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Elite Traveler – ET Insider – April 22, 2008

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ET Insider – April 22, 2008

Elite Traveler Insider –

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April 22, 2008

Elite Traveler Insider

By Douglas D. Gollan, President and Editor-in-Chief, Elite Traveler Magazine  

Welcome to the latest issue of Elite Traveler Insider, the bi-weekly newsletter designed to update our top partners on trends in the private jet lifestyle. This information is provided to offer a better understanding of how to target these globetrotting elite travelers, their impact on your business and other trends that affect you. Remember, private jet travelers are paying up to $10,000 per hour to fly by private jet, so these super rich consumers could be and should be your best customer. We talk about them and how you can get more of them and more from them.

CONTENTS:

1. What Do You Do When The Forecast is For a Category 5 Hurricane?

2. Cessna Parent Textron Credits Private Jets For Sales Increase

3. Another Big New York Real Estate Sale: The $45 Million Apartment

4. India to Develop 300 Private Jet Airports

5. A Trader Trades Down; Pain Comes Quickly After Years of Splurges

6. Not All Bankers Are Going Broke: Billion Dollar Bankers

Elite Traveler’s BPA audited circulation aboard private jets and mega-yachts in over 100 countries means your ad is guaranteed to reach the highest spending luxury audience in the world no matter where they are from and where they happen to be today – each issue is read by 318,000 readers with a Household Income of $1 million +, the highest of any magazine or newspaper in the world! Sources: 2007 Prince ET/MMR for others

1. What Do You Do When The Forecast is For a Category 5 Hurricane?

What do you do when the forecast is for a Category 5 Hurricane? My answer is simple: Prepare and create a Survival Plan for you and your business.

Now this advice may not be applicable to some of the global titans of luxury. You may remember that following Bernard Arnault’s optimistic speech at The International Herald Tribune Supreme Luxury conference in Moscow last December I wrote that perhaps it doesn’t rain on the LVMH side of the street. And judging by the financial results I see from LVMH, Group Richemont and PPR, I think I could make a good case that their heavy investment in creating a global footprint and near 100 percent brand awareness for their “flagship” brands has put them out of harm’s way.

For many others I am not so sure. The stream of market soundbites I keep hearing for the US – and now the UK market – should give pause to small to mid-size luxury businesses.

A quick sampling of the barometric pressure building (or dropping in the case of hurricanes):

  • Americans have already lost $2 trillion in home value, with predictions that another $2 trillion will be lost, according to the CEO of JC Penney.
  • American homeowners are heavily leveraged against the falling value of their homes: 34 million American households (more than half who own homes) have borrowed against the value of their homes in the past four years, according to Peter Yesawich, chairman of Y Partnership.
  • Henry Paulson, US Treasury secretary, warned of “more bumps in the road,” saying, “It took time to build up recent excesses and it will take time to work through the consequences.
  • Citigroup sounded a bearish note on the US consumer business, according to a Financial Times report, saying that “further losses were likely as consumers fell behind on credit card and loan repayments.” CFO Gary Crittenden told Wall Street analysts that the slowdown and housing crisis could “result in significantly higher credit (card) losses in the remainder of the year”.
  • Merrill Lynch’s new CEO John Thain said last week, “Consumers were just beginning to feel the impact of higher food and energy prices,” and that “we haven’t yet seen the full impact on the real economy.” Mr. Thain believes the worst could be yet to come.
  • General Electric’s “miss” on earnings forecasts spooked investors as the conglomerate’s problems spilled past its financial service divisions into healthcare and industrial businesses.
  • Jobs at auto dealers hit an eight-year low, according to Automotive News, and “the only argument you’ll get from (dealers) is whether this is the worst business climate dealers have faced in 20 years, 35 years, or ever.”
  • 74% of those surveyed by PARADE Magazine said they have had to make sacrifices over the past year to make ends meet, including:

– 68% curtailed vacation plans – 67% cut back on dining out – 52% put off home improvements – 34% stopped buying designer clothes – 32% stopped buying jewelry

