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Belmond hotel group in surprise sale to LVMH

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LVMH, the luxury goods group behind Louis Vuitton and many other high-end brands, has emerged as the surprise winner in the race to acquire the Belmond hotel group.  It will pay $3.2bn including existing debt, which is loose change for a company with a market capitalisation of €130bn.

LVMH already has a small hotels presence with its Cheval Blanc brand.  These are genuine ‘uber luxe’ properties, however.  Belmond is generally made up of historic properties which are past their prime and in need of investment.  Other LVMH hotel interests include Fendi Private Suites in Rome and, via its Bulgari subsidiary, a 50% shareholding in Bulgari Hotels & Resorts.

Mount Nelson Cape Town

It is possible – and this is just my guess – that LVMH will cherry-pick a few hotels, such as the Mount Nelson in Cape Town (below) and the Cipriani in Venice, and resell the rest. 

I could be wrong though, as LVMH definitely has the money if it does decide to upgrade all 30+ Belmond properties.  I am pretty sure that the status quo won’t be maintained as LVMH is not interested in attaching its reputation to ‘past their prime’ hotels.

The reason that the sale price is so high is that Belmond owns the freehold or long leasehold to many of its properties.  This is probably why ‘asset-lite’ groups like IHG were pushed out, because they were less willing to dilute their return on equity by doing anything as radical as physically owning a hotel.

When IHG bought the UK’s Principal Hotels recently, for example, it teamed up with a property company so that it did not need to take on the assets.  That is fairly easy to do if you’re buying a group of UK city centre hotels but a lot trickier when the assets are spread across the globe as they are here, and also include rail and cruise operations.

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