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

If Small is Beautiful..... Exclusive beats it.

by Alvaro HIDALGO

New destinations mushroomed

If the origin of mass international tourism can be placed in the 60s, one can situate the explosion of new destinations in the 80s, a moment in which major changes in the airline industry enabled access to new international and transcontinental locations at reasonable prices.

New destinations subsequently mushroomed, and the main focus of Destination Manager Organizations (DMO) was to increase the number of visitors as a measure of success.

As a tool to analyze this growth, the well known Tourist Area Life Cycle (TALC) concept was developed by Butler in 1980. Since then, it has survived three decades of constant scrutiny and verification studies, and it is considered now as a cornerstone in the analysis of tourism destination development and a milestone in Tourism academic literature.

Having entered into the second decade of the XXI century, the reactions to the model nowadays are mostly in the line of : .... ok, fine, but what’s news.

Nevertheless, TALC’s chart retains its validity by carrying a good reminder of the existence of – using an aerodynamic term- a “point of separation” beyond which specific measures should be taken to avoid the flow of tourists to become turbulent, resulting in the destination entering in a stall and declining.

Closely linked to the above, the “Carrying Capacity of a Tourist Area" concept started to be shaped. Carrying Capacity is defined by the WTO as "the maximum number of people that may visit a tourist destination at the same time, without causing destruction of the physical, economic, socio-cultural environment and an unacceptable decrease in the quality of visitors' satisfaction".

Maximum carrying capacity overflow

The Carrying Capacity must not be considered as a number resulting from a formula, but as a constantly ongoing process which overviews the destination to ensure that its quality and its capacity to attract tourists is maintained.

Indeed, if the first consequence of success is that it makes obsolete the tools and processes followed to attain it, we then need to constantly re-assess –with a fresh view- the new reality that resulted from the previous plans & actions, and make further plans for this new environment.

The concept evolved into the much broader “Sustainable Tourism” term which is now centering efforts of the industry and governments.

Resulting from this, DMOs are shifting their emphasis from Destination Marketing -focused just in bringing in more tourism-, to a Destination Management perspective centered in enhancing and maintaining the characteristics and attractions that made the destination what it is.

Some destinations are born to be directed to the mass tourism only, but in many others, the geography and/or configuration enables that several poles of activity with very different characteristics cohabit in a broad Tourist Area. Majorca and Costa del Sol are good examples of zones hosting both cheap mass-tourism sites and highly exclusive secluded locations.

The dilemma that any destination faces in the “point of separation”  is therefore the dreaded question: ".....what do we do now?". Being clear nowadays that sustainability must rule and lead, then the farsighted Schumacher’s statement “Small is Beautiful” is the automatic answer.

....But as the title of this entry states, “...Exclusivity beats it”.

Indeed, exclusive destinations are sustainable by their own nature and origin, and cannot overgrow beyond a certain point. Apart from some exceptions –there are always exceptions-, most of the exclusive tourism destinations remain as such after 50 or even 100 years of operation.

The price entry barrier not only keeps out most of the problems brought by excessive growth, but it also generates the revenue that will attract the levels of investment needed (i) to keep facilities, attractions and environment in good shape and (ii) to be updated recurrently. If the destination characteristics, configuration and/or name enable it, a destination facing the point of separation should always consider the "road to exclusivity" as the first alternative to be analyzed.

Luxury Brands are not only natural a path to exclusivity, but most importantly, they will shorten the transition time to attain the objective.

Indeed, Luxury Brands bring (i) the desired level of exclusivity and therefore sustainability (ii) a major worldwide marketing impact and (iii) a defined solution and a defined project. (See our previous entry on how do brands shape a destination http://bit.ly/r4mICb and http://bit.ly/pDkgoU )

The importance of point (iii) is generally overlooked. Indeed, when a new branded luxury project is announced for a Destination, its effects are apparent immediately. It creates a focal point that will drive its future development changing the investment and economic landscape of the overall destination on the spot.

By concentrating the efforts and resources into one clearly defined direction with an established timeline, the branded development begins to shape the destination and its perception from the day of the signature.

And thanks to their versatility, branded projects  provide its benefits to most types of destinations, whether it be a new tropical beach & golf resort, a new Marina or an old ski resort seeking rejuvenation.

Luxury Brands are the most direct vehicle to attain exclusivity and as a result, they assure sustainability.