  • 80% of the PARADE group said they have “nothing or little left” after they pay their basic expenses, and 41% said if they get a tax refund they will pay off debt. 70% of the economists from The National Association of Business
  • Economists, economists from major companies, said they are “more pessimistic” now than January and for the first time in over 20 years more said their company margin are declining than those who said they were increasing. 34% of the PARADE survey said they are concerned “they will lose their job”.
  • Unity Marketing’s Pam Danzinger reports that past and planned spending on luxury by her Mass Affluent survey sample (mainly under $200,000 Household Income) are at record lows.
  • Ron Kurtz and his AmericanAffluentResearchCenter just released its Spring 2008 report which surveys the wealthiest 10% of U.S. households (about 11 million). The findings were not pretty, showing historic lows in plans to make major purchases, with categories such as jewelry and international travel taking big hits. Fifty-five (55%) percent of respondents said “they had reduced or deferred expenditures in the past 12 months and would continue to do so.” The only bright spot was seen in Households with at least $6 million Net Worth, and there was still considerable weakness among this group.
  • The Prince & Associates/Elite Traveler survey released about eight weeks ago showed that the safe harbour will be those consumers with a Net Worth of at least $30 million. While lower segments will still buy, they are both “trading down” and taking longer to make major purchases.

I have several Wall Street Journal alerts that send me emails about the latest financial news, and not only are many of these prefaced with “lowest in 17 years” or “worst in 30 years,” but I actually saw a housing-related statistic that made a comparison to the 1930s.

Last week I spoke at The Luxury Marketing Council in Dallas where Chapter CEO Richard Baker had assembled an engaged group from locally based corporate members such as Bombardier Flexjet, Skyjet and Neiman Marcus to top local car dealers and clothiers.

After giving my Category 5 Hurricane warning, I was surprised to hear from one attendee who was at an American Express Publishing conference the week prior in California that despite the many dire forecasts, Amex was trying to paint a bright picture, even though its own credit card division has made a $450 million provision for bad debt with cardholders.

As I stated, if the company name on my business card is Cartier, Gucci or Louis Vuitton, I would be apt to sing a happy song. However, when you consider that 90% of today’s Super Rich are self made and some 80% of these folks have made their money in the past decade or less, the basic fact is many of the newly minted Super Rich are completely unfamiliar with the names on the boutiques that line Madison Avenue or Bond Street (in fact, a Harrison survey from the Amex conference reported that kids of the Super Rich had a greater knowledge of luxury brands than their parents).

As spending by those aspirational consumers that drove the sales of entry price and mid price point products has pretty much dried up, the key, I believe, is to create an intense program to cultivate more business from the Super Rich – both current customers and new ones.

For smaller and medium size companies, I would strongly suggest an Action Plan to ensure that the folks who still have the money (the Super Rich) have your brand top of mind as they go shopping. Remember, 80% of the Super Rich ($30 million +) in the Prince survey said they will actually increase spending in 2008.

Hopefully it ends up an Action Plan, not a Survival Plan, but my viewpoint is the indicators are that the storm is pretty big and dangerous. With luck it won’t be a direct hit, but it would also be extremely foolish to ignore the mounting warning signals.

While the world’s economy today is unsteady, one thing is for sure: The wealthy consumers flying aboard private jets are your best bet, and only Elite Traveler delivers these elite travelers to our advertisers through our BPA audited circulation aboard private jets in over 100 countries, including Russia, the UAE, Kuwait, Qatar, Bahrain, Oman, India, Singapore, Korea and China. All with one ad buy!

2. Cessna Parent Textron Credits Private Jets For Sales Increase

With a $22 billion order backlog in its aircraft and defense segments and earnings growth of 17.9% in the last quarter, Textron says it’s set to soar in the next few years.

Textron, according to Forbes, attributed its strong first-quarter growth to overseas demand, particularly for its private jets. The company’s Cessna unit is the largest maker of corporate aircraft. In the first quarter, the company delivered 95 business jets, up from 67 a year ago. At quarter’s end, Cessna had a backlog of $14.5 billion in orders.

“Global demand continues to be brisk across our aircraft business, which led to another significant expansion in our backlog during the quarter,” said Chairman Lewis Campbell in Forbes.

Over 90 percent of today’s Super Rich are Self Made and over 80 percent of the Super Rich have made their fortune in the past 10 years. Now is the best time to make sure they know your brand. 86% believe Elite Traveler is a good showcase for luxury products.

