Luxury and Retail

Aman Resorts: A Tough Sell for DLF

Amangiri – Utah, USA

Two weeks ago, there was some news that China-based conglomerate, HNA, had sent in a bid to buy Aman Resorts, a collection of unique luxury resorts in some of the most sought-after destinations in the world. Aman Resorts, which is owned by DLF, an Indian development company, represents the company’s biggest non-core asset.

To bring you up to date, DLF currently has a net debt of more than $4 billion and is looking to raise as much as $650 million to shore up its debt levels and put some cash on its balance sheet. In 2007, the company had bought a 97% stake in Aman Resorts based on a $400 million valuation, while the remaining three percent was held by Aman founder Adrian Zecha. Considering that the purchase was made right before the global financial crisis, DLF has been desperately looking for a buyer for this property.

HNA Hotels and Resorts is part of China-based HNA Group. With assets exceeding $30 billion, the group has its tentacles in airlines, hotels, airport management, real estate, retail, financial services, logistics, and tourism. Annual revenues are around $10 billion (as of Dec. 2011). The hospitality segment of the group consists of a total of 43 luxury hotels and resorts in China and Europe (40 in China and three hotel assets in Brussels and Belgium).

Reports are out that HNA is out of the bidding process for Aman Resorts, since it never received any feedback on its undisclosed bid. Reuters reports that “bids came in the $300-$315 million range”, which means that the market feels these luxury assets are overpriced. This is a huge setback for DLF considering the list of companies interested in Aman Resorts. They include:

  • Malaysian sovereign wealth fund, Khazanah
  • LVMH, and
  • Kingdom Holdings, which owns a 47.5% stake in the Four Seasons chain of luxury hotels

It’s looking bleak for DLF, but maybe some other group will step up to take over Aman.

WSJ: Luxuries Flow Into North Korea

Though Western governments have imposed stringent trade sanctions on North Korea, luxury goods still find a way into the country – mainly by way of China. The Chinese policy of support and assistance may not be welcome by the bulk of the international community, but the influx of cell phones, iPads, and much of the latest technologies may do more harm than good for the country’s current regime.

Government workers making as little as $3 a month now make up to $15 by trading in luxury goods. As such, an entrepreneurial class is rising in the country fueled by the black market for electronics, tobacco, cars, and electrical appliances. Will the influx of western technology adversely affect the Kim dynasty in North Korea? My answer is that it will play a considerable role because many more people will have access to the most powerful weapon that ever existed – information.

Click the image to open the article

Adding Value – Train Rides and iPads

Train rides are very enjoyable for me because I get the chance to remain terrestrial. I’m not driving myself, nor am I on a bus going pretty much the same way I would have driven myself. Since train tracks do not always follow “car routes”, I get to take a more scenic view, stumbling upon sights that don’t come into my view on a regular basis. I also like to take trains at times they are sparsely occupied, so that I have a lot of space to myself. The combination of those components makes the ride an enjoyable one. However the real luxury experience can be summed up in one picture from my last trip on Amtrak: Continue reading →

Luxonomics

Today’s post focuses on luxonomics (luxury economics). Since luxury goods embrace the concept of rarity, it would be an obvious deduction to assume that the more scarce a luxury product or service becomes, the more demand it enjoys. Consequently, prices can appreciate – to levels that can be absorbed by few.

Some of the factors affecting supply include:

  • Input Prices
  • Technology or Government Regulations
  • Number of Firms
  • Substitutes in Production
  • Taxes
  • Producer Expectations

Today I want to show you some “scarce” luxury products, whose supply has largely been affected  by government regulations. As the cited MSN Money slideshow states, all the products listed are affected by legal restrictions limiting their production, distribution, and sale in parts of the world. Much of the reasoning behind these bans is aimed at protecting the environment. Continue reading →

Luxury is About Freedom

So, we can obviously say that relativity plays an important part in the way we think about many things – including luxury. What’s that old adage: One man’s meat is another man’s poison? I read an article from WSJ that brought this idea well into focus for me, and I think it also has some adjacent relevance to the concepts of trends and cycles.

