LVMH purchase gives Belmond a leg up in ultrahigh luxury

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The Belmond Hotel Cipriani in Venice is one of the brand's signature properties.
The Belmond Hotel Cipriani in Venice is one of the brand's signature properties. Photo Credit: Helen Cathcart/Belmond

This month's news that high-end hospitality group Belmond had been acquired by Paris-based luxury conglomerate LVMH came as a surprise to most. Industry insiders had predicted Belmond would most likely be snapped up by a larger hotel player or a private equity fund and that parts of the group's sprawling stable could potentially be sold off piecemeal. 

For LVMH, however, the deal provides an expedient inroad into the ultraluxury hospitality space. Belmond's holdings include 46 hotels, restaurants, trains and river cruise ships across 24 countries, with the Belmond Hotel Cipriani in Venice, 21 Club restaurant in New York and Venice Simplon-Orient-Express train service in Europe being the company's more well-known assets.

The deal values the Belmond business at $3.2 billion. It is expected to close in early 2019.

"The future of luxury will not only be in luxury goods, as it's been for many years, but also in luxury experiences, and we want to be in both segments," LVMH CFO Jean-Jacques Guiony said in a recent conference call with investors.

But while LVMH's move was largely unexpected, most analysts agreed last week that Belmond is well positioned within the Paris-based group's portfolio, which includes the Louis Vuitton, Christian Dior and Fendi fashion houses as well as the Moet Hennessy wine and spirits portfolio, among many other brands. 

Hospitality consultant Bjorn Hanson said, "This is one of the most exciting lodging stories of 2018 and as it plays out will be one of the most exciting lodging stories of 2019. One of the reasons it's exciting is because LVMH knows how to deal with luxury buyers of all kinds. This will allow Belmond -- which, frankly, has never achieved anything near its potential -- to have a totally fresh approach that comes from outside the lodging sector."

Though widely considered an outsider, LVMH has dabbled in the hotel space for some time. It has a joint venture with Marriott for a hotel concept branded under its Italian jewelry, watch and accessories label, Bulgari. Launched in 2004, the Bulgari Hotels & Resorts brand has locations in Milan, London, Bali, Beijing, Dubai and Shanghai as well as properties in the pipeline in Paris, Moscow and Tokyo.

LVMH also unveiled its own boutique lodging brand, Cheval Blanc, in 2006, opening three outposts in Courchevel, France, the Maldives and St. Barts, with another two slated to debut in Paris and Saint-Tropez, France. Both the Bulgari and Cheval Blanc brands, however, are dwarfed by Belmond's reach. 

Thomas Mielke, managing director of Aethos Hospitality Group's London office, said, "Based on the timid progress of its own in-house hotel brands, some might argue that LVMH would have otherwise found it difficult to gain any sort of substantial market share in the hospitality space. This is a chance to acquire a luxury hospitality portfolio with a strong distribution platform in place, [and] LVMH is able to tap into a highly competent management team whose senior leadership comes from large and successful international hotel operating companies, most notably Starwood and Hyatt."

'Trophy' properties

The purchase also grants LVMH an impressive collection of "trophy" properties, many of which are owned by Belmond. Guiony said Belmond's relatively asset-heavy portfolio was a major draw.

"In our view, the fact that Belmond owns an extremely large share of their portfolio and an unusually large share compared to peers is a strong competitive advantage," Guiony told investors. "In other segments of hospitality, the distinction between operations and real estate makes much more sense, but as far as luxury hospitality -- and especially ultraluxury hospitality -- is concerned, I think aligning the real estate and operations is extremely important."

Belmond, meanwhile, stands to benefit from LVMH's proven track record when it comes to brand building as well as potential synergies with other luxury labels within LVMH's sizable consumer goods stable.

Mielke said, "Some other luxury hotel brands, such as Aman and the Oetker Collection, have recently moved into retail, aiming to offer an extension of the branded lifestyle into peoples' homes. Given the plethora of brands LVMH controls, one can only assume that Belmond will very quickly be ahead of its competitors in that area." 

He added that the affiliation with LVMH's highly recognizable brands could also help Belmond regain the "cachet some might say had been lost" when the company stopped licensing the Orient Express hotel brand name in 2014. 

Meanwhile, Hanson said that LVMH's move could prove to be a game-changer within the high-end hospitality space. 

"I think the traditional hospitality executive looks at a luxury hotel and sees it as a hotel that happens to be luxury," Hanson said. "But LVMH's view of the world is that there are things that are luxury, and they can be put together, whether it's clothing or Champagne or a hotel. This is a transformational change, with Belmond becoming less of a hotel brand and more of a luxury brand, in essence. 

"In my opinion, this will certainly give other luxury hoteliers pause."

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