Covid-19 era: Would you stay in a Louis Vuitton hotel amid the pandemic?
Before the novel coronavirus hit, the world’s bling behemoths were pulling out the stops to sell “experiences” where their jet-setting customers could indulge in opulent lodging and dining, all while posting photos of themselves on Instagram. Between 2010 and 2019 demand for experience-based luxury, including fine wines and gourmet food, outstripped that for personal goods, such as watches and handbags.
Then Covid-19 upended the trend. Few are crossing oceans to stay at a Bulgari hotel or dine at a Gucci restaurant right now.
But companies from Giorgio Armani Spa to Capri Holdings Ltd.’s Versace and LVMH Moet Hennessey Louis Vuitton SE could still turn the strategy of tapping into luxury as a broader lifestyle to their benefit. They could offer extravagant getaways to high spenders happy to pay extra to dine, shop and relax in a safe and secluded environment. Or coax more potential local customers out for exclusive home-town retreats given people aren’t splurging on long-haul airfare. And they could expand their offering with a broader push into health and wellness, where spending was already booming before the pandemic.
LVMH, the world’s biggest luxury group, is probably the most advanced on this frontier. It acquired Belmond, owner of Venice’s Hotel Cipriani, to complement its exclusive Cheval Blanc hotel chain. Prada SpA owns the historic Milanese pastry shop Marchesi, Ralph Lauren Corp. has chichi bars and Kering SA’s Gucci has opened Osteria restaurants in Florence and Los Angeles with three-Michelin-starred chef Massimo Bottura.
The investments were meant to cater to rich globetrotters, particularly from China. But while consumers around the world are prepared to travel domestically, or to nearby countries, demand for luxury lodging catering to international clients and long-haul flights remains severely depressed. It’s not clear when the number of big-spending tourists snapping up Hermes scarves and Chanel handbags will bounce back.
When it does, LVMH will be able to offer its affluent customers everything from breakfast in bed to the dress they wear to dinner. It could throw in a visit to one of it vineyards in France or a distillery in Scotland for a truly personalized experience.
In the meantime, with sales of top-end goods set to fall by as much as 35% this year, luxury adviser Mario Ortelli says stronger brands may get opportunities to acquire assets that wouldn’t otherwise come onto the market. When it comes to hospitality, that could include trophy hotels.
Offering unique culinary experiences could also be a way for groups to pull in a hip local crowd in the U.S. or European markets. Some luxury brand restaurants are adapting to the new reality: Ralph Lauren’s Polo Bar in New York is offering home delivery.
While social-distancing measures may mean fewer diners, this is less of a worry for the big luxury groups. Hospitality is more about creating an aura around their collections than making money.
And if fewer Chinese are coming to Europe, there may be opportunities in exporting branded experiences to China. Luxury spending is recovering there as travelers stay home. While Burberry Group Plc hasn’t reopened its Thomas’s café in London yet, there’s one in its new Shenzhen store opened in partnership with Tencent Holdings Ltd. Gucci plans another restaurant in Tokyo, but there is no reason why its Osteria collaboration with Bottura couldn’t be expanded to other Asian cities.
At home or abroad, health and wellness offers another area for experimentation. This could include beauty spas, but also wellness services in flagship stores, such as the vitamin infusions offered by London’s Harrods. With many consumers still nervous about hitting the gym, helping wealthy customers get in shape is worth exploring, particularly given the increasing fusion between fitness and fashion.
There are still risks. Running restaurants, hotels and health spas is very different to selling shoes and handbags. For hotels, it requires a distinctive aesthetic, not to mention pockets deep enough to ride out the current travel slump. Even before the pandemic, a bad stay, meal or skin peel risked alienating those who would buy clothing and jewelry. Now any brand offering services faces the additional peril of its premises becoming a source of infection.
No wonder LVMH has appointed an experienced executive to lead its charge. Andrea Guerra, formerly of Eataly and Ray-Ban maker EssilorLuxottica SA, will soon take up the role of chief executive of LVMH Hospitality Excellence. Partnerships with restaurants, hotel operators or high-end fitness chains are another option. For example, Marriott International Inc. operates the Bulgari hotels.
Either way, expanding into new categories amid the worst luxury downturn in modern history is not for the fainthearted. But the biggest players take a long-term view. Offering extravagant experiences is one area where this approach could pay off.
(This story has been published from a wire agency feed without modifications to the text. Only the headline has been changed.)