When the great fashion designer, Yves Saint-Laurent started his own couturier in 1958, there wasn’t much in the way of pattern machines or industrial cutters for him to achieve his goal of making womenswear more affordable for the masses. In those times, the best clothing cost too much for common folk because of the time, money, and people that were required to make the ravishing clothing he designed. Today’s more affordable technology could certainly have done much for “la mode”. Continue reading →

On the Shoulders of Giants

It’s been a while since I wrote something on this blog. I must apologize for my absence. I took some time off to do some studying. I watched movies, read books, and thought much about the cycle of business. My current curriculum includes books by Vance Packard, Marvin Traub, and Paco Underhill. I intend to have some of their books read by the end of Jan. 2012. You are probably wondering what those studies have to do with luxury and retail. My answer is ALOT.

From fashion to real estate, cycles are the most repetitive phenomenon. For me, business success has little to do with the present, but more with predicting the future. It’s not about what’s going on now, but what will happen in the next month. Thus, in order to get better at “seeing around corners” in the business environment, it’s important to study the past.

I am going as far back as Da Vinci, to learn from successful people who had something profound to say. Vance Packard, Marvin Traub, and Paco Underhill all bear some insight into the history of consumerism, the evolution of modern day retail, and the science of advertising.

They may not all be talking about social media, but ALL of what they say in books like The Hidden Persuaders, Like No Other Store, and Why We Buy should be part of the curriculum of any professional. I view my entrance into luxury and retail like little kids playing jump rope on a Harlem sidewalk. Imagine the little boy waiting for the perfect time to get inside the pattern that the twirling rope takes. It’s the same with business cycles – you just need to have great timing and jump to the rhythm – real well.

It is great to be back.

Real Estate is an Entrepreneurial Venture

I wrote another blog post about the real estate course at the Mason School of Business. It starts out like this:

As with the last 100 meters the 400-meter dash, the conclusion of the 2011 fall semester marks the beginning of the end of my time at Mason. As I race towards the finish line in May 2012, good thoughts come to mind, especially of the Real Estate CAM taught by Prof. Ben Bolger. The course exposed me to the nuances of an industry where success is not necessarily about reality, but your ability to create a perception, in which people want to participate. In the CAM, we covered cases analyzing the future of real estate at academic institutions using Harvard and W&M as examples; urban development in Brazil; and the redevelopment of the World Trade Center.

Click here to see the rest of it…

Pictures from NYC: Part 2

Yesterday, I forgot to mention that I have successfully completed the 30-day Challenge. I am really proud of the fact that, with exception of a few days where things were beyond my control, I was able to write a blog post every single day, for 30 days. Now that I am done, I’ll slow down just a tad to work on some other projects I have. Now on to more pictures from NYC. Continue reading →

Pictures from NYC: Part 1

30-day Challenge – Day 30

In the past two months, I have been to New York City twice. In fact, the first time I was in NYC was when I interviewed the CEO of Saks for this blog. The second time I went up to the “big apple”, I was with my classmates from the Real Estate CAM (Career Acceleration Module) at the Mason School of Business.

In a previous post, I had promised to talk to you about my experiences in NYC, and now I am “making good” on that promise. I’ll start with my October 2012 trip. Continue reading →

A Room With a View of Your Porsche, Ferrari, Benz, …

30-day Challenge – Day 29

In the second half of this past semester at business school, I took an immersion course in real estate – the best course I have ever taken. The course not only exposed me to the business of real estate, but also introduced me to the nuances of an industry where success is not necessarily about reality, but your ability to create a perception, in which people want to participate.

Real estate can give you a means to exercise your networking, negotiation and selling skills. At the same time, real estate allows you to be very creative in realizing your visions of developing mixed use, multi-family apartments, commercial, or industrial structures. You can literally do anything and the next lines will show that. Continue reading →

Some Stuff I Read Today

30-day Challenge – Day 28

It’s been a wonderful and exhausting day. Our LuxRe Club did some consulting work for a large VA winery today, and I’ve been busy doing some necessary follow up.

Today I’m posting a link to an article, entitled “Top 8 Luxury Travel & Marketing Trends for 2012”. I recommend it not only because I read it, but because I do not believe I could give you the gist of it without omitting some important information.

