Elite Traveler – ET Insider – August 11, 2009

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ET Insider – August 11, 2009

Elite Traveler Insider –

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August 11, 2009

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.

IN THIS ISSUE:

1. Who’s Flying On Private Jets Today? And Where are They Going?

2. An Antidote for Luxury Hotel Discounting

3. Should The Super Rich Keep Spending? Our View

4. New: Nearly One in Ten Amex Cardholders in Default

5. Weekend with Bernie: Tales from his Centurion Card

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.

1. Who’s Flying On Private Jets Today? And Where are They Going?

Private jet movements (landings and takeoffs) are down about 25 to 30 percent on a month-to-month basis, according to Flightaware, and various other services that track the fragmented general aviation industry. So while there’s no question that business is down, the question then becomes, “Who are the people making up the 75 percent of the market that is still flying since they obviously still have the money to spend and are in fact, spending it?”

Over the course of the past week I spoke with over a dozen executives from private aviation providers, charter companies, aircraft management companies, fractional companies, jet card companies and FBOs (private jet terminals) as well as with several private jet pilots. Speaking both on the record and not for attribution, a fairly consistent picture took shape.

First of all, for those who want to say luxury is a bad word, they are barking up the wrong tree. According to Woody Harford, Chief Revenue Officer for Citation Shares, “It’s part of their (private jet users’) lifestyle. It wasn’t a luxury to begin with. Unless they lost so much money they can’t afford it, our customers are continuing to fly.”

Steve Hankin, CEO of Sentient, noted for his customers “there’s a practical side. There are a lot of people who just can’t run at the pace they need to run without private aviation.”

While Hankin spotlighted softness on the leisure side, Harford noted there has been virtually no change in leisure flights. Many executives agreed certain business segments such as real estate developers and car dealers are down. At the same time, Harford said business flying by executives of private equity funds is up as they make more frequent visits to the companies they own, with private jet travel being the most time-effective way to manage hundreds of millions of dollars and many times billions of dollars in business assets.

Wayne Rizzi, Chairman and CEO of Los Angeles-based Air Royale, which has a strong base of high net worth customers, added, “We’ve also experienced a jump in leisure travel,” calling the alternative option “lousy, unpredictable commercial airline travel.” Hankin separated activity saying hard to reach destinations such as Nantucket and Martha’s Vineyard were doing fine, but when Jet Blue started a Westchester County Airport to Palm Beach flight, one client traded down, saying “it was fun to see his kids have to deal with a commercial airport.”

For those who still have the means to fly by private jet, executives universally agreed there is more attention to cost and “less exotic trips, round-the-world, multi-continent trips,” Michael Green, CEO of Delta AirElite told us.

That said, for Green’s clientele, trans-Atlantic travel has been steady and on the uptick, with London, Paris, Milan, Athens, Stockholm, Madrid and Istanbul proving popular destinations for elite travelers. While for the Mass Affluent a trip to Europe is a special event, for elite travelers, going to their favorite European capitals and resorts is part of their lifestyle, and not something they view as being excessive or over the top. “It’s just how they roll,” one pilot told me.

One change in travel patterns, according to Sentient’s Hankin, is that late booking business and leisure trips have dried up. Customers are planning better, not making the impulse trip. It is a trend many in the luxury industry are seeing.

Another jet executive who did not want to be quoted by name said, “The High Net Worth individuals I have lost are no longer high net worth individuals. There is nobody out there who is trading down to commercial air travel if they can continue to fly privately.” One pilot noted one of the High Net Worth customers he flies for has recently been scouting out real estate buying opportunities. “They have several homes, but they feel there is great value out there for the long term, and they have the money to invest,” he said.

Another constant is that people are not loading more people onto their jets. The number of passengers per jet has remained fairly consistent, executives said, with Delta AirElite noting an average flight typically has four passengers across its various sized jets.

While it may be a populist theory that the rich are ashamed to be spending, one executive disputed this. “The cars in the parking lot are the same – it’s Mercedes, Maybach, Maserati, Jaguar, Rover, Lexus, etc. The way they dress is the same. There is still a lot of Louis Vuitton luggage. Our customers never had their name on the side of their jets, so they were never really showing off to begin with.”

Bob Seidel, Senior Vice President of the Americas for Jet Aviation, a company that runs FBOs, manages aircraft for owners, and offers charter and jet card solutions, noted that for a few clients who did trade down to commercial flights domestically, they have all since returned, including one who called via cell phone after the terminal at LaGuardia was recently evacuated due to a terrorist scare. “His driver came back to pick him up, he brought him over to Teterboro and he was off on a private jet within two hours from when he called us,” Seidel said.

Seidel noted strong U.S. inbound business from Brazil and a return in business from the former Soviet republics, as well as outbound to the Caribbean, and lots of short getaways. “There are less requests for Tibet.”

Echoing the idea that those folks with lots of money have not traded down, Seidel added, “Some of our former bread and butter clients don’t exist anymore, but those who are there, they are still with us and still flying.”

New customers: With very little new wealth being created these days, most jet companies report that as much as 98 percent of new customers are coming from other private jet providers – in other words, a share war, with some people looking at charter or jet cards as alternatives to owning a jet, and some people buying jets at bargain prices; but clearly there is little if no trading up from non-private jet users as bonuses and public company windfall compensation has come under scrutiny. In other words, the folks flying First Class on domestic commercial airlines are unlikely to be joining the private jet set any time soon.