But if it is true that the incorporation of any established luxury brand may result in the above benefits, only one can bring Power, Beauty and Soul…. the three qualities that most destinations seek to offer their visitors.

For more information please contact FIRSTLOGIC Consulting
http://www.first-logic.com
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Aston Martin 2011/2012 Coolest brand : "This British icon is truly the coolest of the cool".

http://www.coolbrands.uk.com/aston-martin

Gaydon, Warwickshire, 28 September 2011.
Aston Martin has been awarded the prize of the UK’s coolest brand, winning this prestigious accolade for an unprecedented fifth time in six years.

Once again, Aston Martin has topped a poll which comprises an array of leading international contemporary design-driven brands, including Apple and Bang & Olufsen, as well as other leading automotive brands. Aston Martin was also voted the top automotive brand surpassing a host of other luxury and specialist manufacturers to complete a double success.

Stephen Cheliotis, Chief Executive, The Centre for Brand Analysis and Chairman of the CoolBrands Council commented: “Smooth, sexy and sophisticated; British built, high quality and hand finished, let’s be honest, young or old, male or female, opinion former or British public, who wouldn’t aspire to own what is truly the coolest car on the road. Number one in five of the last six years, this British icon is truly the coolest of the cool.”

Since it was established in 2001, the CoolBrands initiative has been canvassing the opinions of experts and consumers to identify the coolest brand in the UK, based on factors including style, innovation, authenticity, originality and desirability.

This year’s council of 36 influencers includes music artist Jessie J, DJ and Bestival founder Rob da Bank and actress and fashion designer, Sadie Frost. After 10,000 brands are initially identified, a shortlist of 1,500 brands is established and the panel and consumers then vote to produce a top 500 of the most highly rated brands.

The past decade has seen Aston Martin transformed from a small-scale manufacturer of specialist sports cars to one of the world’s best-known luxury brands, boasting its strongest ever line-up. From the breathtaking One-77 supercar and the elegant yet brutal V12 Zagato to the Tailor-Fit luxury city car, the Cygnet, from the powerful Vantage range and new Virage to the exquisite DB9, DBS and Rapide, every Aston Martin expresses the core values of Power, Beauty and Soul. The Aston Martin range was expanded further at this year’s Frankfurt Motor Show, where the company unveiled the striking new DBS Carbon Series.

Aston Martin is globally represented with a network of 136 dealers in 42 countries, most recently opening new dealerships in Istanbul, Turkey, Las Vegas, USA and Mumbai, India. The company also has ambitious growth plans for up to four new dealer sites in China over the next 12 months, doubling the existing network.

Aston Martin remains at the forefront of contemporary manufacturing, a cultural force that embodies design and engineering excellence, and a brand with a truly special heritage. Renowned around the world, Aston Martin enters the next decade with the promise of radical innovation and change, without losing the core qualities that make this strong, independent British brand so widely revered.

For further information, pictures and videos please visit www.astonmartin.com/coolbrands

For more information on Aston Martin Branded developments please contact FIRSTLOGIC Consulting
http://www.first-logic.com

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How Luxury and Tourism transform economic unsettlement into steady growth

by Alvaro HIDALGO

In this period of calls for higher taxes, worries about Banks’ solvency;  American and Chinese officials telling off Europeans upon debt, currency and measures to  recover confidence;  BRICS meeting today to decide whether they buy European  debt or not; high unemployment  in industrialized countries; severe austerity programs applied in Portugal, Italy, Greece and  Spain;  talks about overheating Brazilian markets;  bubble in Chinese real estate markets and its implications to its financial sector;  etc, etc, etc, there  is an industry continuing to perform worldwide: Leisure, Travel, Tourism and Lifestyle.

Bulls & Bears may fight pulling up and down stock exchange indexes for reasons difficult to grasp (down 50% twice in a decade and then  returning back to the starting point),  but if there is a sector in which we see the largest gap between reality and  its reflection in the markets, this is the Tourism.

Indeed, most analysts continue to forget that Tourism has provided nonstop stable growth for the last 50 years and is now hovering 10% of GDP in average in OCDE countries, increasing its weight every year. China expects to double the weight of Tourism to 11%  of GDP by 2020.

Most importantly, Tourism is an automatic and effective channel for wealth & investment transfer from cash rich countries to cash seeking countries…,  ...something that sounds good enough in these days.