If you are thinking of starting a new business catering to affluent consumers, I recommend you take the 10 minutes necessary to increase your knowledge. The article may validate or refute some of your perspective, but I can assure you that it covers a lot of ground.

I also recommend you read “To Market or not to Market? The No-Marketing Approach“. I read the following lines and couldn’t stop because it’s one of the best luxe conceptualizations I have come across:

We can live without luxury, and we are consciously aware that when we buy it we are spending our money on something we don’t need. So why, in an age of financial instability and austerity measures, is luxury spending on the rise? The decision to purchase luxury good is closely tied to the importance of freedom – freedom of choice, or the freedom to spend our money as we wish.

– Dr. Isaac Mostovicz, consulting academic

Yao Ming Launches Wine Brands

30-day Challenge – Day 27

I’m not much of a sports fan, but I couldn’t help but notice recent stories about the former Houston Rockets star, Yao Ming, releasing a line of luxury wines in his native China. Continue reading →

Please Define “Rich”

30-day Challenge – Day 26

There are a lot of words and phrases to describe the typical luxury consumer. You could use: wealthy, affluent, moneyed, well off, well-to-do, prosperous, opulent, well-heeled, and a bunch of other colorful words. Though today’s luxe buyers can be segmented into different income and wealth categories, we have usually characterized luxury with the most affluent segments of society.

In my post entitled, The Pulse of Luxury, I discussed the definition of “affluent”: those earning incomes of $100,000 or more. For the longest time (or as long as I’ve been around – not too long), much of the literature has considered $100,000 as the “rich” threshold. Well, if you read that post, you will remember that I raised a question as to whether we need to keep using that description because it does not seem to take inflation into consideration or consumer sentiment. Continue reading →

Second St. American Bistro Homepage - Click the picture to see the website for yourself

Night and Day: Fine Dining in Williamsburg, VA

30-day Challenge – Day 25

There is a well known adage about business success in relation to a customer’s experience:

A happy customer tells one friend, but an unhappy one tells everybody

Today, I write as both a happy and unhappy customer with experiences in the same product category, from two different brands. More importantly this post is so realistic, it serves as a practical case study on how to deliver the best customer experience possible – whether you are in the luxury, mid, or low product/service segments. Today’s post is about restaurants, and based on the title of this blog, I’m talking about fine dining. I’ll talk about two specific fine dining experiences I had on Sunday (12/11/11), while taking my darling wife on a day of dedicated DSE (dining, shopping, and entertainment) in the Williamsburg, VA area. Continue reading →

Swatch: Creating a Shakeout in the Swiss Watch Industry

30-day Challenge – Day 24

A watchmaker at Edox, one of the Swiss companies challenging Swatch's decision to stop selling timepiece components.

For a company with revenues in excess of $6.5B, Swatch is considerably the worlds largest watchmaker. The Swiss company recently received approvals from the regulatory agencies to stop supplying competitors with the movements they use to make their timepieces. This is an ironic twist of events, because I am forced to ask myself, “why didn’t Swatch’s competitors invest in producing their own inner workings?”

Continue reading →

Morningstar: Luxury Firms are Overvalued

30-day Challenge – Day 23

Luxury brand valuations – from Morningstar  

Aside from writing on this blog, I’ve got some other nice skills, particularly in the areas of financial analysis and valuation. I am also fortunate to be part of a select group of MBA students, who manage approximately $500K for the Mason School of Business. In my duties as an equity analyst for The Batten Fund, I cover the consumer staples & discretionary sectors, and as such all the securities associated with luxury firms fall under my purview.

Yesterday, Francesco Lavecchia, an equity data analyst with Morningstar Italy published an opinion piece on the biggest decision luxury brands are facing in their bids to enter the growing Asian market. There are two choices lux companies have in conquering Asia: Continue reading →

Hospitality Jobs Coming in Europe

30-day Challenge – Day 22

As my classmates and I get closer to graduation in May 2012, the anticipation of finding a job only increases. Today’s post will shed some light on where some luxury companies may be hiring – specifically hospitality.

Hilton Worldwide recently made an announcement of its intention to add more than 8500 new jobs in Europe by 2014. Check out the press release here.

