By  on November 16, 2006

MILAN — Versace is getting serious about the hotel business.

Gianni Versace SpA and Australia-based real estate developer Sunland Group have inked a deal to roll out 14 Palazzo Versace resorts around the world over the next 15 to 30 years, joining the existing Gold Coast resort in Queensland, Australia, and a Palazzo Versace in Dubai, set to open in 2009.

Versace and Sunland are already business partners for the Australia and Dubai hotels. They first joined forces in 1999, announcing plans to roll out a chain of six Palazzo Versace hotels. The Gold Coast resort, which opened in 2000, was the only one realized.

Construction on the Dubai hotel will start in January, a year later than originally expected. It will feature a neoclassical facade resembling Versace's Via Gesu headquarters in Milan, three restaurants and three swimming pools, one stocked with tropical fish. The Dubai property will cost 1 billion Australian dollars, or $764.7 million, to complete, and each subsequent Palazzo Versace will require a similar investment, said Sahba Abedian, managing director of Sunland Group.

Sunland will foot the entire cost of the hotels. Versace will benefit financially through royalties and sales of its home collection items, needed to furnish the hotel.

Versace chief executive Giancarlo Di Risio said the resorts, like Versace's other branding initiatives for private jets and yachts, are part of a broader strategy to target the highest-spending luxury consumers out there. Versace is not shooting for volume sales of $325 handbags, he said.

"This is an opportunity to demonstrate how Versace is reinforcing its image as an Italian luxury brand," Di Risio told WWD, adding the house and Sunland spent a year hammering out the agreement.

Abedian said the third Palazzo Versace hotel likely will be in Asia but that it's too soon to specify other locations. Resort locations and "gateway cities" are probable candidates, he said.

"It has to be an international city. It has to have a receptivity to high fashion," Abedian said. "Obviously, emerging markets are very important for us."

The Queensland hotel features marble floors, a sandy beach lagoon, restaurants and a marina. Rooms run from 385 Australian dollars, or approximately $295, for a standard room to 3,500 Australian dollars, or $2,676, for an imperial suite overlooking the water.Di Risio took advantage of the hotel news to give an update on Versace's business. He said sales are exceeding forecasts, boosted by high-margin items such as handbags bearing six-figure price tags.

Versace's sales for the nine months ended Sept. 30 were 229 million euros, or $290.8 million, down 5 percent from year-earlier figures because the company has eliminated several lower-end product lines. When presenting first-half figures in September, Di Risio said the company is expecting full-year sales to exceed 270 million euros, or $346 million.

Di Risio said Versace is designing the actual structure of the hotels — down to the shape of the windows — rather than just providing furniture and lending its name to the project. Versace has intensified its focus on its home collection, a trend that will no doubt continue as the company furnishes each hotel. The executive said Versace will need to boost design staff and also hire engineers and architects to carry out the new hotel project.

During Milan's last furniture fair in April, Versace unveiled an Art Deco-influenced collection of black-and-white quilted leather furniture. That shift away from the house's more colorful, Baroque past echoes a broader, ongoing evolution at the fashion company toward cleaner lines and more sophisticated clothes.

Abedian noted Versace's home collection was a project for Gianni Versace, who was killed in 1997.

"It's something that Gianni had created for himself, for his own personal homes and palazzos," he said.

Fashion houses and luxury brands have been tapping into the hotel business for years. Krizia's Mariuccia Mandelli, a pioneer of sorts, opened her K Club in Barbuda in 1990. Over the past couple of years, Bulgari has opened two hotels with Marriott International Inc., in Milan and Bali. Meanwhile, Giorgio Armani is set to open a hotel in a Dubai skyscraper and a hotel above his Milan Via Manzoni flagship in 2008. Labels such as Missoni, Byblos and Miss Sixty are getting into the hospitality business with their own projects.

"Competition is very healthy," Abedian said. "No doubt [Palazzo Versace] will become one of the largest chains of boutique hotels upon completion."

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