To start with,  international tourist arrivals are estimated to have grown  to 440 M consumers in the first half of 2011, +19M  more over last year period….several world markets and regions growing by +9% !!!. …and all this in spite of the crisis.  (http://bit.ly/py1zwy , UNWTO)

Tourism has also shown its capacity to bounce back from any type of Political, Health or Natural disasters, whether it is mayor global events (9/11), regional ones (SARS crisis, Iceladic volcanic eruption) or local  (Mexican Swine flu, Far east Tsunami), the recovery period comprised between 3 months for local events, to 12-24 moths for global high importance events (OAG Crisis Analysis Aug.2011).

In the midst of troubled financial markets, the Travel & Tourism infrastructure continues to expand: +3.6% steady growth in air seats per annum since 1979; Airport capacity needs to cope with figures that will double before 2030 (UK demand will go from 240 to 465 mppa. See today's article in FT on the cost of postponing investments http://on.ft.com/ocGbk8); Brazil will double its airport capacity before 2013 requiring US$ 3,76 billion;  Air travel in India passed from  6% to 20% growth p.a  in less than a decade., etc). In turn, Airbus foresees strong ongoing demand for commercial aircraft. By 2030 some 27,800 new aircraft will be required to satisfy future robust market demand, with a combined value of  US$3.5 trillion (source Airbus).

If we leave aside the above number crunching exercise, the two crucial points to consider are:

•    Travel and tourism has become multidirectional, the division between originating and receiving countries is fading with BRICS transforming themselves into originating markets and  USA &  Europe receiving more tourists every year  from the rest of the world.

Funnily enough, the  –once (?) - rich countries are battling in fierce competition to attract this inbound traffic, in the knowledge that  all the economic benefits traditionally provided by Tourism  to developing countries as (i) source of development; (ii)  impulse to investment in infrastructure; (iii) job generating sector;  and (iv) source of hard currency;  are now  providing a good recipe to ease western countries troubles.

•    Regional travel is growing fast in all continents  (a point that deserves an entire blog entry on the subject)

Resulting from these points, hotel chains foresee very solid fundamentals for the medium term. Chris Nassetta, CEO Hilton Wordwide, claimed to be “pretty darned optimistic” about the growth of the hotel sector worldwide, adding that he’s seeing “the best fundamentals in my career to date.”  http://on.ft.com/oCcys5 .

It is true that from a financing point of view, hospitality investments have a bleak short term outlook, due to the accumulation of loan maturities (excellent  article on http://bit.ly/oFvARn ) which will result in a difficult  2012. But again, this is due to short term technical reasons, not fundamentals.

However, there is an additional factor entering the equation:  The new tourism is very focused on Luxury and the common aspects between these -once- different industries are now tying them together and blending them it into one sole industry that could be considered as the Lyfestyle Industry. 

As paradigm of long term view, Mr Arnault , president of the French Luxury  group LVMH,  made his first move 25 years ago by merging the champagne & spirits company  Moët Hennessy with the luxury leather goods and fashion house Louis Vuitton  Malletier -a daring move in those days-.  His vision of reuniting French Luxury brands in one company has proved to be accurate and LVMH is now harvesting the results, having consolidated leadership position worldwide with overall success, let alone minor recent bumps (Hermès) in his strategy.

This brand aggregation -or if you wish, consolidation of the distribution channels- is proving so successful that the subsequent step, The Super Luxury Malls, is becoming a reality http://bit.ly/ppqP93   and http://bit.ly/qop15o,  these two examples showing how the Luxury shopping experience is being implemented.

Las Vegas Crystals at citycenter

This quest for luxury has also entered in full force in the hospitality industry, with relevant brands expanding worldwide (again, note also the penetration of Middle East and Far East hospitality luxury brands in both their regional and the western markets).

The last steps in this trend are the consumer goods luxury brands entering into both (i) traditional hospitality and (ii) residential tourism through the branded residences concept (see excellent article in Forbes magazine http://onforb.es/lMJGey )

The analysis, Q&A on the weight and benefits of the brands in hospitality and branded residences can be seen in previous entries to our blog http://bit.ly/n8XRj2 , http://bit.ly/pO0pIn ;  how a brand can shape a tourism destination. http://bit.ly/r4mICb, and how the presence of the brand reduces risk and shortens maturity of projects http://bit.ly/njITKT . (See also, “the brand advantage” in a real estate market conference marked by wariness http://bit.ly/nxHZyC )

So, while old Bulls & Bears, PIGS or any other category continue to jump like cats in hot BRICS, we should concentrate into proposing this new market what it wants and we can shape.... targeted  Luxury Tourism and Hospitality Services conveyed through brand positioning.