The company is opening more than 110 hotels in Europe, via new builds and conversions. Key growth markets for the company include the UK, Russia, Turkey, Germany and Poland.

A range of award-winning training and development initiatives are also available at Hilton Worldwide such as the fast-track graduate programme, Elevator, which identifies and nurtures talented graduates and high potential candidates from within Hilton Worldwide. These rising stars go through a thorough 18 month training programme before assuming their first management position, and then are usually fast tracked to senior leadership positions, with the aim of developing into successful hotel general managers.

Diamonds are Getting Pricey

30-day Challenge – Day 21

If you are an affluent consumer earning more than $100,000 in annual income, then the recent report by Bain & Company on diamond prices should worry you. If you make upwards of $250,000 a year, then you shouldn’t be as perturbed because you will not be greatly affected by the forecasted jump in diamond prices.

The global consulting firm has put out a report estimating that diamond demand will  grow at a 6% CAGR over the next decade. The company believes that as we approach 2020, diamond supply will not be able to keep up with demand due in part to the growing economies of China and India. Those markets alone are estimated to push diamond demand at a CAGR of 6.6% in diamond volume alone. While demand is estimated to grow, diamond supplies are only expected to grow by 3% (CAGR) in volume. Continue reading →

Keeping to Your Mission with Counterintuitive Marketing Approaches

30-day Challenge – Day 20

A while back, our business school, the Mason School of Business, was visited by Tetsuya O’ Hara, the Director of Advanced R&D. It was a momentous visit especially for students  who had never heard of this manufacturer of outdoor gear and apparel.

One thing Tetsuya told us about the company, was in regards to the new marketing campaign it was executing. Basically, Patagonia was asking its customers not to buy its products – for environmental reasons. As a professional in the luxury market, this certainly looks like a great way to market your product. However, there is some sincerity behind the company’s plea.

You should check out the ad here. Also look at the company’s blog post, explaining their rationale for the ad in more detail. Check out the comments as well.

The Pulse of Luxury

30-day Challenge – Day 19

As long as time continues, tastes will change, new desires will emerge, and premium goods and services will be valued above their regular substitutes. However, the definition of luxury will be a moving target depending on cyclical economic patterns and societal mores on the exhibition on wealth.

I have been reading a couple of books to help my thought on luxury and they all say the same things differently. Most of those books were published in times when special circumstances were affecting the luxury market (think 2001 dot-com bust or the 2007 housing bubble).The intention of this post is to bring attention to one of those varied views on luxury, but this one is important because, unlike the books I’ve been reading, this perspective has its relevance in the now, and it is supported by empirical data.

Ipsos Mendelsohn is an international market research company ranked high in the global playing field. For the past 35 years, the company has put out its annual Affluent Survey, a study of affluent households (incomes of $100,000 or more) in the US. The survey has been a key reference for many luxury brands because it is considered a reliable measure of the pulse of the US luxury consumer.

As a side note, I will say that the definition of affluent doesn’t seem to have changed in the last 7 years. Most, if not all of the books I have been reading use the same income definition. I wonder if we should think about changing that number especially because of the effect of inflation, or the fact that some luxury items are no longer accesible by just the wealthy – but I digress.

The results of the latest Affluent Survey warrant a view not just from those currently in the industry, but also from people looking to get hired in the space. These results may not tell you what the next best innovation will be, but if you are truly passionate about serving this specific segment of consumers, it might be useful to draw upon these insights in your interviews and casual conversations with luxe professionals.

I wouldn’t recommend anything I haven’t tried, so be rest assured your reading time will be well spent on these publications. You can get the gist of the survey in two different ways:

Let me know if you see something unique or worthy of comment.

Travel in Luxury, Live with Value

30-day Challenge – Day 18

The spending power of luxury the luxury consumer is strongly tied to developments in the global economy and the performance of major stock indices. As the DJIA climbs and dips, you will see wallets open up and clamp shut. However, in recent times, luxury consumers are showing a very unique spending pattern

American Express (AEXP) recently released its Business Insights report discussing the spending habits of luxury consumers in Q3 2011. The company highlights a new trend of selective luxury spending among both consumers and businesses. Ironically consumers are more apt to splurge on certain products and services compared to others.

