enhanced lifestyle credentials, elevated perceived value and brand equity, increased customer engagement and dwell time, and a way to differentiate from competitors. Although the ROI may not be immediately quantifiable, the impact of these hospitality-inspired experiences is a strategic investment for future retail success. For customers, it offers the convenience of multiple services under one roof, the experiences they crave, and entertainment and engagement beyond shopping.

Credits: IADS (Christine Montard)