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25.09.2022 06:00

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Reading. Read the article about strategic plans of a famous Italian designer Giorgio Armani and mark the statements below as True (T), False (F) or Not Mentioned (NM) (1-10):

Breaking into new markets.

Should luxury goods firms go into hotel business?

Giorgio Armani is already one of the most diversified brands in fashion. As well as haute couture and everyday clothes, Mr. Armani and his team create scent, cosmetics, spectacles, watches and accessories. Customers can purchase Armani furniture, flowers, chocolate, sweets, jam and even marmalade. There are Armani cafes and restaurants in Paris, New York, London and other cities. An Armani night club recently opened in Milan. Now Giorgio is branching out still further. On February 22nd his firm announced a USD 1bln hotel venture with Dubai's Emaar Properties, the Middle East's largest property developers. Mr. Armani will be in charge of the design for ten new hotels and four luxury resorts to be built in the next six to eight years.

Armani's is the boldest move so far by a luxury goods company into the hotel business. But it is by no means the first. In September 2000, a hotel designed by Donatella Versace opened on Australia's Gold Coast. In February 2001, Bulgari, an Itallian jeweller, confirmed a joint venture with Ritz-Carlton to build six or seven hotels and one or two resorts. Salvatore Ferragamo, an Italian shoemaker, has designed four hotels in Florence.

But in the final half of last year, both the fashion and travel industries were doing badly as travel and luxury follow the same economic cycle. So, does it make sense for designers of luxury goods to go into travel business? Armani and Bulgari would say “yes”. Mr. Armani considers hotels a logical extension of his aim of promoting his brand in all walks of life. (So can Armani toilet paper be far behind?) Rita Clifton, Chairman of The consultancy Interbrand, says that this strategy can work. A strong product, strong images a a strong experience, such as staying at a fashion designer's hotel, can combine to make a super strong brand, claims Ms Clifton. To fit the firm's luxurious image, Bulgari says that its hotels must be as upmarket as possible. Because small is considered more exclusive, Armani and Bulgari plan to launch mostly smallish five-star hotels. Armani's Dubai hotel, due to open in 2008, will be an exception, however, with 250 rooms. Bulgari's Milan hotel will have no more than 60 rooms.

Losing control of their brand is the biggest risk for luxury firms expanding abroad or venturing into a new line of business. Over the years, Pierre Cardin, Yves Saint-Laurent and Christian Dior have each lost their good names by giving out licences all over the world to firms that didn't deliver the appropriate quality. Calvin Klein's current

problems are related to the company's loss of control of the distribution of its products in many countries.

But designers' hotels can generate positive publicity. Even if Bulgari's hotels turn out not to make any money, the venture could be seen as an expensive yet effective advertising campaign.

Mr. Armani's hotel plans are more ambitious and the danger of brand dilution is much greater. Armani says that the management company for its hotel venture will have its head office in Milan rather than Dubai and that Mr. Armani will be fully in charge of design. So far Mr. Armani has managed to control his brand tightly despite being involved in many different businesses. Hotels, however, are a bigger challenge than flowers and marmalade.

1. Giorgio Armani is involved in various businesses all over the world.

2. Giorgio Armani is the first fashion designer to get involved into the hotel business.

3. The travel industry brings in higher revenues than the fashion industry.

4. Fashion designers move into the hotel industry to improve their brand image.

5. Giorgio Armani designed special Armani toilet paper to promote his brand.

6. Armani's hotels will be small because building larger hotels is too costly.

7. If you expand your business, you'll sooner or later lose control of it.

8. Christian Dior lost his good name due to a hotel failure.

9. Bulgari does not hope that their hotel venture will ever become profitable.

10. Mr. Armani will personally travel to the construction sites of his future hotels.