From Products to Experience: LVMH buy Belmond
When commenting on the acquisition CEO of LVMH, Bernard Arnault, explained Belmond’s compelling hospitality experiences in the most desirable destinations offered clear opportunity for future group growth.
The deal represents a breathtaking equity value of $2.6 billion and an enterprise value of $3.2 billion. One should bear in mind it is only relatively recently that Belmond has managed to pick itself up after years of ‘disappointing investors’ according to the Evening Standard. The value of the acquisition is, therefore, pretty incredible.
So, how is it that Belmond has been able to boost its share premium by 40%?
Those ‘one-of-a-kind’ moments
Firstly, it is important to understand the move is symptomatic of much wider growth across the luxury sector -- not because of spending on luxury goods (in many ways this has retracted) but because of increased spending on luxury experiences.
Belmond has successfully honed a portfolio of extraordinarily unique experiences aimed at a ‘globally diverse but highly refined customer’. See the hotelier’s immersive safari in Botswana, or the legendary Venice Simplon-Orient-Express Train journey, or even the caviar masterclass in its St. Petersburg property… the list goes on.
The phenomena of ‘experiential hospitality’ explains why a certain calibre of traveller are willing to fork out five-star prices for igloo accommodation with no heating, no bathroom and no windows.
Rather, its an audience willing to pay for the unrivalled experience of staying in the middle of the Swiss Alps in beds carved from ice, topped with fur throws and expedition strength sleeping bags. Though most visitors book for a single night, the experience creates a legacy. A story that can be shared. In its basest form a productised badge of honour, shared through a story, photo or a place on an Instagram feed. A mere tick in the box.
But at its most visceral, these experiences have the power to be transformative, and force a genuine, physical interaction too much the missing in the digital worlds we inhabit.
Experience isn’t everything
Yet, these experiences must be communicated in an authentic and accessible way to truly maximise shareholder value. The power of the brand and its connotations are increasingly a reflection of our own character, personalities and values.
Effective, confident branding and digital competence creates a robust business that can scale effectively (through acquisition in this case), thereby helping increase shareholder value.
According to analysis conducted by the Marketing Accountability Standards Board (MASB), brand equity contributes 19% of enterprise value in consumer businesses, and 10% in B2B businesses.
Digital plays a key role in how guests engage with hospitality brands. Genuine engagement is always driven by delivering real value back to the customer - and by doing so, brands earn the right to stay with their guests long after the experience. There is ample opportunity to do this across the traveller experience -- in its simplest form, using digital touchpoints to handhold and demystify foreign terrain, activities and adventures.
And by creating brand driven lifestyle-oriented platforms, businesses can scale quickly, and effectively diversify revenue streams.