Luxury, Sports and Developments

by Alvaro HIDALGO

Luxury and Lifestyle are difficult to showcase without including an attractive sport.

Indeed, the marriage between Luxury and sports has proved to be solid and dynamic, with luxury brands investing strongly in sponsoring sports events with ever growing budgets (Prada  just recently committed 40M€ to the next America's Cup  challenge http://bit.ly/veiMOa).

Moreover, seasonality allows luxury brands to shape Lifestyle by adequately dosing  their presence in the different scenarios provided by seasonal sports: spring golf tournaments, summer sailing, autumn outdoors  -hunting is not entirely politically correct to be used as brand image- and winter sports. In this way, Luxury brands succeed to be ever present and ever changing.

Certain events and venues provide the stately flair much sought after by established Luxury brands which, by consistently appearing as sponsors of these, obtain not only the ROI on the spot but also a further contribution to the solidity of the brand image.

Wimbledon's Central court

Indeed, consistency is valuable, and once a Luxury brand gets a spot in prime venues it will not be surrendered. It is said that in 1978, André Heiniger -the old  Patron of Rolex- was reluctant to sponsor Wimbledon fearing to be perceived -in those days- as some other Japanese mass watch manufacturer arriving to the market.  It just took him one visit to Wimbledon’s central court to say “this is Rolex” and since then, Rolex has been sponsoring Wimbledon… a spot that many other brands would love to snatch.

In the same way that the image of sport as a representation of status is sought after and enhanced by Luxury brands, a new trend has recently appeared willing to benefit from the item Lifestyle & Sport:  The housing schemes linking with prestigious sports venues.

Within this general configuration, we must differentiate the projects that completely refurbish and transform existing facilities into entirely new developments, from those willing to maintain the prestigious venue and its current use, and benefit from such kudos to create a “Sports brand image” under which the properties would be marketed.

With regards of the latter category, it is clear that it does make sense to both developers and owners of the facilities. The question that will determine whether the concept is successful or not, is if a venue that hosts certain prestigious event(s) provides the Luxury and living Lifestyle that the very event represents.....Or in a nutshell, will it make sense for the future owners?

An excellent article by Graham Norwood in the FT covers the issue with examples of both  approaches  http://on.ft.com/qMtifn.  The pros & cons are covered therein.

One could argue that those developers  following the  “Sport branded”  approach pursue the same line of thought as Luxury brands entering hospitality and branded residences do.....In the end, the resulting product is more or less the same: Both schemes are likely to include the sports facility(ies), the hospitality component and the housing/residential.

Nevertheless the devil is always in the details and in this case, in the order of priorities.

While ones are bound to base the project on an existing venue that must continue to host certain events, Branded developments create a competitive product and are only bound to offer the qualities that the brand provides.

Furthermore:

(i)    Luxury brands are committed to maintaining the value of their products and to increase the power of the brand itself.  Hence, if by signing a development Luxury brands obtain the exposure sought after -see http://bit.ly/rQ10AU -, this exposure requires from them to ensure that brand standards are maintained.

Indeed, if Luxury brands solidity is brought by detail, quality and consistency, then brands will ensure that their residences and destinations -as any other of their products- maintain such qualities.

The brand is an intrinsic part of the development, and is there to stay.… a point that provides additional solidity to the investment.


(ii)    Branded developments are business units in themselves. The three components (hospitality, housing and sports) may provide different sources of revenue but are run as one sole business.

This point not only implies that the priority will not be established in succeeding one or several events a year, but most importantly that there will be no conflict of interests between the holders of the different assets, properties or rights upon the facilities.

So, in the same way that Luxury brands take care of materials, design and manufacturing, they ensure the conceptual business and the legal framework to provide the expected services-consistently and year round- to owners, users and clients.

(iii)    Finally, Luxury branded developments must be exclusive….

This is Wimbledon too

And if several brands can bring the much needed exclusivity, no other can add the qualities of the well reputed “Coolest brand”: http://bit.ly/mdMAmz and  http://bit.ly/oSjuiu

For more information please contact FIRSTLOGIC Consulting
http://www.first-logic.com

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Why Luxury brands aim non-core sectors?

by Alvaro HIDALGO

If in previous entries this blog covered the question of what do brands bring to real estate developments (Do brands really add value to real estate developments? –see http://bit.ly/n8XRj2 and  http://bit.ly/pO0pIn ) this one will cover the other side of the coin: Why Luxury brands would be willing to extend and enter other non-core sectors.

Indeed, global Luxury goods sales (that is, not including hospitality services,  luxury toys -cars, boats and planes-  transportation or property) have continued 2010’s double-digit growth path and will see an increase of 10%, up to €191 billion in 2011.

With such figures and growth outlook, markets expanding rapidly in Asia, then why do they need to extend to other fields? 

Let us not forget that the luxury industry has acquired the status of a driving economic sector not more than 35 years ago. Before that date, they were just a collection of small firms and ateliers....and they had achieved these results by extending the brands.

