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.
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.
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.
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.
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