Hotels tagged with luxury retail brands make resurgence

By Danny King
Armani MilanBulgari. Versace. Armani. Baccarat. Missoni. When talk turns to hotels tagged with these kinds of luxury retail brands, even the metaphors get pricey.

“It’s crafting hotels as if they were jewels,” Silvio Ursini, executive vice president of Bulgari Hotels & Resorts, proclaimed during a presentation at the International Luxury Travel Market conference in Cannes, France, earlier this month. “It’s like running a Formula One [race car]. They’re like emeralds and sapphires.”

Until recently considered a vestige of pre-recession irrational exuberance, retail-branded hotels, particularly those with brands well-known to wealthier consumers, appear to be getting built or getting the green light again.

Much of that trend is begin driven by a resilient luxury travel market.

Since last November, the world’s second Armani Hotel opened in Milan, while the world’s third Bulgari hotel opened in London under Marriott International’s Ritz-Carlton luxury umbrella.

Meanwhile, Starwood Capital, the real estate and hotel-development firm of former Starwood Hotels & Resorts CEO Barry Sternlicht (the two Starwoods are unaffiliated), said in April that the Baccarat-brand of luxury hotels, widely thought to be dormant, will have a New York outpost as soon as 2014.

Jan Freitag, senior vice president at Smith Travel Research (STR), said a brand that has achieved a strong association with luxury is in a good position to leverage that image with a high-end hotel.

“The customer trusts a brand with a certain value proposition,” Freitag said, “so some hoteliers are extending that brand horizontally. They’re saying, ‘You like our suit? Stay in our suite.’”

Indeed, with both larger global hoteliers like Marriott and Hilton Worldwide and more moderately sized operators like Mandarin Oriental and Peninsula all looking to expand their global footprint, retail-branded properties are viewed as the best of both words: a way to convey that the hotel offers something different from its competitors but with a label that’s already known worldwide.

Globally known luxury brands are all the more effective as a growing proportion of the world’s luxury-travel spending stems from countries like China, where, to many, the Armani brand holds more sway than the Four Seasons brand.

Adam Weissenberg, vice chairman and U.S. leader of the travel, hospitality and leisure sector at Deloitte, said global pockets of wealth ensure international recognition for luxury brands.

“It’s much easier to take a brand like Bulgari around the world, because a brand like that has such appeal in the Middle East and Asia,” Weissenberg said.

Of course, that was the rationale that drove a number of hotel developers during the early part of the last decade, before the bottom started dropping out of the travel industry about five years ago. The first major example of a hotelier affixing a global, non-lodging brand to a hotel, then customizing the hotel’s design and service proposition accordingly, was probably the Hard Rock Hotel. Named for the Hard Rock Cafe chain of restaurants, that 1,505-room hotel opened in Las Vegas in 1995 with an emphasis on Americana and rock ’n’ roll history.

Luxury retail brands started entering the hotel-development lexicon about five years later.
Bulgari London
The 231-room Palazzo Versace, inspired by the Gianni Versace Italian fashion brand, opened on Australia’s Gold Coast in 2000. A year later, Marriott’s Ritz-Carlton luxury badge said it would start developing a brand of ultraluxury properties with the name Bulgari, the LVMH-owned jewelry company that was founded in 1884. The world’s first Bulgari Hotel opened in Milan in 2004, while a second hotel opened in Bali two years later.

Meanwhile, in 2005, Brussels-based Rezidor Hotel Group and Missoni launched a partnership to develop luxury hotels with the brand name of Missoni, the Italian fashion company founded in 1953. A similar partnership was announced the same year between Dubai-based developer Emaar Properties and Italian fashion designer Giorgio Armani.

Two years later, though, the global recession had begun pulling the reins on the financing required for expansion. Rezidor and Missoni, which had slated three hotels to be opened in 2007 and as many as 30 by 2010, did not open its first Hotel Missoni, in Edinburgh, Scotland, until 2009. It has since opened just one other hotel, in Kuwait.

Meanwhile, the world’s first Armani Hotel opened inside Dubai’s Burj Khalifa, the world’s tallest building, in 2010, followed by a second property that opened in Milan last year. But beyond those openings, Emaar Properties is vague about further plans, saying only that the developer is looking to build more properties “in leading cities and holiday destinations around the world” but offering no details beyond that.

Baccarat, the French crystal company founded in the 18th century, might be the most telling example of the boom-bust-rebirth nature of luxury retail-branded hotel developments. Starwood Capital announced the Baccarat Hotels and Resorts brand in 2007, with plans to open the first Baccarat property in what was the Renaissance Wailea in Hawaii. Other properties were slated for the Caribbean, Europe and Asia. But to date, not a single Baccarat hotel has opened.

Still, there are signs that this slice of the luxury lodging industry is on the rebound. London’s 85-room Bulgari Hotel was that city’s first newbuild hotel in four decades. And in September, Bulgari said it had reached an agreement for a 120-room hotel to open in Shanghai in 2015.

Last April, Sternlicht announced that the 114-room Baccarat Hotel & Residences New York would open in midtown Manhattan in 2014, the same year that two Baccarat properties are slated to open in China.

Additionally, not too far from the original Hard Rock Hotel, the world’s first hotel branded with the name of celebrity chef-restaurateur Nobu Matsuhisa will open “inside” Caesars Palace in Las Vegas early next year. Nobu Hotel Caesars Palace, whose investors include actor Robert De Niro, will offer 181 rooms.

Granted, much of the appeal of these hotels lies in their exclusivity, so their numbers will remain small and the room rates exorbitant. A mid-January weekend stay at London’s Bulgari Hotel starts at about $700 a night and tops out at more than $14,000 for the Bulgari II Suite.

The Armani Hotel Dubai’s rates also start at about $700, with the hotel’s Signature Suites charging about quadruple that.

Armani DubaiStill, there might be potential for some trickle-down effect, with hotels adopting brands associated with decidedly non-luxury retailers.

For example, California-based real estate developer Centurion Partners, whose projects include the Residences at the Little Nell in Aspen, Colo., is working on a hotel project that would be named for the Quiksilver surf-apparel brand.

The first project, a 300-room hotel earmarked for Quiksilver’s home base of Huntington Beach, Calif., will integrate surf and action-sports culture into the hotel’s design, including elevating the hotel’s pool so that swimmers have views of the Pacific Ocean and offering physical therapy-type rehabilitation services, according to Scott Lee, president of San Francisco-based SB Architects and the project’s designer.

Lee said the Quiksilver hotel could break ground as soon as mid-2014 and would be designed to have room rates of $250 to $300.

“There’s certainly a place for the upper-upper-end luxury, but those are designed for a different generation,” Lee said. “There’s a younger group that’s less about conspicuous consumption and more about active lifestyle. That’s a segment of the market that hasn’t been tapped.”

Follow Danny King on Twitter @dktravelweekly. 
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