3. Another Big New York Real Estate Sale: The $45 Million Apartment

According to a story in The New York Times, the super rich are still spending superbly and buyers have “already closed on 71 Manhattan apartments that each cost more than $10 million, compared with 17 apartments in that price range during all of 2007.”

The New York Observer followed that up with news of even more high-end action: According to city records, an 11th-floor apartment at The Plaza sold this month for $45,100,956, which makes it the second most expensive apartment ever to close in New York.

According to The Observer, the buyers here are hidden behind an anonymous limited liability corporation, but a source said it’s a New York finance man and his young family. He’ll be in good company at the May 10 party for Plaza buyers, featuring caviar and Cognac, 12 women musicians “made up to look like statues and clothed in dresses” of roses and gardenias, and of course, a food spread “designed to visually replicate 17th-century Dutch paintings.”

While the world’s economy today is unsteady, one thing is for sure: The wealthy consumers flying aboard private jets are your best bet, and only Elite Traveler delivers these elite travelers to our advertisers through our BPA audited circulation aboard private jets in over 100 countries, including Russia, the UAE, the U.S., Mexico, Brazil, Kuwait, Qatar, Bahrain, Oman, India, Singapore, Korea and China. All with one ad buy!

4. India to Develop 300 Private Jet Airports

India, with its booming economy and infrastructure that is finally getting the attention it needs, plans to develop around 300 airstrips currently lying idle all over the country in order to facilitate the burgeoning private jet industry.

According to local reports, the current plan is to focus on airstrips near major cities as this would relieve the major airports that have their hands full with the scheduled aviation sector.

Civil aviation minister Praful Patel has earlier said that the country will need around 300 to 400 private jets in the next three to five years.

Until a couple of years ago, India had a little more than a score of private aircraft but now there are an estimated 130 private jets based in India with thousands more visiting from the Middle East, North America, Russia and Europe.

Industry sources said that the demand for private jets could even grow at around 50% on a year-to-year basis given the right incentives. The ministry is likely to offer these airstrips to private companies for modernization.

Of course Elite Traveler is already aboard private jets in India via our BPA audited circulation, and these numbers look sure to grow!

Over 90 percent of today’s Super Rich are Self Made and Over 80 percent of the Super Rich have made their fortune in the past 10 years. Now is the best time to make sure they know your brand. 86% believe Elite Traveler is a good showcase for luxury products.

5. A Trader Trades Down; Pain Comes Quickly After Years of Splurges

The Wall Street Journal recently had a good profile on how some of the folks who helped push the luxury economy up the past few years are now struggling. The newspaper profiled a Bank of America trader Derek Thornhill. His story should be food for thought as luxury companies figure out what ponds to fish in over the next 12-18 months.

“Derek Thornhill never imagined he would be canceling vacations and cooking dinner at home to save money. In 10 years working at Bank of America Corp., he rose to become one of the company’s top equity salesmen.

But in January, Mr. Thornhill was laid off — the day before he was expecting the annual bonus that typically accounts for 75% of his pay. Instead, he was paid 20 weeks of severance and a bonus that was only 5% of the previous year’s. People in his position typically earn roughly $500,000 to more than $750,000, including their bonus.

“I not only lost my job, but I barely got paid for all the work I did last year,” bristles Mr. Thornhill, 34 years old, who has had no luck finding a similar job. Dozens of other laid-off workers said they are having the same problem, forcing some to consider lower-paying jobs or new professions.

It is crunch time on Wall Street as the mortgage turmoil and a dearth of deals and credit lead to mounting job losses. Since last summer, securities firms have announced more than 20,000 job cuts, stretching from New York to London to Hong Kong.

“The job prospects for Wall Street through this time next year are about as bad as for any industry in the country,” Mr. Zandi says. “And people who hang on to jobs will suffer through less compensation. The Wall Street job engine won’t be going again until sometime in the next decade.”

Throughout the U.S., the sputtering economy has claimed more than 85,000 jobs since December. Particularly hard hit are mortgage lenders, construction and manufacturing firms. As more securities jobs disappear, the ripple effect could hurt many other industries.

Among the announced job cuts: Citigroup, Inc. will get rid of more than 6,000 jobs, or 10%, in its capital-markets and mergers-and-acquisitions work force. Lehman Brothers Holdings, Inc. is laying off 1,425 people, or 5% of its employees. Goldman Sachs Group Inc. went deeper than its annual routine of cutting the weakest 5% of employees.

