All Dressed Up and Nowhere to Go

That seems to be the state of the luxury industry, that has been badly hit by the coronavirus pandemic. When certain sectors of economies have been hit particularly hard by Covid-19, it is to be expected that the luxury industry too will be adversely impacted.

That’s because the consumption of luxury goods is closely connected with the worst affected sectors: travel and hospitality, retail and outdoor dining and entertainment. Think Thorstein Veblen’s Theory of the Leisure Class, about which I have written before on my blog. The wealthy classes are typically the people who have greater leisure and spend conspicuously on goods and services that signal their status to the rest of society. This willy-nilly entails stepping out and socializing with family, friends, colleagues and acquaintances. The coronavirus has given us no freedom or chance for that through most of 2020, when we have been shut indoors.

Luxury automobiles have revived relatively quickly during Covid; Image: Matt Lamers on Unsplash

If we look at the various sub-sectors within luxury, we find that not all have been equally affected. Luxury automobiles have recovered pretty well after the initial lockdowns, with automobiles overall doing well thanks to people preferring to own private transport during and after Covid. Jaguar Land Rover has seen sales rise in the September quarter, thanks to the US and UK markets, though October sales were down 4.6%. Other luxury cars too have seen a healthy uptick. Mercedes-Benz has already reported sales equivalent to pre-Covid levels in India during the same quarter. Another significant development in cars during the pandemic is the rapid change to new technologies, with BMW accelerating its electrification drive as well.

Although the luxury fashion industry has also been severely impacted, some of the larger and better-known brands seem to have survived the worst of the pandemic. According to this article in Financial Times, LVMH saw a revival in its sales in the September quarter, thanks to two of their best-known brands, Louis Vuitton and Dior. While the first half of the year was disastrous for the luxury conglomerate, the second half is already seeing a recovery, and it’s the stronger brands that are performing better. This when competing luxury conglomerates such as Kering and Richemont are still suffering from the pandemic.

Luxury fashion for some brands like Louis Vuitton are looking up; Image: Christian Wiedige on Unsplash

As you’d expect, the revival of both luxury automobiles and fashion is led by China. It not only recovered the fastest from the pandemic, economically, it is also the world’s biggest market for luxury brands.

When it comes to wines and spirits consumption, this industry too has been severely hit by the closure of bars and restaurants as well as the slump in air travel. However, in most parts of the world, consumers can still buy online and consume at home in small gatherings. Or gift them to friends and relatives, as it is that time of the year. I had previously shared my thoughts on how the wines and spirits industry can improve customer engagement during Covid as well as shared my thoughts and ideas for a Champagne brand.

Luxury travel and hospitality has been the worst hit, with most luxury hotels reporting a sharp fall in occupancy rates of as much as 90% at the start of lockdowns early this year. According to this McKinsey article, it is reported that they are likely to revive only very slowly by the end of 2021, with a return to pre-Covid levels expected only at the end of 2023. Within this, airlines are probably not doing as badly as luxury hotels; they would still be flying domestic routes and carrying economy/coach passengers, though they would miss the additional revenue and profits that business class and first class bring. It is when those segments of air travel pick up, that luxury hotels are likely to see guests return.

According to media reports, luxury hotels in the US are not seeing the meetings and events part of their business grow, either. However, that has not prevented some of them from trying to lure luxury travellers. Luxury properties located out in the country and exotic island resorts in the Caribbean are still seeing guests. Many luxury hotels in the US (and I suppose those elsewhere, as well) have introduced Covid-related changes to their operations, such as contactless check-ins and check-outs, as well as in-room meals, since guests might not wish to visit restaurants.

Wines and spirits depend on at-home consumption and gifting; Image: Matthieu Joannon on Unsplash

Besides, it is reported that some luxury travellers even in the big US cities are opting for long stays at luxury hotels rather than stay in their own homes. Yet another interesting aspect is that some luxury hotels are seeing guests drive to their properties, while travellers flying in are still down. 

The US might be the worst market to look at right now for luxury travel and hospitality, given that it is reeling under the coronavirus. Deaths have crossed 300,000 and hospitalisations are rising every single day. However, with vaccines now rolling out in the US and UK, there is hope that life might return to normal at least in the second half of 2021.

Even when luxury travellers return, I see scope for a new focus on safety, exclusivity and hygiene that luxury travel can provide. And that would mean a new kind of business class in air travel, as well as an elevated level of luxury in hotels. I have put down my thoughts on a luxury hotel that belongs to the Taj brand and IHCL in India, but is located in New York City. The Pierre, New York, is a 90-year-old luxury hotel located in the heart of NYC that I thought needs to position itself more distinctively in the minds of luxury travellers and also needs to integrate itself better with the Taj brand.

Luxury hotels like The Pierre are counting on a revival in air travel; Image: The Pierre’s website

I haven’t come across any news or editorial reportage on The Pierre or indeed on brands that I consider competitors to The Pierre, namely The Plaza and Waldorf Astoria, to tell me how these hotels are indeed coping with the pandemic. However, I did visit their websites, and I must say I didn’t find any distinguishing features that set the three brands apart. If anything, I saw content on the website of The Plaza that made me wonder what on earth they were up to!

You can see my thoughts on the brand strategy I propose for The Pierre, New York as well as the communication package I have created for them by clicking on the link below.

I had already worked on a brand strategy and communication package for the Taj Hotels brand, which I lost to termites some years ago. Suffice it to say that in it, I had recommended that IHCL not create too many hotel brands such as Vivanta, Gateway, etc but focus on consolidating and building the Taj brand. The only other hotel brand from IHCL, with a very different product offering is and should be Ginger Hotels. However, after visiting the website of Ginger Hotels, I recommend that they rethink several aspects of the Ginger Hotel brand as well.

Since Ginger Hotels is not a luxury brand, it does not fall within the purview of this article and discussion. On Taj Hotels, my recommendation was and is that they position it as the finest meeting place for world travellers. The Taj Hotel brand has great salience and cachet within India, but not as much overseas, perhaps. It really does need to communicate its brand positioning better to overseas audiences as well as to luxury travellers in India.

As we have already seen in the case of LVMH, it is the stronger brands that recover easily from setbacks, even when the fate of an entire industry hangs in the balance. Besides, with luxury travellers even more discerning and demanding now in the wake of the pandemic, we can expect them to respond well to brands that understand this dimension of luxury: reserved, understated and efficient.

It all depends on how we build brands during and after Covid. What seem like restrictions can be turned into advantages for brands. Distance and space are valued in the luxury industry, as is hygiene, because they all enhance the consumer’s experience of exclusivity.

It is amazing that even as the wealthy have continued to get wealthier during the pandemic, thanks in no small measure to the stock market rallies we have seen around the world and some industries such as tech and healthcare benefitting disproportionately from the Covid restrictions, their lifestyles have been cramped in many ways. Perhaps, it’s time they stepped out and splurged.

The featured image at the start of this post is by Laura Chouette on Unsplash

2 thoughts on “All Dressed Up and Nowhere to Go”

  1. We have seen the luxury industry rebound from the pandemic lows, much earlier than others thanks largely to the quicker recovery of China and also to a few brands from the LVMH stable, as I had mentioned in a previous blog post of mine. The pandemic also saw many newly minted millionaires and billionaires, as well as the wealth of their tribe grow, thanks to certain sectors doing well and the soaring stock market. Bentley is reported to have seen record sales last year and Mercedes-Benz has seen a significant growth in revenue, as we emerge from the pandemic. […]


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