Elite Traveler – ET Insider- August 14, 2007
ET Insider – August 14, 2007
Elite Traveler Insider –
August 14, 2007
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.
Does Elite Traveler work? Two readers of Elite Traveler just made real estate purchases with Ginn Sur Mer for over $15 million!
1. Elite Travel on iPHONE…a video demo below
Elite Traveler is delighted to have been selected as a launch magazine partner for Apple’s iPhone. Below is a video demo of how we are bringing the private jet lifestyle to our readers even when they step off their jet. Of course, advertisers receive the benefit of this extended exposure as well!
Ask your Elite Traveler sales rep on how you can put your company on iPhone!
Does Elite Traveler work? Elite Traveler delivers. Your leads are extremely qualified and we have closed a significant amount of business from your magazine. Jared Cullop – President, VP Marketing
2. Marketing Alert: Mass Affluent Meltdown Gains Momentum…
For those who wear rose-colored glasses, the meltdown in sub-prime and alternate mortgages probably haven’t been on the top of their agenda. We have been reporting on it in the Elite Traveler Insider for well over a year now.
In many cases sub-prime mortgages were perceived to be more aligned with the Blue Collar affluent. However, Mass Affluent home builder Toll Brothers’ continued negative reports offer a glimpse of what luxury marketers who put too much weight on the Mass Affluent segment may have in their future.
In an article in last Thursday’s Wall Street Journal, the builder (whose homes average $658,000) noted that in the most recent quarter its cancellation rate zoomed to 23.8% from an already record high 18.9%.
What’s more, The National Association of Realtors is warning that new home sales are likely to drop 19% this year.
“In the near term, tightening credit standards for borrowers should reduce the pool of potential buyers: Liquidity and affordability issues may impede some customers from closing, while others may find it more difficult to sell their homes,” CEO Robert Toll said in a statement.
The Journal article noted a staggering 43% of Toll buyers used non-prime financing (see related article on Exclusive Resorts – Item 3).
Recently BMW USA CEO Tom Purves in Automotive News projected lower sales growth, attributing past years’ success to Mass Affluent consumers who used home equity loans to splurge on luxury goods and services. At the same time, those Conde Nast stable advertisers GAP, Abercrombie & Fitch and Limited Brands all attributed their poor showing to the housing crisis and tighter finances by their Mass Affluent customer base, according to the New York Post.
At the same time, The New York Times recently reported that concentration of wealth has never been higher. A mere 15,000 U.S. households captured 5 percent of all income for 2005, and Cap Gemini reports that the fastest growing segment of wealth is Households with a $30 million+ Net Worth.
Speaking of the Super Rich, Elite Traveler continues to focus on this high net worth – and I will say recession-resistant – segment. Based on the latest research from Prince & Associates and MMR, we offer advertisers some 231,000 readers each issue with a Household Income of $1 million+, which is more than The New York Times, The Wall Street Journal, Departures, Robb Report and Town & Country combined.
Do I think our Super Rich readers are in for some interesting times? The answer is yes, but it won’t make any real dent on their spending. While Mass Affluent households will hunker down and default on mortgages, credit cards and car leases, and will generally stop buying, the Super according to Russ Prince, chairman of Super Rich research specialist Prince & Associates says, “We are in the third Gilded age for the Super Rich and it’s not ending anytime soon.”
Super premium luxury cars such as the Ferraris of the world will continue to see demand outstrip their limited supply while BMW, Lexus, Mercedes, Land Rover, Jaguar and other luxury brands will need to make an even more concerted effort to attract the Super Rich segment, as they replenish their fleets of luxury vehicles across their four, five or six houses.
High-end jets, I believe will still do very well, as long as your net worth stays in the hundreds of millions; after all, a $30 million plane with a $10 million interior is not an unusual expense.