……And once you’re in for the brands in the Luxury Lifestyle industry, then there are “brands” and there is the unparalleled “Coolest brand”

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

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7 words and a logo: Does a brand shape a destination?

by Alvaro HIDALGO

Our two last blog entries were centred on anticipating the consequences derived from the now rapidly escalating financial turmoil. By turning this entry to academic issues, we wish to provide some respite to the now omnipresent “crisis talk”. Hence, it focuses on the subject above and brings some comments on the “Advances in Hospitality and Tourism Marketing and Management” Conference held in Istanbul June 19-24, 2011: Destination Development, Marketing & Management.

Destinations are far more multidimensional than consumer goods and other types of services. To be effective, positioning theory suggests that reaching the minds of busy consumers requires a succinct message focussing on one or a few brand associations. Nowhere is this challenge better highlighted than in the development of a seven word slogan that encapsulates a destination’s diverse and often eclectic range of natural resources, built attractions, culture, activities, amenities and accommodation. (1)

As it is, there is an overwhelming amount of choices available to satisfy any consumer’s need or dream and, in such a competitive marketplace, the viability of destinations depends on the ability to develop effective marketing and management strategies (2), among which differentiation is one crucial element to attract clients to a destination.(3)

Setting and developing marketing strategies and conveying such differentiation becomes an overpowering challenge to Destination Management Organizations.

DMOs’ difficult task is to be in both sides of the table. On the one hand they must set rules for a policy and business strategies by involving institutions and individuals. On the other they must draw support from the different stakeholders so that the brand will be both accepted and communicated through both official and unofficial publicity and products, resulting in a unique and consistent destination brand positioning (4).

So…. How to transmit the qualities of a destination, to attract the types of clients appealed by the different facets of what the destination is, “targeting a multiplicity of geographic markets to attract a wide range of segments”(1) … and all in less than 7 words and a logo?

There are countless studies on destination branding, brand equity assessment models, precise definitions and discussions on the difference between destination image and brand personality. But such analyses are not confined to lecture halls. On the contrary, their assessment will have implications in advertising, promotion and positioning of a city or destination (5).

 
Consistent positioning is of the utmost importance since, unless a place can come to stand for something, it will have little chance of being remembered long enough to compete for any of this precious attention. Indeed, most people spend no more than a few seconds each year thinking about a destination, a city or a country on the other side of the world or about. So, unless that city or destination always seems exactly like itself every time it crops up, there is little chance that those few seconds of attention will ever add up to a preference for its products, a desire to go and visit the place, an interest in its culture. (6) (7)

In this sense, the use of Celebrities has been a traditional way of creating awareness.

Indeed, we already knew that they create destinations -Prince Rainiero & Grace Kelly made what Monaco is now- and their successors -HRH Prince Albert- contribute to create awareness in recently established ones  http://bit.ly/qyUI6N

Now, we have empirical models to analyze Celebrities’ impact (8).

But if attracting customers is already difficult, to grab the attention of the most sought after “creative class” (9) becomes of paramount importance. They, as a group, create trends, build and enhance the characteristics of a city or a destination, and their power of influence lasts much longer than any advertising campaign. Bringing them in and being capable to retain them is a nonstop challenge, even more fierce in these days in which companies and full organisations can and are run remotely.

To retain these customers, destinations need to constantly defeat concurrent alternatives, updating themselves and proving they are in the pinnacle of the pyramid by -among other things- bringing the firms that prove and show their status. Only certain destinations and locations can receive and sustain certain brands and, by fostering their establishment, the destination crosses a threshold that separates it from the rest.

Thus,

Academics say: In this 21st century, cities and destinations compete on their brand and will develop in line with it. They are competing on the value that they provide in terms of physical and service offer, their heritage, their ambitions and their character (6).

In essence, they compete to offer “Power, Beauty and Soul”…

                        …in a way, only 4 words and a brand suffice to shape a destination.