One common theme is the Super Rich are indeed paying more attention to price and size of aircraft. “We get more questions. We have people giving consideration to the size of plane in the case of charter,” according to Seidel, who quoted a famous television commercial from the New York Metro area for a clothing store: “An educated consumer is our best customer.”

Who’s losing out? Fido and Sparky. Private aviation executives said the idea of chartering a jet to bring the family pet from Greenwich to Aspen has ended, although Hankin said there are exceptions to the rule. I guess even in the families of the Super Rich, somebody has to suffer.

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 407,000 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

2. An Antidote for Luxury Hotel Discounting

Recently I received an email from the Ritz-Carltons in Philadelphia and Washington D.C. After the hotel “credits” were factored in, the effective room rate was as low as $133 per night. So if you are a luxury hotel or resort executive, let’s just say there has to be a better way.

What is it?

The statistics below are based on Prince & Associates research of private jet owners who read Elite Traveler (read Item #1 for a state of the industry on private jet travel – there are plenty of rich folks still on their private jets).

– 45% of readers will be spending $10,000-$50,000 on a single hotel stay between now and the end of the year

– 37% of readers will be spending more than $50,000 on a single hotel stay between now and the end of the year

– 30% of readers will be spending $10,000-$50,000 on a single spa stay between now and the end of the year

– 28% of readers will be spending more than $50,000 on a single spa stay between now and the end of the year

The Ritz-Carlton promotion may be successful at low-yield revenue. I don’t know and obviously cash flow is important, so I don’t fault Ritz-Carlton for trying something. The good news is there is a nice pool (each issue of Elite Traveler is read by over 400,000 consumers with a $1 million + Household Income) of ultra-affluent customers who are planning to spend significant money between now and the end of the year.

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!

3. Should The Super Rich Keep Spending? Our View

Recently Wall Street Journal reporter and author of Richistan Robert Frank penned a column, “Why the Rich Should Lie Low.” It was in response to an article in The New York Post citing Goldman Sachs CEO Lloyd Blankfein urging his bankers not to flash around their big money bonuses lest it draw negative publicity for the firm.

I took the time to post a response on The Wall Street Journal website, which you can find at the below link and in full below:

“A good chunk of spending by the Bonus Babies and Super Rich goes to medium and small business owners – caterers, architects, tailors, jewelers, car dealers, landscapers, party planners, boutiques, travel agents and local retailers. Most of it isn’t ostentatious spending in that the Super Rich don’t issue a press release saying, “Hey I just bought a $150,000 watch” or “Check out my rented Villa on Flickr.” Some of the spending gets picked up in the media, usually because of a divorce, ill gained wealth, or some incident which makes the spending part of the public record, and it goes from there. It certainly doesn’t take an Ivy League economist to understand that the Goldman bonuses and any other money that can be spent by those who still have lots of it will help the economy much more than if it is instead of tucked into some newfangled financial products in some off-shore entity.”

http://blogs.wsj.com/wealth/2009/08/07/why-the-rich-should-lay-low/

4. New: Nearly One in Ten Amex Cardholders in Default

According to an article in The Wall Street Journal, “the most creditworthy customers (of American Express, publisher of Departures, Travel + Leisure and Food & Wine) are still keeping a tight grip on their wallets.”

Speaking of his customers, Kenneth Chenault, AmEx’s chairman and chief executive, said in a presentation to investors, “The external challenges are not going to go away anytime soon.”

According to the piece, “The problems have been particularly tough on AmEx,” adding “preliminary data indicate that the company will write off 9.2% of its U.S. credit-card loans in July.”

Bad news for Amex Publishing: Platinum and Centurion cardholders that fuel the magazine circulation for Departures and many of its promotions are being the worst hit in terms of spending: “The company’s most affluent customers remain reluctant. Customers who have the greatest capacity to spend are pulling back. . .” according to American Express’ CFO.

5. Weekend with Bernie: Tales from his Centurion Card

He had two Centurion cards and 15 supplemental platinum cards for family and staff. In some months, Madoff himself had 0 charges on his card. We revealed in previous Prince research that the Super Rich often do not pay for anything themselves, delegating that task to surrogates; the Madoff statements back that up. It also means charge card-based marketing programs and databases may be fine for reaching the Masses, but are not a very good way to target the Super Rich.

So what did we find?

They travel in packs, and pay for friends to get there. Over a six month period there were about 40 airline tickets purchased for others to join the Madoffs in locales from Tel Aviv to Palm Beach to New York and Jackson Hole, Wyoming.

They like to eat out, with dozens of restaurant charges every month, many exceeding $1,000 from Cannes to New York and Palm Beach.

Regarding the Madoffs’ use of their private jet, they traveled frequently, in one month dropping thousands at Armani and Jil Sander in Paris, the next day wining and dining in London, two days later $2500 at Polo Ralph Lauren in Palm Beach, then the next day renting a car from Hertz for $372 in Oklahoma City. One week later it was Los Cabos and a two-day stay at Esperanza for $8,400. There was a $2,300 marina bill for fuel and an ad hoc private jet charter for $77,000 (Madoff had two fractional shares).

The frequent travel (they had four houses and a yacht) shows why Elite Traveler has been so successful. For the Super Rich, the private jet is their living room and the best place to reach them!

Interestingly, for luxury marketers, since Elite Traveler reaches folks who are currently flying by private jet, Bernie Madoff is no longer a reader of ours. It’s hard to tell what’s happened to his other subscriptions.