Voters in Beverly Hills narrowly rejected a proposal by Bernard Arnault’s LVMH to build an ultra-luxury hotel on Rodeo Drive.
The surprise result late Friday was a setback for Arnault, the world’s richest man, who chose Beverly Hills as the first U.S. location for his luxury hotel group. LVMH, which recently became the first European company with a market capitalization of $500 billion, spent nearly $2.9 million seeking approval in the vote.
The proposal for the Cheval Blanc hotel was approved by city officials last year. However, it was opposed by a powerful union representing 32,000 hotel and other hospitality workers in Southern California. The group gathered enough signatures to trigger a referendum on whether the project should go ahead.
The union argues that the development agreement makes no provision for affordable housing in Beverly Hills, where few hotel or domestic workers can afford it. Beverly Hills is a self-contained city within Los Angeles County of approximately 32,000 people with a median household income of over $100,000.
Opposition also came from a group of residents who criticized the size of the planned hotel, saying it would tower over neighboring buildings and exacerbate traffic congestion.
“We are against the single Cheval Blanc Hotel project because it is too big and too tall for our village,” said a flyer handed out by Residents Against Overdevelopment, whose mission is to “maintain the quality of life in Beverly Hills.”
LVMH believes the hotel development will generate about $780 million in tax revenue for Beverly Hills over the next 30 years. As part of the deal, the company also agreed to contribute $26 million to the city’s budget and allocate an additional $2 million for arts and culture.
“I’m heartbroken,” said Andy Licht, who oversees Cheval Blanc’s approval as chairman of the Beverly Hills Planning Commission. “It’s a terrible decision.”
There were still a few ballots to be counted, but the LVMH-backed group seeking approval late on Friday conceded that passage was unlikely.
“If the final vote count confirms that voters have rejected our project, we will respect the result and will not resume the hotel project in any way,” said a statement released by the group, Yes on B&C Campaign, thus named about the ballot proposal letters.
Designed by New York architect Peter Marino, who also oversaw LVMH’s lavish refurbishment of jeweler Tiffany & Co’s New York flagship, the Beverly Hills Cheval Blanc represents the group’s latest expansion into luxury hospitality. Plans for the 115-room hotel include a private club that seats 500, as well as high-end restaurants and retail.
LVMH is expected to retain ownership of the property, with the option to develop it for other uses, including retail or office space.
Still, it deprives the company of an opportunity to capitalize on the growing demand for high-end hotels and experiences at the Beverly Hills project. LVMH and its rivals have poured money into the hotel industry in recent years, and analysts expect the sector to be one of the fastest-growing luxury segments in the coming years.
According to consultancy Bain & Company, the luxury hotel market has more than doubled in value year-on-year to 191 billion euros by 2022, although it remains below its pre-pandemic peak.
In 2006, Arnault opened the first Cheval Blanc hotel in the ski resort of Courchevel. This high-end hotel chain has grown to include locations from Paris to the Maldives. In 2018, the group announced a $3.2 billion acquisition of hotel group Belmond, which has a luxury travel portfolio ranging from high-end hotels to Orient Express train services.
The deal strengthens LVMH’s hotel portfolio, which already includes Cheval Blanc and Bulgari Hotels & Resorts. The unit, which includes LVMH’s hotel business, accounted for only a fraction of the group’s record revenue of 79 billion euros last year, but has rebounded strongly since the pandemic after being hit during the lockdown.