Jewelry companies that are trying to drive lower price points may find that the previously buoyant Mass Affluent segment has shrunk significantly, as Toll Brothers is discovering; I would suggest they take a hard look at how they can allocate more resources to pursuing the Super Rich. The Super Rich still have to buy jewelry, watches, and other luxury goods for birthdays and anniversaries, gifts and such.
We perhaps will see some softening at the top with the one-of-a-kind $2 million pieces, (although billionaires will be billionaires and will continue buying), but I think the $10,000 to $100,000 segment will remain strong and perhaps become the sweet spot.
Real estate will continue to see activity at the top. The Super Rich can afford to buy and hold, so a price decrease over a two or three year period is not of concern. Many of their deals are all cash, so they don’t have mortgages to pay and many view real estate as a solid long-term investment.
Those close to the Super Rich will say that they tend to trim staff levels at their homes and their businesses before they cut back on personal spending. Hiring and salary freezes will tighten the spending of the Mass Affluent.
For luxury marketers, I believe the next 24 months should focus on doing a better job targeting the Super Rich, and also showcasing more product line to them. Tomorrow’s buyer of the $15,000 watch or $25,000 necklace will not be a person who just re-financed their home – it will likely be someone who just got off their private jet.
Service providers to the Super Rich such as decorators will say that in good times and bad, the Super Rich generally continue to increase spending. Prince notes in bad times, the Super Rich are making money by shorting stocks and buying assets on the cheap.
For luxury marketers who have been enjoying an extremely robust period over the past five years financed by cheap money, now might be a good time to take a harder look at the core luxury customers – Super Rich households with a Net Worth of $10 million+ and a Household Income of at least $1 million+.
Does Elite Traveler work? Ulysse Nardin sold “at least” two $86,000 Sonnerie en Passant watches from its ad in Elite Traveler’s January/February issue
3. Air Partners Reports Record Profit…
Supporting the notion that the Super Rich are spending more than ever, British private jet charter broker Air Partner said it expected full-year pretax profit to be 50 percent ahead of last year’s, and that the forward order book was significantly ahead of a year ago.
Does Elite Traveler work? Sacramento Jet Center tells us, “Maria Shriver Schwarzenegger takes one every time.”
4. Donn Davis and Steve Case continue their Revolution…
While most CEOs operate under intense pressure to hit quarterly earnings numbers, goose their stock price, prepare for an IPO or some other sort of financial maneuvering, longtime Steve Case deputy Donn Davis, who presides over Revolution Resorts (the parent of destination club Exclusive Resorts and Miraval, the healthy lifestyle resort and residence brand) has none of it.
“Steve cares about changing people’s lives for the better,” Davis related over lunch in Washington D.C. last week. “We have a 20-year vision.”
Case, who brought the Internet to Main Street through America Online, is now five years into focusing on changing how affluent consumers live. Exclusive Resorts (ER), which Case didn’t start but spotted and acquired, signed up its 3,000th member in July. Each member pays a one-time initiation fee between $239,000 and $459,000 that is 80 percent refundable, plus annual dues of $13,900 – $39,900. For that cost, members may use ER’s $1 billion+ in owned real estate in 40 locations — all with a 24/7 vacation concierge and five-star resort amenities — for between 15 and 45 days a year based on the membership level selected.
Accommodations range from luxury homes and villas that are part of five-star resorts such as Ritz-Carlton Grand Cayman and Raffles Canouan, to luxury apartments in venues like the Trump International Hotel in New York and clusters of free-standing luxury homes ER has designed and built. Most of ER residences are in fact built by the company, and the typical residence is four bedrooms and 3,500 square feet. Twenty-four hour service and teams of concierges mean “I can order ice cream at 3am and the concierge will run out and get it.”
Even when ER residences are part of luxury resorts and hotels, Davis takes pride in providing a superior level of ER products and amenities; in future locations such as Sea Island in Georgia, MGM City Center in Las Vegas and Mandarin Oriental Chicago, ER is actually either building homes from scratch or taking over entire floors and custom designing them.