J.P. Morgan Chase & Co.’s emergency takeover of Bear Stearns Co. is expected to cost at least half of Bear’s 14,000 employees their jobs, though no exact figure has been disclosed by the companies yet.

Employees who keep their jobs will likely get much smaller bonuses, which typically can range from hundreds of dollars for assistants to millions for top bankers. Last year, bonuses declined only 5% to an average $180,420 per worker, according to New York’s comptroller.

Wall Street turns in cycles of booms and busts. Thousands of securities employees were fired after the 1987 stock-market crash. There were mass layoffs after the dot-com bubble burst and the Sept. 11, 2001, terrorist attacks. Since 2003, though, Wall Street added 100,000 jobs as securities-industry profits surged.

In New York, city officials expect to lose $2.6 billion this year in business and real-estate tax collections and $690 million in personal-income-tax collections, partly because of Wall Street’s turmoil. The industry represents 5% of jobs in the city, but 23% of income. “We are starting to see big cutbacks in luxury purchases: chartered yachts, expensive cars and the like,” says Milton F. Pedraza, chief executive of the Luxury Group, which conducts research in the high-end market.

Bank of America has announced job cuts of about 3,650 employees since October. The bank won’t comment on individuals. But Jennifer DiClerico, a Bank of America spokeswoman, says bonuses are based on the company’s and the individual’s performance. Last year, Bank of America’s corporate and investment banking unit posted a profit of $538 million compared with $6.03 billion in 2006. Milind Parate, a 35-year-old analyst, was laid off from Bank of America, and his brother now is paying the mortgage on the Manhattan apartment Mr. Parate bought a few years ago. “I couldn’t imagine this a few years ago,” says Mr. Parate, who was promoted to vice president a couple weeks before losing his job. He wouldn’t comment on Bank of America.

Despite great references and contacts, Mr. Thornhill has found jobs only at smaller firms. “It has been absolutely excruciating,” he says.”

Luxus Networks can bring your brand front and center with the world’s wealthiest consumers in over 100 private jet terminals throughout North America. Programs start from $1,000 per month. Contact Kimaada LeGendre at klegendre@elitetraveler.com for more information!

6. Not All Bankers Are Going Broke: Billion Dollar Bankers

The Times of London is reporting that for every Bear Sterns sob story, there’s a banker who played the other side of the equation and between visits to Harry Winston and Chopard is probably hopping on his jet to a shipyard in the Netherlands or Germany to commission a new mega-yacht.

Payouts to individuals climbed as high as $3 billion last year as star dealers profited from the meltdown in America’s sub-prime mortgage markets. Among the top names the Times was able to name (there were more that escaped the earnings spotlight) were Noam Gottesman and Pierre LaGrange, the two co-founders of GLG Partners, the $24 billion London-based hedge fund were paid $350 million each, according to the Times, a hedge fund magazine.

The paydays for the two executives only marginally overshadowed the $300 million in management and performance fees collected by Greg Coffey, GLG’s emerging markets specialist.

Alan Howard, the 44-year-old manager at Brevan Howard Asset Management collected $245 million last year personally while David Harding, the former futures trader who sold the AHL fund he founded to Man Group was paid $225 million thanks to his performance at Winton Capital Management. Three fellow City hedge fund heavyweights were each paid $220 million last year, according to the article. They are Michael Platt, of BlueCrest Capital Management, and George Robinson and Hugh Sloane, of Sloane Robinson Investment Services.

David Slager, who runs the European fund of Atticus Capital, collected $450 million in performance and management fees last year while John Paulson of Paulson & Co received $3.7 billion in compensation. Mr Paulson’s firm made a fortune from shorting America’s sub-prime mortgage markets last year. The crisis in sub-prime led to a seizure in the international banking market. The success of his trading meant that Mr Paulson beat George Soros, the best-known fund manager, into second place. Mr Soros, who runs Soros Fund Management, received $2.9 billion.

Elite Traveler’s BPA audited circulation aboard private jets and mega-yachts in over 100 countries means your ad is guaranteed to reach the highest spending luxury audience in the world no matter where they are from and where they happen to be today – each issue is read by 318,000 readers with a Household Income of $1 million +, the highest of any magazine or newspaper in the world! Sources: 2007 Prince ET/MMR for others

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