Cyma Zarghami, the head of Nickelodeon (VIA), still hasn't taken her kids to the only Nickelodeon hotel in existence, which opened two years ago in Orlando. She doesn't like crowds. But plenty of others (500,000 to be exact) have checked in to eat breakfast with Dora the Explorer, sleep with SpongeBob, and slime each other. Now, Nickelodeon has announced plans to open dozens of upscale hotels around the world in partnership with Marriott International Inc. (MAR) (which will run them) and Miller Global Properties (which will own them).
The idea of putting a brand name on a hotel has attracted everyone from Hard Rock Cafe and Walt Disney (DIS) to Giorgio Armani, L.L. Bean, and possibly Martha Stewart (MSO) and Ralph Lauren (RL). Is there room for Nickelodeon?
The short answer seems to be yes. Consider the trends: More families, including grandparents, are traveling together. Especially after September 11, overworked parents regard family vacations as sacrosanct. And themed hotels attract more guests, at higher prices, than other nearby inns.
Expanding the hotel business helps Nickelodeon in two ways. It could accelerate merchandise sales: The company has licensed its characters in almost every way imaginable (books, DVDs, toys, clothes), and those fees are an important part of its estimated $1.9 billion revenue. And it could help Nickelodeon insinuate itself deeper into the lives of its viewers. The Viacom Inc. network, now 28 years old, is trying to draw in young parents who grew up watching Nick. "We absolutely don't want to be a nostalgic brand for parents," says Zarghami. "But we want them to remember why they loved Nickelodeon as kids." That means no characters from the early days, but only the current gang.
Moving into the three-dimensional world brings with it new management challenges, namely learning how to relinquish control without mucking up the brand. "It is far more complicated to deliver an experience than to deliver entertainment on a screen," says Allen P. Adamson, a brand expert at Landor Associates New York. "You have to rely on employees to do so, and just ask any fast-food chain how complicated that is."
Nickelodeon's lessons from its Orlando debut range from the strategy changing (do more to accommodate parents) to the mundane (clean the pool more often). What surprised them early on, says Howard Smith, the head of Viacom's recreation division, was that some kids didn't want to leave the hotel on outings their parents had planned. "We had to add more of everything—towels, dining options, entertainment," he says.
Relax and Escape
The new hotels, the first of which will open in San Diego in 2010 and most of which will have at least 500 rooms, will offer water slides, live shows, and all manner of relatively organized, slightly manic activities. But unlike the Orlando property, which is operated by Holiday Inn (IHG), there will also be places for parents to relax (read: escape). "We found that even though parents do want to be involved in their kids' lives, they still need their own space," says Zarghami. "That's the beauty of the deal with Marriott. They get that idea, and they do it well." The hotels will include spas, fitness centers, and real restaurants.
There will also be meeting facilities. Smith hopes to attract business travelers or groups—mostly, though, those who might bring their children. Bill Marriott, chairman of Marriott, says they will help fill up the hotels during the week. "We feel pretty good about that business," he says. "Those guests will get with the program."
As for adults without kids, they probably won't. "We will be modulating the experience," says Smith. "Not every component of the hotel is going to be branded." What about SpongeBob? "He'll be there. Whether he will be in the lobby or not, we're not sure."