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

References:

(1) TOURISM DESTINATION BRANDING COMPLEXITY
Dr Steven Pike. (2005). Tourism destination branding complexity. Journal of Product &Brand Management. 14(4): 258-9

(2) DESTINATION BRAND PERSONALITY AND BEHAVIORAL INTENTIONS: A COMPARISON OF FIRST-TIME AND REPEAT VISITORS
Ahmet Usakli , Nevsehir University , Turkey
Seyhmus Baloglu, University of Nevada, Las Vegas, USA

(3) LONG-TERM COMMUNICATION EFFECTS OF TOURISM MALAYSIA MARKETING COMMUNICATIONS ON THE AWARENESS AND PERCEIVED DESTINATION IMAGE DIMENSIONS AMONG POTENTIAL TOURISTS FROM THE GULF COUNTRIES (GC)
Ashraf Mohammad Teehi Alfandi and Azilah Kasim
Tourism and Hospitality , College of Arts and Sciences, Universiti Utara Malaysia Kedah, Malaysia

(4) DESTINATION GOVERNANCE AND INTERNAL BRANDING AS ANTECEDENTS OF DESTINATION BRAND DEVELOPMENT: AN EXPLORATORY STUDY ON EDINBURGH
Ilenia Bregoli, Università Cattolica del Sacro Cuore Milan, Italy
Giacomo Del Chiappa Università degli Studi di Sassari Sassari, Italy

(5) EXPLORING THE RELATIONSHIP BETWEEN DESTINATION IMAGE & BRAND PERSONALITY OF A TOURIST DESTINATION – AN APPLICATION OF PROJECTIVE TECHNIQUES
Girish Prayag Faculty of Law & Management, University of Mauritius

(6) CITY MARKETING AND PLACE BRANDING: THE CASE OF CAPPADOCIA
Elem Yalçın and Burçak Çebeci Perker
University Faculty of Economics and Administrative Sciences,Istanbul, Turkey

(7) PLACE BRANDING Some Important Distinctions in Place Branding. , Simon Anholt (2004)

(8) SELECTING THE ‘RIGHT’ CELEBRITY ENDORSER: LATENT MEAN STRUCTURE ANALYSIS
Robert van der Veen and Haiyan Song
The Hong Kong Polytechnic University,School of Hotel and Tourism Management,

(9) THE RISE OF THE CREATIVE CLASS. Richard Florida, 2002.

Wealth preservation - Self preservation?

by Alvaro HIDALGO

As a follow up to our last blog entry http://bit.ly/njITKT  and after  the recent havoc in financial markets and the serious doubts on what is to come next,  many are no longer wondering how to obtain the highest return from their investments but how to keep those funds safe.

Indeed, we have seen this summer how top 2007 star managers as John Paulson  are having -30% performances or Bill Gross, manager of the world’s largest bond fund for Pimco, has seen his widely followed call to avoid US government debt backfire.

Masters of the Universe loosing against markets

As the FT clearly states: “But the fact that the 'Masters of the Universe' have got it so wrong is a sign of how upside down the investing world is today. Everyone has struggled, with two-thirds of managers of stock funds failing to beat the S&P 500 index benchmark in the past three years according to Standard & Poor’s. On the eve of another September when banks are starting to eye each other nervously -as they did in the run-up to Lehman Brothers’collapse in 2008- mere mortals face a rapidly shifting landscape”  See FT article http://on.ft.com/oCOntn

More and more sources refer to this crisis and to the banks as facing not only a liquidity crisis but a solvency one. The significant reduction in volume in interbank market is the best telltale of this. To create even more unsettlement, 6 recent Economy Nobel prizes have issued 6 different –and some of them opposed- recipes.

Gold: 20% up in 2 months, 46% up in 1 year

Finally –or as a result-, gold has gone 46% up in the last year, 20% in the last two months. If gold was traditionally bought as a way to preserve wealth, does the current price mean that everything else is now worth 46% less than it was a year ago, or is its price a reflection of -again- crazy markets and decision makers?

So, put it in the simplest of ways.……

Are you going to trust these guys with your money?          
                                    .

    



                                                       Again?


Banks & bankers come and go, markets change swiftly and randomly, fortunes are made and savings are lost, but only assets stay.

And in all the crisis of the last century, nothing has preserved wealth more efficiently than high quality assets. Whether it be top of the range property investments, art or even signature cars, if you can hold on to the asset, its real value adjusted for inflation will be maintained or even increased with time.

