GIORGIO ARMANI is already one of the most diversified brands in fashion. As well as haute couture and everyday clothes, Mr. Armani and his firm create scent, cosmetics, spectacles, watches and accessories. Customers can purchase Armani furniture, flowers, chocolate, sweets, Jam and even marmalade. There are Armani caf?©s and restaurants in Paris, New York, London and other cities. An Armani night club recently opened in Milan. Now Giorgio is branching out still further.
On February 22nd his firm announced a $1 billion hotel venture with Dubai’s Emaar properties, he Middle East’s largest property developers.Mr. Armani will be in charge of the design for ten new hotels and four luxury resorts, to be built in the next six to eight years. Armani’s is the boldest move so far by a luxury goods company into the hotel business. But it is by no means the first. In September 2000, a hotel designed by Donatella Versace opened on Australia’s Gold Coast.
In February 2001, Bulgari, an Italian Jeweler, confirmed a Joint venture with Ritz-Carlton to build six or seven hotels and one or two resorts. Salvatore Ferragamo, an Italian shoemaker, has designed four hotels in Florence.But in the first half of last year, both the fashion and travel industries were doing badly as travel and luxury follow the same economic cycle.
So does it make sense for designers of luxury goods to go into the travel business? Armani and Bulgari would say yes. Mr. Armani considers hotels a logical extension of his aim of promoting his brand in all walks of life.
(So can Armani toilet paper be far behind? ) Rita Clifton, Chairman of the consultancy Interbrand, says that this strategy can work.A strong product, strong images and a strong experience, such as staying at a fashion designer’s hotel, can combine to make a super-strong brand, claims Ms. Clifton. To fit the firm’s luxurious image, Bulgari says that its hotels must be as upmarket as it is possible to be.
Because small is considered more exclusive, Armani and Bulagri plan to launch mostly smallish five-star hotels. Armani’s Dubai hotel will be an exception, however, with 250 rooms. Bulgari’s Milan hotel will have no more than 60 rooms.
Losing control of their brand is the biggest risk for luxury firms xpanding abroad or venturing into a new line of business.Over the years, Pierre Cardin, Yves St Laurent and Christian Dior have each lost their goods by giving out licenses all over the world to firms that did not deliver the appropriate quality. Calvin Klein’s current problems are related to the company’s loss of control of the distribution of its products in many countries. But designers’ hotels can generate positive publicity.
Even if Bulgari’s hotels turn out not to make any money, the venture could be seen as an expensive yet effective advertising campaign. Mr.Armani’s hotel plans are more ambitious and the danger of brand dilution much greater. Armani says that the management company for its hotel venture will have its head office in Milan rather than Dubai and that Mr. Armani will be fully in charge of design. So far Mr. Armani has managed to control his brand tightly despite being involved in many different businesses. Hotels, however, are a bigger challenge than flowers and marmalade.
Taken from: Trappe, T. & Tullis, G. (2005). Intelligent Business. England: Longman. Giorgio Armani, a Diversified Brand By zizosrag_92