Luxury products and hotels – a good mix?

19 Apr, 2018

At first glance, it would seem to be a natural symbiosis - luxury products enhancing luxury hotels.

However, the history of collaboration between hotel chains and luxury product companies proves that the relationship has been anything but easy, as the efforts at dual-branding have either been disbanded or have failed to develop critical mass.

For example, the house of Versace launched its hotel concept in 1999, two years after its flamboyant founder, Gianni Versace, was gunned down in front of his palatial Miami home.

The group's first property, the 205-key Palazzo Versace Hotel and Condominium Resort, opened on Australia's Gold Coast in 2000.

Now almost 20 years later, there is only one other location – in Dubai.

It's been a similar story for LVMH's Bulgari collaboration with Marriott, which was launched in 2001. The first property opened in Milan in 2004.

Now almost 15 years later, only 4 additional properties have been opened: in London, Bali, Dubai and Beijing. According to a former Marriott executive, finding a site that fits the brand's specifications is a major challenge which puts a break on development.

Palazzo Versace Hotel Dubai
Photo credit: Palazzo Versace Dubai  http://www.palazzoversace.ae/en/ 


Rezidor tried twice

Radisson Hotel Group's 70%-owned Rezidor subsidiary, tried twice without success to co-brand with luxury goods brands.

In 2003, the group announced a partnership with the Parisian luxury clothing and accessories brand, Cerrutti.

In 2004, Rezidor announced their first three Hotel Cerruti projects – in Vienna, Dubai and Kuwait, but nothing ever came of the collaboration which was discontinued in 2005.

Rezidor subsequently launched a new hotel concept with the Italian luxury textile group, Missoni.

However, the master licence agreement for the development and operation of Missoni Rezidor Hotels was terminated at the end of 2013 and the existing properties, Hotel Missoni Edinburgh and Hotel Missoni Kuwait, ceased to operate under the Hotel Missoni brand as of mid-2014.

Armani, stymied by the crisis

Armani entered the hotel sector with high hopes in June 2005, when the group signed an agreement with Dubai's Emaar Hotels & Resorts to develop a collection of luxury hotels and resorts.

Emaar was to be responsible for developing and operating the properties, with Armani overseeing all aspects of design and style, including interiors and amenities.

The various Armani fashion, furnishings and beauty collections were to be incorporated into the properties.

Originally, the joint venture envisioned opening at least seven luxury hotels and three vacation resorts over the coming decade (i.e. by 2015), backed by an investment of over US$1 billion from Emaar.

However, Emaar and Dubai were hit hard by the financial crisis in 2008-2009 which put a damper on development.

Thus, today there are only two properties up and running: a 160-key hotel in Dubai and a 95-key hotel in Milan.

Armani Hotel Dubai
Photo credit: Armani Hotel Dubai  https://www.armanihoteldubai.com/ 

Ferragamo's Lungarno Collection

One of the more successful forays into the hotel sector by a luxury goods company has been Ferragamo's Lungarno Collection.

Like Versace, the Florentine Italian luxury shoe group has quietly, unobtrusively created its own hotels, instead of partnering with a chain.

Today, Ferragamo's Lungarno Collection includes six operating hotels – 5 in Florence and one in Rome.

For the last two years, the Portrait Firenze and the Portrait Roma have been two of only 10 hotels in Italy, and of only 26 in Europe, to be awarded a five-star grading by Forbes, which has much stricter grading standards than European national grading systems.

Ferragamo's hotel operation has been successful because it has stuck close to the core business and has not embarked on any ambitious attempts at global expansion.

In addition, the branding is subtle, e.g. there is no Ferragamo name emblazoned on the entrance of its hotels.


LVMH targets the ultra-luxury segment  

The secretive media-shy LVMH Group is one of the largest luxury goods companies in the world and generates a yearly turnover of some €42.6bn from its various lines of business.

Besides the abovementioned collaboration between the group's Bulgari brand and Marriott, the company operates three ultra-luxury hotel properties under the Cheval Blanc brand, including: a 17-key property in the upmarket French ski resort, Courchevel; the 40-key Cheval Blanc St-Barth Isle de France; and the 45-villa Cheval Blanc Randheli in the Maldives, which is a 40-minute seaplane ride from the country's capital Male. Rooms night in a Cheval Blanc property can cost anywhere from US$600 to over US$6’500.

According to the company, the target market includes: royalty; fashion, music and sports celebrities; self-made entrepreneurs, and high-level executives travelling with their family or friends.

Cheval Blanc Maldives
Photo credit: Cheval Blanc Maldives  https://www.lvmh.com/houses/other-activities/cheval-blanc/ 

LVMH's development push

Cheval Blanc Hotels dates from 2006 when the first property opened in Courchevel.

Currently there are five more properties or 'Maisons' (as LVMH calls them) under development, including a planned opening in Paris for 2019.

Now, the group intends to kick start development and was present at the recent IHIF (International Hotel Investment Forum), held in Berlin in early March, promoting its concept to potential investors.

To spearhead its development push, LVMH has just hired an experienced professional, Nevius Glussi, a 2002 graduate of the Ecole hôtelière de Lausanne.

As an Italian with Mandarin language capabilities, Glussi has the benefit of extensive hotel development experience in Asia and in Europe and was most recently senior corporate director of development at the luxury chain, Rosewood Hotel Group, prior to joining LVMH.