Luxury fashion brands such as Louis Vuitton and Bulgari have cultivated brand names that have transcended generations and remained relatively immune to the volatility of trends. The timelessness of such brands comes from the brand equity that has been developed through a carefully crafted purpose-driven approach and fiercely protected by trademark law, both domestically and abroad.
As a result, a growing number of iconic brands are capitalizing on their brand recognition and brand loyalty and thus, have entered the luxury travel and hospitality space, as a brand extension. Companies are beginning to leverage their trademarks in ways that are outside the box, hoping to have their pristine and prestigious brand names lead the way into areas traditionally outside their expertise. Some expand into new product niches to transform a luxury brand into a global lifestyle powerhouse, while others are finding new areas of growth such as the rapidly expanding luxury travel market, which has seen exponential growth in the past several years due to the experiential travel preferences of the millennial demographic.
The luxury jeweler Bulgari was a pioneer in the move into hotels. Although some initially questioned what a watch and necklace maker would know about hotels, Bulgari was one of the most recognized luxury brands in the world, and its powerful brand equity facilitated its foray into the luxury travel and hospitality market. Today, Bulgari has branded hotels in Milan, Bali, and London, and plans are in the works to open new ones in Shanghai, Dubai, and Beijing.
A flurry of companies — including the designer Karl Lagerfeld, the upscale fitness club Equinox, and luxury furniture maker Restoration Hardware — have announced plans to open hotels or residential properties in the next two years. Other luxury brands that have already (successfully) entered the luxury travel market are Giorgio Armani, Ferragamo, and Fendi.
But not all brands have been successful in their attempts to tap into other industries (case in point: Missoni). Trademark lawyers and other branding experts caution brands to move carefully and strategically into new niches because missteps in a new product area could taint their overall image and tarnish their brand name. Reputational risk and brand dilution are major concerns. A well-known brand may lure customers to a hotel, but a bad experience will stop them from returning and could be catastrophic for a brand. People view luxury brands as promises of an unforgettable experience, which often includes quality, architecture, style, ambience, customer service, and a unique experience. Similarly, when licensing and expanding a brand, it’s critical that a company seek partners with knowledge and success in the new industry – giving somebody your logo and then hoping the execution will live up to the brand promise is a recipe for failure; oversight must be hawk-like to maintain brand longevity.
The brands that are successful in their growth efforts first consider how the brand extension impacts the current offer. After carefully weighing the risks and benefits, they consider if the brand can legitimately stretch into a hotel. They need to be able to replicate or exceed the same levels of excellence in service in the hotel as in the retail space, making it a seamless experience for the brand-loyal consumer.
Aside from brand dilution, another challenge is that hospitality (and every industry) has its own set of standards. Doing one thing well and having a depth of expertise is the core of many luxury brands. But can the core competency of a jewelry or leather goods brand translate to hospitality? Particularly for the luxury hospitality industry, a company has to think in terms of curating an experience that relates back to the brand’s values and vision rather than simply building a hotel.
Whether it’s luxury travel, luxury fashion, or any other industry, trademarks matter, and no one knows that better than multi-billion dollar luxury brands that have built empires around their names.
Published in the American Bar Association (ABA) Trademark Newsletter (September 2018)