Call Olivier Lefebvre, head of hotel activities for LVMH Hotel Management in Paris, keeper of the brand. He is emphatic when he says the ultra-luxury hotel management company will quickly walk away from any deal when the partner, the architect or the space is not right. Protecting the greater LVMH Moët Hennessy Louis Vuitton brand and the empire of French businessmen Bernard Arnault is more important than any hotel deal.
At the same time, Lefebvre believes the company’s Maisons Cheval Blanc hotel brand will grow to include perhaps six or seven properties over the next five years from its current portfolio of two operating hotels — Cheval Blancs in Courchevel and, more recently, the Maldives. Other Cheval Blancs are currently under development in Paris — also owned — and via strict management with no guarantees in Oman. Paris will start construction this year.
While the management company wants to grow without placing equity, it will remain opportunistic, which was the case in August when the parent company acquired the Hotel Saint-Barth Isle de France from under the noses of Germany’s Oetker Group, which became a minority shareholder for a year only and had signed a 15-year management contract with then-owners AJ Capital Partners and Charles and Mandie Vere Nicoll. As of January, there is no move to rebrand Isle de France, according to Lefebvre.
HOTELS recently talked to Lefebvre, an engineer by training and a former development executive with Starwood Capital’s Société du Louvre, to discuss LVMH Hotel Management’s plans and philosophy.
HOTELS: What are your criteria for deals?
Olivier Lefebvre: We are in the range of 40 to 60 keys for resort destinations; 60 to 80 keys for urban hotels with more suites than rooms in both cases. We are very careful about choosing partners as we need to share the same vision, and we need long-term partners as it is difficult to work with investors who want to sell after two years.
We prefer to take more time to build the right project and deliver the right RevPAR afterward. We are not in a hurry. Any of our investors must make a certain amount of money or we won’t be able to develop anymore. That is a key element. We never do a project unless we are convinced the investors will make money. If they don’t make money, they will not maintain the property, which would be very damaging to our brand.
We are looking first for destinations that can attract the high-end luxury market we target, and in any market we want to be number one. In St. Barth, for example, that is why we looked at Isle de France — the only hotel we would consider there.
There are no more than 50 destinations that can attract the level of guests we want and allow us to achieve the RevPAR at a level high enough to be profitable.
HOTELS: You had projects in Egypt under development with Orascom. What is the status?
Lefebvre: The projects were put on hold. We stay very close to Samih Sawiris of Orascom but cannot ensure today the style and service we want to afford our guests. Opening there would be difficult right now.
HOTELS: Where are your other targets?
Lefebvre: We have no acquisition targets at this stage. We are in discussion in a number of destinations for management agreements. We want to be in Shanghai — we have a site identified — and are in discussion in Bodrum (Turkey), and we are looking at Bali. We also have a project that will open on the coast of Mexico. In addition, we are actively looking at markets such as London and New York City. In London, we are looking at opportunities in much detail.
HOTELS: Why did LVMH get into the hotel business?
Lefebvre: The origin of LVMH is real estate. Mr. Arnault (LVMH Chairman and CEO Bernard Arnault) used to be a real estate developer. That’s important. If you look at the hospitality market in the luxury segment it is a significant market, and it is a market with which different brands of our group are very close, such as beverages and the spa business. It’s a market where Mr. Arnault developed his first hotel in Courchevel, and it proved to be so successful that he decided to build a brand from that. The brand has a number of synergies with the larger group.
HOTELS: What is the hotel company’s hold philosophy?
Lefebvre: Look at the history of LVMH. It has never sold any of its brands. It is not the culture of the group, and I don’t expect it to change.
HOTELS: How does Cheval Blanc differentiate itself from other ultra-luxury hotel brands?
Lefebvre: There are four core values for Cheval Blanc. The first is craftsmanship, and it is shared with other brands in the group. Artisanal is the way we work on products.
Another key element is the exclusivity, which means a very limited number of guests on the property. Courchevel has 36 rooms, the Maldives has 45 keys and there are 40 rooms in St Barth.
In terms of product, it has a very residential focus. In Paris at the former La Samaritaine department store we are working with Peter Marino, who has a strong focus on residential, which is how he approached Courchevel.
We also have a very strong focus on F&B. We have two Michelin stars in Courchevel,and the Maldives has a very extensive F&B offering. We spend a lot on the training of our chefs and team recruitment.
The other value is creativity. When you look at Courchevel and the Maldivies, we gave a lot of freedom to the designers and architects to interpret the destination, which is a signature of LVMH for all of its brands.
HOTELS: How do you control the project when only managing?
Lefebvre: You can secure from a legal standpoint the fact that you have full control of the property, which is the case for all of our contracts. We have a number of our owners who have been our guests at Courchevel and have never had any major issues. If we have a major issue we would leave the project as we don’t want to take any risks with the brand. We are not pushed by the group to go quickly, and we don’t have the right to fail. We have identified good properties in the past, but not with the right architect or partner, so we preferred to drop the projects.
HOTELS: What challenges do you face on the development side when it comes to sourcing the right deals?
Lefebvre: It is not easy to find deals in the right location — something which is not too small or too big. In destinations like New York City where we want a really good location, it is difficult to take 10 floors in a 30-story tower. In some markets like New York City, where most projects are owned by private equity, it is difficult sometimes to have the same time horizons. In a number of locations we have competitors who will do residential, too, and it is difficult to compete against residential.