Buffett-backed Restoration Hardware is betting a mysterious 'Guesthouse' will put it on the luxury map

• Restoration Hardware is betting a mysterious "Guesthouse," set to open in Manhattan next year, will elevate its brand and help it to compete with the world's biggest luxury labels.
• The high-end furniture maker - which Warren Buffett's Berkshire Hathaway invested $206 million in last quarter - is "doing something that I think nobody can imagine," CEO Gary Friedman said, adding that the property won't feature any of its products.
• The likes of Hermès and Chanel were "born at the top of the luxury mountain" and "don't really want you to make that climb," Friedman said.
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Restoration Hardware is betting a mysterious "Guesthouse" - set to open in Manhattan next year - will elevate its brand and help it to compete with the world's biggest luxury labels.

The high-end furniture maker - which Warren Buffett's Berkshire Hathaway invested $206 million in last quarter - is "doing something that I think nobody can imagine," CEO Gary Friedman said on the group's third-quarter earnings call Wednesday.

By all accounts, the Guesthouse will be a high-end hotel with swanky guestrooms, fancy furniture, attractive artwork, and gourmet dining. Yet Friedman offered few specifics, only stating that it's not a hotel, a boutique hotel, or a product showroom.

"It's not going to have any of our products," he said. "That usually is what twists everybody's head around a bit."

The goal of the Guesthouse is to lift RH to the level of the leading luxury labels, which didn't have to earn their prestige, Friedman said.

"All the best luxury brands, whether it's Hermès, Louis Vuitton, Chanel, you name it, on and on, Christian Dior and all the others, they were all born at the top of the luxury mountain," Friedman said.

"We're one of the few that is trying to make the climb," he continued. "The people at the top of the luxury mountain quite frankly don't really want you to make that climb. They don't really invite you to their party. You're not from the neighborhood. You don't have the background."

"To make that climb up the luxury mountain you have to do things that create a forced reconsideration," he added.

Critics have questioned why RH, rather than testing the concept away from the spotlight, is opening its Guesthouse in New York, Friedman said.

"We more operate from the Frank Sinatra model and believe that if you can make it there, you can make it anywhere," he said. "That's why it's important to start in New York. You start in a city like that, it brings out your best work, it brings out your best thinking."

Friedman finished by opaquely describing the Guesthouse as "something that's entirely new, entirely unexpected," before adding, "I've just told you entirely too much."