As consumers increasingly look for experiences over material goods, LVMH is expanding its brand in anticipation. The deal will see the company take over Belmond’s global portfolio of hotels, restaurants, trains and river cruises. The move, which is expected to be completed in the first half of 2019, is LVMH’s largest since the payment of $7.3bn for full control of Christian Dior in 2017.
LVMH has been very successful in recent years. The company reported a record year in 2017, with revenue of €42.6bn ($47.9bn), an increase of 13% over the previous year. The fashion and leather goods segment made up 36% of the company’s total revenue in 2017 but the other activities segment, which includes its travel brands, was the only segment to report a loss. The acquisition of Belmond is likely to rectify this.
LVMH already owns a variety of brands including Christian Dior, DFS, Starboard Cruise Services and Dom Perignon. The rising trend of spending on experiences in areas such as high-end food and wine, luxury hotels and travel is likely to continue to be a growth opportunity. According to GlobalData, the global revenue of luxury hotels – for both business and leisure – is expected to increase 36% between 2018 and 2022, from $165.3bn to $224.9bn.
LVMH Belmond acquisition to bolster hotel portfolio
The acquisition will result in an expansion of the company’s own hotel portfolio, which comprises the Cheval Blanc hotels, the Saint-Barthélemy, and Bvlgari Hotel and Resorts. The Belmond deal will boost the company’s existing collection by 36 properties, including the Hotel Cipriani in Venice, the location of George Clooney and Amal Alamuddin’s star-studded wedding, the Le Manoir aux Quat’Saisons in Oxfordshire, and the Copacabana Palace in Rio de Janeiro.
LVMH will also take over the ownership and operation of two Belmond river cruises and seven tourist trains including the Venice Simplon-Orient-Express and Belmond Royal Scotsman. Spreading its offerings so wide could be a risky strategy but the company has proven that it has the financial power, expertise and experience to prosper in many different sectors.
While the move will be beneficial to the company, there are fears that it will result in a lack of choice for consumers. However, the company tends to keep its brands separate to create an illusion of choice so it is likely that this deal will be similar. Whether consumers are choosing luxury goods or luxury experiences, LVMH will be reaping the benefits and its competitors will have to work hard to catch up.