The problem with these types of assets is that all of them required -up to now- additional cash flow to cover taxes, maintenance & security, insurance, etc.

Indeed, up to now.......One of the advantages of new property ownership systems has been that costs are covered by the operation, thus solving – at least partially in the worst case scenario- the cash flow issue.

But there is an additional benefit. Many banks are looking for both deposits & safe and profitable lending operations. By tying a property purchase mortgage with a guarantee deposit,  the investor is  (i) buying a solid asset, (ii) securing finance at reasonable levels and most importantly (iii) using also property as a way to secure the funds placed in banks, and not the other way around as we have been used to for the past 25 years. Indeed, by tying up a deposit/guarantee to an automatic reduction of the principal, the investor retains the possibility to convert at will the cash -a liquid but nowadays uncertain vehicle- into a solid wealth preserving investment.

Quality assets are immune to monetary crisis, exchange rate turmoil and policymakers' whims.

And as we have covered in all past blog entries, nothing helps to better preserve value -and its perception by the market-  than brands.

By creating a valuable product that will keep its value in time, branded residences provide benefits for all parties involved.

For more information please contact FIRSTLOGIC Consulting
http://www.first-logic.com
J48C45WG4RN5 

Money, Money, Money… Where is the Money? (II)

by Alvaro HIDALGO

As a follow up to our entry in late January 2011 http://bit.ly/dHQTrc and as usual in a market downturn, the first thing to notice is that the IMF forecasts mentioned  then have -again- proven wrong.

From a global markets’ perspective, August is proving to be an awful month, most markets losing an average 10%, even more in the banking & finance sector. And under this doom & gloom few are ready to think about new operations or investments.

Again, it’s not that there are not funds available…it is the aversion to risk!

With regards of Real Estate and/or Residential & Tourism developments, most funders/ bankers/ investors have been fighting & suffering to reduce their exposure to real estate over the last two years. And those coming out of such ordeal, will now smile -or blatantly laugh- if you meet them and ask for funds for a new project.

So?

Probably the biggest change that happened in the last 8 months is that investors, once achieved the stabilization of their portfolio after 2 years of asset & debt consolidation, are now becoming aware that liquidity needs to be allocated. Indeed, Banks and professional investors see that operational margins have been healthy and –in many cases- sufficient to compensate for all the bad debt losses....up to now. But to continue obtaining those margins they need to invest & fund or finance new operations.

This need to allocate funds applies to individual investors too. In spite of the destruction of wealth that this market crash represents, there is liquidity desperately looking for alternative investments that minimize risk:

ICI estimates $40Bn withdrawn from funds in the last month

Stock markets are not even being considered, Funds & fund managers are not trusted (see chart) any kind of debt /sovereign debt is frowned upon, general commodities are on average suffering from the foreseen economic downturn, main currencies are becoming more volatile...… only the safe havens are sought after. Therefore Gold is skyrocketing and Swiss Franc is steadily gaining strength.

Moreover, individuals have even further concerns and start doubting Banks and Financial Institutions' solvency and wondering whether their deposits are safe.

Thus, under this market environment one should go back to basics: Fixed assets and Real Estate have traditionally been a safe haven to preserve wealth through uncertain economic times.

This may sound almost like a joke after all we have suffered, but we all know now that the 2007-2010 Real Estate crisis was generated by excess of liquidity and indiscriminate access to debt enhanced by mortgage loan packaging and its effects in housing prices. When the scheme ran out of fuel, the whole system collapsed.

Housing prices back to rational levels

In any case, all that is old stuff.

Nowadays, a severe correction (30% - 50%) in Real Estate prices has already been incorporated & absorbed by the market in most countries & regions.

Whether there is room for a further correction or not is arguable, but it is likely that  we are now close to the levels where housing prices should rationally be.

Therefore, it is now time for added value projects, clearly differentiating themselves by targeting specific market niches.

And to assure lenders & investors that sales and revenue will be there and they will get repaid, and simultaneously assure buyers that they will maintain value,
one must go –once more- back to basics and trust in three major truths:

•   Location, Location, Location
•   The power of the brand
•   Productivity and return

…which get us back to Branded Residences.

Indeed, they do attract customers with powerful brands and they run with operational agreements/ condo-hotels that provide a source of revenue. Additionally, the nature of the business requires them to be in the right location.