Luxury vs. Value

Rather than asking themselves if they want an item bad enough, luxury consumers are now pondering the balance between value and luxury. Recent trends show that consumers are willing to spend more on airline flights, and pare down their purchases of luxury accommodations such as hotels and resorts.

I guess you could say that the uncertain economic headwinds plaguing consumers is forcing them to think more about the utility and marginal benefit of purchases they would have typically made without hesitation. Below are some bullet point notes to take when from the AMEX study:

  • More First Class, Less Business and Coach: Sales of first class tickets in the US went up 9.6% in Q3 2011, while spending on mid-priced lodging went up by 41.6%.
  • Larger, but Less Frequent Retail Shopping: Average transaction amounts in the jewelry sector went up 9.2%, while overall jewelry spending went up only 2.4%. In fashion and apparel, average transactions increased 11.3%, while spending only moved up 0.3%.

Taking the Fun and Games Inside

AMEX reports that consumers are becoming more penny-wise opting for less expensive ways to entertain themselves. Total indoor entertainment purchases for activities such as bowling increased by 8.9%, while outdoor entertainment spending dropped. As far as their gastronomic pursuits are concerned,  consumer spending saw an across-the-board decrease (fine-dining down 5.5%; casual dining down 8.2%; and quick-service  establishments down by 1.3%). The above reinforces AMEX’s assertion that consumers are thinking more about the balance between value and luxury.

Spending Led by Younger Consumers in Metropolitan Cities

As far as spending demographics go, younger purchasers lead all other age segments.

Most notably, young adult affluents in Los Angeles increased lodging spend by 34% and young adult moderates in San Francisco posted a 24% uptick on home furnishings. Retail shoppers in New York City decreased transaction volume while increasing transaction size, mirroring the national trend of spending on big-ticket fashion items.

Without the exact figures, the findings of the AMEX study don’t seem far from what most of us may be experiencing today. The data becomes actionable when MBAs like myself start to think about where jobs in the luxury sector reside in good and bad times.

Legalizing Luxury: India

30-day Challenge – Day 17

I have to apologize for not making a post yesterday. I have been in New York with my MBA class in Real Estate. Yesterday, our class visited the iconic Time Warner center, and was given a no-holds barred tour of the building by the property owners – The Related Group. I’ll write more about the experience in terms of how mixed use development creates adjacent opportunities for luxury brands. For now, lets learn about a substantial development in the Indian luxury market.

4409_6168583443_f46152aab6_b_medium

India's only stand-alone, street level luxury retail store is the Hermès store located in Horniman Circle, Mumbai

For any business, global expansion is no longer an option – it is a mandatory strategic move; and for luxury brands, access to international markets is key, especially when brands have saturated their domestic markets.

As such, the recent news from India regarding rules on foreign direct investments (FDI) in single brand retail is a plus for luxury brands. After years of negotiations, Indian legislators have passed laws allowing 100% of FDI for single brand retailers, and 51% FDI for multi-brand sellers.

In spite of the fact that India comes in third in the number of millionaires it produces, the country only accounts for half of a percent ($846) of the global luxury market which is valued at $169 billion. China, the second largest market takes a healthy 10%, and is predicted to grow to 20% by 2015 (McKinsey Study: Understanding China’s Growing Love for Luxury).

Though the new FDI laws are in a positive step, luxury brands still face some hurdles in India. High import duties, lacking retail infrastructural development and a highly regulated real estate market are other hurdles than will need addressed in order to help brands make the long term investments that the Indian legislature seeks.


Remember the 4Ps of marketing? Well here are the 4Es.

30-day Challenge – Day 16

The fact that I’m currently traveling in NY is no excuse to miss out on making my 15th post in the 30-day challenge. However, as I type this post on my mobile phone, from a cab going down E 57th, I must say that I will be rather brief today.

From time to time I get emails from friends, faculty, and strangers about interesting articles on luxury products and services. A good friend of mine, Eric sent me an article by Duke Greenhill, founder and CEO of Greenhill+Partners, an agency for bespoke luxury brand marketing.

