Gucci Has Designs on the Luxury Hotel Market

The Gucci name has gone from designer leather goods to designer clothes -- now, it's getting into the hospitality business.

Elisabetta Gucci Hotels, a company led by the daughter of designer Paolo Gucci, plans to open its first hotel in Dubai by the end of the year. A night at the 87-room boutique hotel will go for about $408.50 to $6,808, according to a Reuters report.

While the hotel company is not affiliated with the fashion brand, Elisabetta Gucci -- the fourth generation of the fashion family -- is a furniture and interior designer, and the artistic director of Formitalia Luxury Group, a furniture manufacturer.

Speaking at the recent Reuters Global Luxury Summit, Lorens Ziller, a partner at Elisabetta Gucci Hotels & Resorts, said the company is looking at growing markets such as Russia and Brazil. The next hotel development after Dubai is expected to be a China hotel in 2011. Elisabetta Gucci Hotels aims to open 40 hotels over the next 15 years, Ziller told the group.

Gucci is just the latest fashion name to attach itself to a hotel brand. In the 1990's, fashion houses such as Bulgari, Ferragamo and Versace began to expand into hotel design. Armani recently joined the crowd, opening a Dubai hotel in April; Ralph Lauren frequently has been rumored to be interested in opening hotels, too.

"The luxury market is growing more experiential, and hotels are the ultimate experience," said Pam Danziger, president of Unity Marketing, a market research firm specializing in luxury.

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Designer Hotel Photos

Browse through the gallery for a glance at several high-end hotels bearing famous luxury brand names.

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Brand Extension or Brand Extinction?

But Danziger warned that expanding into hotels can threaten the integrity of a fashion brand. What makes a hotel successful is good service, not design, said Danziger. In fact, many luxury brands are known as having haughty service at their stores, not the kind you expect in a hotel, she said.

Those companies also run the risk of spreading themselves too thin and losing their cachet, said Danziger, author of Putting the Luxe Back in Luxury, due out later this year.

"It's brand extinction, not brand extension," Danziger said.

Dubai: Where Excess Never Goes Out of Style

It's no coincidence that many of the designer-hotel companies are starting out their international expansions in Dubai, one of the seven United Arab Emirates. Despite the global recession, the wealthy emirate is still going full-throttle with projects including luxury housing developments on man-made islands off the coast and the world's tallest building, the Burj Khalifa tower -- which coincidentally, houses the new Armani hotel.

"That's one of the strategies that brands are going to have to use: Swim where the fishes are," said Danziger. The luxury market is coming back, but it's not as strong as it was before the global recession, she said. In fact, many speakers at the Reuters conference said the luxury marketers will stay away from Europe while its debt crisis plays itself out, and focus on Chinese and U.S. markets, where luxury is making a modest comeback.

Most speakers at the Reuters summit said they don't expect Dubai to budge from its spot as the top luxury market in the Middle East, and one of the leading ones in the world. Despite a 45% drop in sales in 2009, retail in the emirate recovered in early 2010 and sales are expected to rise this year.