From a funder point of view, Branded Residences provide a higher level of liquidity (being secured by the brand and the market niche) when compared to standard assets. But, most importantly, they grant additional levels of security by (i) allowing pre-sales and (ii) bringing a built-in source of revenue….even if sales were sluggish in the initial stages, the operation will provide the revenue required to cover payment of at least the interests from day one.   Hence, for Buyers and Investors, the Branded Residences concept provides overall solidity to the project. And, in the same way that the brand serves the final client and the operator, it does also attract the banker/funder as it buffers many of the risk factors.

Does this mean we can find money now?  It is not a risky bet to say that after this month of August -and what still may come-, bankers will put on hold any new operation for a while.

Solidity & Credentials

Nevertheless, we need to go to see our bankers now, being sure not to ask them for money but on the contrary to acknowledge their current predicament, keep them updated of the status of our project, and focus in its solidity and in the duration of the production cycle.

Indeed, projects starting now could be ready to be completed by 2013 -a moment in which the market should be in full recovery.

What’s the objective? The purpose is to be sure that your banker will have your project in mind when his P&L shows him that they may have done too good a job in the management of risk, but that there is no revenue. At that moment, your project must immediately hit his mind for it is solid, profitable, has all the credentials and is ready to go.

And a top brand project, per definition, has the solidity and the credentials.

So, how to attract the money? In the end, if one can bring power, beauty and soul to a branded destination, money will come too.

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

Do brands really add value to real estate developments and travel destinations? ( and III)

by Alvaro HIDALGO

Following our last blog http://bit.ly/n8XRj2 we stirred up quite interesting conversation threads in different LinkedIn forums, and we believe it may be worthy to close the series gathering some of the points raised.  (Quotes are numbered and authors are referred below)

The most expected question “Isn’t it there something to be said about overextending a brand's horizontal expansion? While ultra luxury brands understand quality and value, I hesitate to agree it translates to the hospitality sector” (1) was very clearly answered within the discussions: “if the ‘brand promises’ of the development and the luxury brand complement each other it works….. In the luxury sphere clients are used to getting the best and thus having a famous luxury brand involved in a project is a natural extension of the developments' positioning in the market” (2).

A brand can be regarded  as “a comprehensive set of values that enable the asset to articulate its benefits concisely to its target market”(3) but, instead of being understood as a  whole ,  this very precise definition gets frequently  distorted and is applied only to the short term capacity to attract its target market and make the sale.

Indeed, this short term approach is followed by “many property firms for which branding is little more than project marketing using individual, short-lived marketing and PR measures. But because property branding must be seen in the long term,” “targeted brand positioning, differentiation, authentication, and cultivation should create a lasting genius for your project”(4).

Thus, branding must not be applied to “just a surface-level activity, but the architecture and master-planning should be an integrated part of the brand and the delivery of the community & the facilities management to ensure that the brand promise is delivered on a day-to-day basis to end users.” (5)

It is clear that real estate product identification should always be understood in the long term.

A good example of the importance of the name can be seen in the gated communities & condominiums. Their name becomes an established brand in time and this is only achieved by proving to be capable of maintaining certain standards during a number of years. “Brands may 'tag' products but ultimately it is the individual experience with an induced value that creates that brand” (6).

Branded developments fill this short term - long term gap. By showcasing the brand from the very early stages of development, established brands commit not only to bring in their set of values, but also to maintain them for the long term.

Indeed, top brands' reputation is based in their capacity to produce top-of- the-range products and services and to make them evolve to adapt to -and in many cases to shape- new trends and ways of life.

Bringing these levels of design, quality and service to a final product is something that many try to achieve and very few succeed in the long term –some have been succeeding for almost a century…..    Here lies the brands’ strength and power.

Finally, applying brand standards to the very immaterial sales process does also make the difference.

“If you want to reach the buyers who buy ultra-luxury branded real estate, you need to reach the same kind of buyers who buy the ultra-luxury brands” “It requires an understanding of how to market branded luxury to the elite, creating an exclusive invitation only type offering and keeping the brand integrity of the project sound to maintain value for the project and for the buyers.  It requires managing the inventory so the initial buyers enjoy greater benefits then the buyers who come in last and the exclusivity of the offering builds a backlog of those that wish they could have bought. With the development phase really hitting the market at just the right time in Asia, understanding how to pre-sell your ultra-luxury branded residences & hotel residences into these markets can really minimize the risk and increase the ROI to the developers and the ownership to the buyers” (7).

