A recent announcement by Abu Dhabi’s Tourism Development and Investment Company (TDIC) that it has reached an agreement with L Capital, the real estate investment arm of LVMH to develop a luxury mall in Abu Dhabi has come as no surprise as competitive pressure pushes the bounders of innovation and adaptability even for the largest players. It was LVMH which made headlines over a year ago when the first ever Louis Vuitton store opened in an airport, at Seoul’s Incheon.
In his quest to ”protect” his large stable of luxury brands, LVMH’s owner, Bernard Arnauld, also France’s richest man, is developing its hotel chain, Cheval Blanc, with a second hotel due to open by the end of this year, in Paris. While in the case of the development of a mall, securing retail space and market presence seem to be the obvious motivation, when it comes to the new hotel chain, Arnaud sensibly grasped on the opportunity to create a lifestyle bridge between his brands from various sectors, aiming for an ”LVMH lifestyle”. Hopefully, this connectivity will not be an overt one like in the case of the first Cheval Blanc Hotel in Courchevel which houses a Vuitton boutique and hosts during the high ski season, almost on a daily basis, fashion shows or presentations (some say ”private sale sessions”) for many of the fashion brands which form his conglomerate. The choice of opening the third Cheval Blanc in the Maldives, thus aiming to target the predominantly Russian clientele, may prove to be as challenging, given the many experienced hoteliers which already operate in the Maldives.
However, Arnaud seems to overlook two very important aspects in his real estate development - given the positioning of his brands (ie Vuitton), hotel guests will expect the highest quality both in product and service and the risk to disappoint consumers / hotel guests will have an indirect negative impact in the long term as it will generate a long term negative association. Employing former experienced hoteliers is far from guaranteeing a successful outcome for the Cheval Blanc Hotels, which will compete against the likes of Four Seasons, Peninsula, Mandarin Oriental and Ritz Carlton. Despite a joint venture with Marriott, it has taken Italian jeweller Bvlgari (owned since last year by LVMH) over 5 years and two ”experimental” projects (Milan and Bali) to define its identity as a hotel brand. This has eventually been achieved with Bvlgari’s recently opened London hotel which captures Bvlgari’s luxury lifestyle blending heritage values with 21st century elements.
World’s second largest luxury group, Swiss based Richemont, also took to real estate development in 2012 with the development of its first multi-brand store in Paris on Boulevard de Capucines, a 2200 sqm store which will be managed by watches and jewellery retailer Bucherer, a major retailer for the watches brands of the group. Richemont is reported to have invested over 70 million euros in this project which is due to open this Spring. This move come as startegic especially to create market visibility and awareness for Richemont brands and at the same time, to ”upgrade” the positioning of some brands such as Baume & Mercier which is often perceived as premium rather than luxury. By creating such a destination, Richemont also has the opportunity for a strategic targetting of the Asian customers who are incresingly choosing Paris for their shopping.
It remains to be seen how PPR, the world’s third largest luxury group (ironically former owner of Parisian department store Printemps) will be willing and able to secure its position, especially given the growing rumours of Asian conglomerates prepared to pay a high premium to own a department store such as Printemps or Galleries Lafayette. In December 2012, China’s Dalian Wanda Group was reported to be in advanced discussions with the owner of the Printemps department store with its current owner, Deutsche Bank, for an undisclosed amount. Thai based Central Retail company already owns Milan’s largest luxury department store La Rinascente and plans expansion of the brand in Italy, Germany and Russia.