We have all learned about the 4Ps of marketing. In fact, I think some marketing nerds might have it tattooed on their foreheads. In his post on Mashable.com, Duke discusses the 4Es. I read it and believe it is worth the time it takes you to click the links above . At the least, you can add another marketing acronym to your bag of buzz terms.

You can now congratulate me on my first mobile post from a yellow cab (now on W 57th). See you tomorrow.

Leaders in Luxury: A Series of Insights

30-day Challenge – Day 15

I am devoting today’s post to Leaders in Luxury, a series of insights from esteemed professionals leading global luxury brands. My thanks go out to FT.com for making these available. Enjoy…

Sung-Joo Kim, head of MCM Group, on her career and the business of luxury

Leonard Lauder, Chairman Emeritus of Estee Lauder on the next luxury consumers.

Differentiating Upscale Hospitality Series: Four Seasons Hotels and Resorts

30-day Challenge – Day 14

If you have been in touch with much of the happenings in hospitality, then you would have noticed a huge emphasis on rolling out more value-added services to complement the commoditized room revenue segment.  Over the past year, one of the hotel and travel components being actively pursued by hospitality groups, developers, and licensees alike, has been spa services.

I can’t remember where I heard or read it, but someone once said something very profound about luxury brands:

Luxury brands don’t discount, they add value.

Continue reading →

Differentiating Upscale Hospitality Series: Ritz-Carlton

30-day Challenge – Day 13

An image from the Ritz-Carlton "Let Us" video

Today, I am going to highlight an ingenious new brand platform put out by Ritz-Carlton. If you don’t want to read the post and just get to the core of an exciting and counterintuitive differentiation strategy, play the video below.

Continue reading →

Differentiating Upscale Hospitality Series: Orient Express

30-day Challenge – Day 12

Today, I am looking at emerging themes in luxury with a focus on the hospitality industry. With rooms becoming commoditized, hotels have but one option to capture the hearts of its customers – differentiate. How do you differentiate one luxury hotel brand from another? Well, for starters we are way past thread counts, serving sumptuous breakfasts, and delivering the morning newspaper. Upscale hotels are having to differente themselves on the experiences they can provide their guests. In the next posts, I’ll talk about how some hotel groups are doing just that. We’ll kick off the series with Orient Express.  Continue reading →

Sustainability – The New Dimension of Luxury

30-day Challenge – Day 11

Over the course of writing this blog, I have learned a lot by covering the evolving themes in the business landscape occupied by premium brands.

For any of my readers interested in working in the luxe space, these themes are what I believe will dictate and most possibly define their success. I have talked about luxe-related issues ranging from social media to responsible business. Today I want to talk about sustainability. If you have already got a dose of this in my earlier posts, then I am re-emphasizing it in light of recent news articles highlighting how some brands are introducing sustainability in their corporate strategies.

Who would have ever known that acclaimed jeweler, Tiffany, would build a dedicated web page to highlight its efforts in corporate social responsibility (CSR); or that the renowned Peninsula Hotels would make a bold (and maybe costly) decision to stop serving shark fin in its restaurants?

Well, its happening all around us today. Whether or not you believe in the sincerity of these varying corporate initiatives, sustainability is no longer a matter of lip-service. Brands are actually paying attention to many of the concerns of consumers. In his opinion piece on luxurysociety.com, Leslie Pascaud, Director of Added Value Paris, discusses why luxury brands should and will embrace sustainability in the near future. See the article here.

Questionable Co-branding

30-day Challenge – Day 9

One thing that I highly admire about companies in the luxury segment of any product or service category is the uncompromising passion with which they pursue their strategic goals. I have never been a fan of trying to be everything to every consumer because it is not always an efficient way to drive your business. However, I do believe in leveraging your brand in any way possible to reach your current and future customers. That brings us to today’s topic on co-branding. Continue reading →

The New Luxury – Custom/Bespoke

30-day Challenge – Day 8

The term “luxury” evokes a multitude of disparate meanings for different people. For some luxury is synonymous with “expensive”. For others it can be associated with “unique”, “exotic”, “rare”, “sophisticated”, or “exclusive”. However, I want to make you aware of two words that I feel are most synonymous with the definition of luxury today – “custom” and “bespoke”. Continue reading →