Ikea to build budget hotels across Europe

A car passes next to an Ikea store on May 31, 2011 in Lomme, next Lille, northern France.

Story highlights

  • Ikea is looking to build and develop at least 100 budget hotels across Europe
  • The hotels will not have the Ikea name, nor be run by the furniture giant
  • Also considering building student residences across Europe

Ikea, the secretive but hugely successful budget furniture retailer, is looking to build and develop at least 100 budget hotels across Europe in its latest push into the property market.

Inter Ikea, the company that owns the intellectual property rights of Ikea -- which were last week revealed to be valued at €9bn by the company -- is considering sites across Europe for what it calls "budget design" hotels.

The hotels will not use the Ikea name and will not be run by the Swedish company but by an established hotel operator, according to an executive familiar with the plans.

Ikea is also considering building student residences across the continent as it looks for ways to put its cash into long-term businesses in an attempt to earn a good return.

Inter Ikea hopes to build the hotels in markets where it is already active in property, such as the UK, Netherlands and Poland, as well as new markets such as Germany.

"We will announce within a few weeks the first location for our budget hotel in Germany and we are in talks with hotel operators to rapidly implement our concept," Harald Müller, a senior manager in Inter Ikea's property division, told the Frankfurter Allgemeine Zeitung in Germany.

So-called budget design hotels, which offer boutique styling at lower price points, are one of the fastest growing sectors in the industry, with Munich-based Motel One among the best known. It has 39 hotels with more than 8,500 rooms in Germany and is now looking to expand in Europe, including a hotel in Edinburgh in Scotland.

Ikea, the world's largest furniture retailer, was founded in 1943 but has disclosed little financial information until recently. In part, this is due to its complex structure where the ownership of Ikea's stores was separated from the ownership of its brand name and other intellectual property rights.

The brand is controlled by Inter Ikea, which receives money from all Ikea franchises, which must pay it a percentage of their revenues. In a rare financial disclosure made because intellectual property rights were transferred from one subsidiary to another, Inter Ikea revealed last week that the Ikea brand is valued at €9bn, making it one of the world's most valuable marques. Inter Ikea also invests in other activities including shopping centres, financial investments, and property.

One of the property division's most high-profile projects so far is a large-scale development to be built hundreds of metres from the Olympic Park in east London. Strand East, as the development is known, will have about 1,200 homes and up to 500,000 square feet of commercial space.

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