illy\'s hotel business serves up challenge to Starbucks

illycaffé SpA, the upscale Italian coffee company, hopes to make further inroads onto Starbucks Corp.\'s turf by serving coffee to well-heeled travelers in upscale hotels.

illyCaffe SpA, the upscale Italian coffee company, hopes to make further inroads onto Starbucks Corp.'s turf by serving coffee to well-heeled travelers in upscale hotels.

For the past two years, Illy has been signing contracts with U.S. cafes that agree to serve its brand exclusively. Now, it's aggressively pursuing business at hotels around the world.

The JW Marriott Marquis Miami, an upscale Marriott International Inc. hotel that opened in October, serves Illy coffee in a pool-side cabana, at an Illy-branded coffee bar in the lobby that Illy helped design, and in its restaurants and banquet rooms.

The coffee company sent its top barista from Italy to train the hotel's employees on proper coffee-making methods.

In addition, the hotel's guest rooms are outfitted with Illy espresso machines.

"Other brands have become so populated in little hotel coffee bars that it's become mundane," says Paul Pebley, the Miami hotel's director of sales and marketing. "Illy provides a differentiation and uniqueness."

He adds that he met with several coffee companies before choosing Illy.

Andrea Illy, chief executive of the closely held Trieste, Italy, concern, says he isn't taking aim at Starbucks, just trying to build his business by being in more of the places frequented by coffee connoisseurs.

Illy coffee is now served in 2,000 hotels around the world, up from about 700 five years ago, and Mr. Illy says he plans to double the brand's hotel business in the next five years.

"If people appreciate the brand in a hotel, it can serve as a promotion for other channels, like home," Mr. Illy says.

So far, though, Illy poses little threat to Starbucks, which dominates U.S. coffee culture with more than 11,000 retail stores in the U.S. and offerings at 15,000 U.S. food-service locations, including hotels and restaurants.

"Illy might just now be waking up to the importance of coffee to food-service customers," Starbucks spokesman Alan Hilowitz says, but "Starbucks has been delivering a high-quality specialty coffee experience in hotels, restaurants and meeting spaces since 1994."