The Homa Files

TakeAway:   LVMH made an interesting business decision when it decided that opening hotels was the best option to continue its corporate growth. 

Yes, it said that there were no good acquisition targets left in its core business area. 

Yes, it observed that other high-end brands had opened hotels. 

But, the hospitality business is very different from the luxury consumer goods business. 

Although hotels may be a good way for LVMH to expand its presence in the luxury market and provide a new point of sale for its luxury goods, this strategy could require LVMH to devote enormous marketing funds to gain customers in the already-crowded luxury hotel market and could backfire if the hotel experience does not meet customers’ expectations of the LVMH brand.

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Excerpted from WSJ, “LVMH Extends Posh Label To New Luxury Resorts,” By Christina Passariello, April 9, 2010

… LVHM, the world’s largest luxury-goods company, said Thursday it will develop resorts using the name of its Bordeaux winery, Cheval Blanc. 

LVMH tested the concept with a first location that opened in the French ski resort Courchevel in 2006. Two more hotels are scheduled to join the chain by 2012 in Oman and Egypt …

The project is “a natural extension of activities in luxury hospitality with Cheval Blanc,” LVMH said in a statement.

Like many top hotel operators, LVMH is limiting its exposure to the volatile hotel industry. It won’t own the real estate or finance construction, but will instead run the resorts under management contract, a similar model to other high-end chains such as The Ritz-Carlton …

The move shows how LVMH is trying to grow without resorting to costly acquisitions. Two years ago, the company pushed the boundaries of its luxury-goods universe to include yachts when it bought Dutch ship builder Royal Van Lent. A few years earlier, LVMH developed a new high-end rum, 10 Cane, instead of buying an existing brand.

LVMH grew throughout the 1990s and until 2001 thanks to expensive acquisitions. But many purchases … haven’t turned into major successes. Now, as the industry leader, there are few targets for LVMH that would have a significant impact on its growth.

LVMH’s hotels will be a showcase for many of its brands. The Cheval Blanc in Courchevel has a Givenchy spa, and visitors can buy its Louis Vuitton and Dior goods in the hotel.

Luxury brands have moved into the hotel business in recent years, looking for new ways to increase their presence …

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Full Article
http://online.wsj.com/article/SB20001424052702304198004575171680599417158.html#mod=todays_us_marketplace

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This entry was posted on April 15, 2010 at 7:41 am and is filed under Mktg - Brand Management, Mktg - Brands. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.