So, bringing in luxury brands avoids the pitfalls in this final leg and their expertise adds value by setting standards and requiring that the process is handled by professionals.  They do know how to successfully manage the distribution and the retail chain to enhance both the product and the brand itself…. few sectors can surpass established luxury brands in the mastering of this process.

Hence, by incorporating their expertise to the branded destination concept, brands do play in their home court. They are just extending their capacity to provide lifestyle to other niches and by this they create value and maintain it in the long term.  And the implications of this provide a major benefit to all parties involved: brand, developer, funders, lenders &  investors, sales force and clients/owners.

Branding complements and fulfils all parties’ aims and needs…... they come at a price but they generate the returns.

Of course, under the brand umbrella there are many different standards.....And none can compare with the reputed “Coolest brand”: http://bit.ly/mdMAmz

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

Quoted Contributors:

(1)    Kyle Thieme, Social Media Coord at Madplum Creative 

         http://madplumcreative.com/

(2)    Jp Fourie, CEO  Admakers

         http://www.admakers.com
(3)    Jason Barret,Commercial Property Manager with a twist
         Jason Barret's LinkedIn profile
(4)    Lee Valentine, Brand Strategist at Team scope design
         http://www.teamscope.com.au
(5)    Lisa Knight, Founder & Creative Director at The Brand Foundation
         http://www.thebrandfoundation.net
(6)    Jessica Osborne, Project Consultant
        Jessica Osborne LinkedIn profile
(7)    Robert Rann, President & CEO Refined Resort Residences
         http://www.refinedresortresidences.com/
         http://blog.refinedresortresidences.com/

Many thanks to all LinkedIn discussion contributors for all your valuable entries, quoted or not.

Interior garden picture courtesy of  John Glover, leading specialist garden photographer http://www.johnglover.co.uk

Do brands really add value to real estate developments? (II)

by Alvaro HIDALGO

After our first blog entry on this last February (http://bit.ly/qQujFJ), the topic has become hotter and hotter.

More brands are entering into this, some of them with mixed results. The more negative of which is  – as in most cases – not due to the concept itself, but to its faulty application. 

Is it the right brand in the right market?

Introducing a successful brand in a country/region in which it is not known is risky business in itself.

And it is so, even if the objectives are limited to the core brand products, not to mention trying to export a brand and simultaneously enter a non-core sector. 

The second common mistake is branding just an average real estate project in which the brand brings only a stamp. Why should someone pay something for nothing?

  

So, when do brands add value?

Quite simply, when the resulting product becomes a better one by incorporating the qualities and know-how that the brand represents.it is just getting back to basics, and  High-end and Ultra Luxury brands are proving their ability to do this in earnest.

Back to basics

By successfully translating their respective expertise into the real estate and hospitality sectors, quality brands bring to the table what is expected from them, i.e., creating and maintaining value (the latter is proving to be a capital point under this market). 

An excellent cross-comparison on this was published by Sally Howard in Forbes http://onforb.es/lMJGey.

But then, there is the other side of it.  Real Estate is probably the most important statement and expression of lifestyle.

Brands bring similar people together

It is true that in some cities the location of the property provides by itself this flare, but in many other places the results of the location-identification equation are not clear. 

Thus, the incorporation of a well established brand that impersonates the essence of lifestyle to a property investment is the natural step to follow.

Moreover, people identify themselves with a certain image, and since most of us want to live in places surrounded by people with similar interests and values, branded property ensures, in a way, that the owners/users will be in contact and in the vicinity of like-minded people. Brands, In the end, bring similar people together.

This natural market segmentation reduces the buyer’s decision time; besides, there are not so many properties available under a specific brand. Thus, reduced decision time translates into quicker sales and easier cash-flow management, which benefits the developer.

Brands are powerful tools and, as any other tool, when handled with care provide the desired results. 

By creating a valuable product that will keep its value in time, branding properties provides benefits for all parties involved.

Of course, under the brand umbrella there are many different standards.....And none can compare with the reputed “Coolest brand”: http://bit.ly/mdMAmz

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

 Pictures courtesy of wozcup2011.com ; events.piaget.com ; thedailytruffle.com

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