Indeed, the economic growth resulting from the stable political and economic framework  ensuing  WWII, provided a scenario capable of generating an unprecedented increase in wealth, which started to materialize in the 1960s. The first luxury bubble was to some degree burst by the oil crisis and only the factors allowing the steady growth of this sector came into place in the late 1970s.

Luxury industry which until then was used to sell to a very reduced number of people saw how: (i) Economic growth and increasing wealth enlarged their market base (ii) Travel and Tourism extended the influence to other countries; and (iii) Change in social uses broadened the market potential allowing the introduction of lines of products, some of them accessible to further social strata.

Simultaneously, societies became less and less formal. This resulted in a significant shift in the dressing codes welcoming once common pieces of clothing, even typical of the working class, like jeans.

Nevertheless - or precisely due to this- the need to establish status was still there –as it will always be-, and the natural solution was to add a couple of Luxury complements and apparels to any basic clothing.  This is when the terms “Casual"  and "Chic” came into play together in full force.

All the above changed the landscape of the luxury industry, a whole new market with new rules was born, and the first problem to solve was how to communicate with it. 

Indeed,  the traditional communication method of “Bouche à Oreille” between the well to do was exclusive by nature, but it became rapidly obsolete to attract the rapidly growing affluent.

This change induced decision-makers to face for the first time the dilemma that now represents the cornerstone of the luxury industry:

If to expand clients' base one needs communication and advertising, how is exclusivity maintained when using mass communication channels?  (a question now more present than ever with Internet).

Aside from the careful choice of the communication channel(s), the first step taken was to strip the communication of Luxury of any link to the end product.  The adage in Luxury: “heighten anticipation and maximize desire” was subtly reinterpreted:

If Luxury can be afforded only by those with a certain Lifestyle, then by communicating Lifestyle – instead of focusing on the product- Luxury retains the exclusivity.

This scheme opened the door to mass communication and advertising of Luxury goods and succeeded in making them even more appealing.  Everyone could see then what Lifestlyle is, and could buy a piece of it.

As an example of this de-materialization, if Luxury is Lifestyle, then it is difficult to better showcase this concept  than with the combination of sports , culture, adventure and excellence chosen by Rolex, succeeding to represent each activity and expression by its embodiment through individuals, events and venues (see http://bit.ly/qCaaom). It clearly follows Mr. André Heiniger's, -the old Patron of Rolex- approach, who was once asked: “How’s the watch business?” to which he answered:  “I am not in the watch business, I am in the Luxury business”.

On a larger scale, Perfume makers and distributors understood the power of communication of the fashion industry. In fact, few haut couture houses –if any- can survive without economic support, so fashion became a lifestyle showcase through which the revenue generating activities -sales of perfumes, jewelry and fashion complements- were advertised.

Nevertheless, certain goods, assets -and to some extent, services - are Lifestyle and Luxury in themselves.  Indeed, luxury cars, boats, planes, jewelry, property and hospitality services do not need to evoke anything; they are just the epitome of luxury.....And since these goods or assets are exclusive by nature –and price-, then their communication should do little but show the product.

Is it so?...  maybe not any longer.

Luxury items are expected to provide a pleasure to our senses, are supposed to fulfill our aspirations and desires and must do so based on impeccable design and outstanding materials all wrapped up in superb craftsmanship.  When these elements are reunited, the end product becomes a luxury one, whether it is a watch, a certain wine, a car, a boat, a plane or a property.

Luxury brands know that their business consists in satisfying the most selective individuals in a very competitive sector requiring to maximize exposure.... and this maximization can seldom be achieved by reaching the customers with one field of expertise.

The answer is therefore to extend the brand capacity in as many fields as possible, to maximize the possibilities of satisfying clients’ needs and aspirations.  We already mentioned in previous blogs how this trend was initiated by the merger of LV -a leather atelier-, with MH -a champagne and cognac-, then taken over by Arnault, owner of Parfums Dior. http://bit.ly/pDkgoU .

In a different sector, and in a non conventional approach to brand extension, the traditional marriage between wineries & hospitality has been given a further twist with the “Marqués de Riscal” Spa, in which an excellent winery is married not only with a restaurant & hotel, but extends its scope to a wine focused spa (vinotherapie), all wrapped in stunning Frank Gerhy’s architecture and managed by Starwood Luxury collection…. And as well as being a good business in itself, it provides exposure and access to worldwide markets.

Hotel Marqués de Riscal

It is not by chance then why Luxury brands extend their brand to other fields. They understand the nature of the business, they bring the design and craftsmanship capabilities and they have spent thousands of person/hours not only developing their core-products, but also carrying holistic approach analyses on how to satisfy the most exclusive, selective individuals.

Regarding our specialty -real estate developments and residential tourism- we already covered what  do brands bring to real estate developments, which in a nutshell are the same elements that they bring to other products : Exclusivity, Uniqueness and all round Quality (see our blog entries http://bit.ly/n8XRj2 and  http://bit.ly/pO0pIn - ) and it is clear that brands, in their turn, expect to benefit from the further exposure that such projects provide.

But then, from all the brands available, many can bring Beauty, some will bring Character, but only one can bring  "Power, Beauty and Soul"

For more information please contact FIRSTLOGIC Consulting
http://www.first-logic.com