Davis, who exudes energy and enthusiasm, noted that despite the wild gyrations in the stock market and the sub-prime mortgage meltdown, July was the club’s best sales month in its five-year history. He notes that fewer than 10 percent of members finance their membership and ER draws customers from across America – less than 10 percent of members are from New York, while its membership encompasses 49 states and 24 countries. What’s more, Davis says most ER members pay out of accumulated wealth as opposed to income.
For ER, its spread means “how America is behaving” is as important as the real estate crisis in Florida.
ER targets households with a Net Worth of at least $5 million and while it does have centi-millionaires and celebrities, Davis says the club’s sweet spot is between $10 million to $20 million net worth. Most are the “working rich” and he compares the ER customer profile to Mercedes, not Maybach. He notes about 20 percent of club members are frequent users of private jets but makes the comparison to MarquisJet users who buy their air travel in 25 hour chunks as opposed to NetJet owners who make five year commitments and are typically worth more than $50 million. He also says his members are situational private jet fliers: They may fly commercially between big cities where there are frequent flights, but use a private jet when flying between cities that don’t have direct flights or on vacation where his average guest party totals seven.
The ER formula also provides some resistance against recession. After making a several hundred thousand dollar membership commitment, members pay annually in advance a fee based on their type of membership, which equates to approximately $1,000 per night. Davis notes the average member uses ER properties seven times a year (members can stay from one night to two weeks). Even if finances tighten, it is likely then they will cut back on trips or spending beyond their prepaid ER annual fees.
Of course while ER has grown to control over 70 percent of its category, Davis and Case are again taking on traditional hospitality companies with a different approach under the Miraval banner. From its routes as a substance and behavior treatment center, the Tucson-based resort concept now embraces helping people who want to make positive changes in their life.
Expansion is coming on several fronts. First, in New York the Miraval Living concept is being extended to a high end residential building opening this fall. Nighttime yoga classes are just one of the 70 plus services available to residents, as well as concierge shopping for healthy foods and the like. Other benefits include highly filtered water that will be “far better” than what other New Yorkers get from their taps, and state of the art air conditioning systems that have better filtration and are environmentally friendly.
Another Miraval will open in 2010 in Costa Rica as part of a mega-complex that will include an ER community with its own private clubhouse, a 100-room Miraval Resort and 50 Miraval residences that will each be priced in the millions. There will also be a 120-unit all-suite One & Only Resort in the development fashioned after their Maldives retreat. It is the first time an outside operator has come into an ER development, and for Davis and Case it’s a stamp of approval from a preeminent uber-luxury brand that will also use Cacique for their first ever foray into real estate with 250 fully serviced residences priced from $2-$20 million.
Davis sees Miraval as being in sync with Case’s vision of improving people’s lives but not making them work to do it (just pay); however, don’t look for a rollout of 20 properties in five years. Davis says the Case philosophy of “getting it right” means because of the complexity and training behind the offerings at Miraval, one new resort every two years is as much as they can do.
In terms of overall vacation trends, Davis notes that ER members want nearby vacations and “once in a lifetime” vacations. To that end, he has been lining up more and more getaway spots such as Sea Island on the Georgia coast where he says Owner Bill Jones approached ER to tap into its 40ish customer base and open the legendary resort to a new generation it had been missing.
On the once-in-a-lifetime front, Davis chartered a Seabourn ship for two weeks in the Med this year with a customized itinerary for members. It sold out in two weeks. For 2008/2009, a series of 16 fantasy trips will be offered, including a Dude Ranch and an biking trip through Provence.
How much pressure Case puts on Davis in terms of financials is hard to know, but at least as of last Friday the revolution of Revolution is product before profits. With a claimed 96% satisfaction rate, perhaps Case will again have a billion dollar hit before the DC’s woeful baseball team the Nationals make the playoffs. Or as Davis notes, “Steve likes to swing for the fences.”
Does Elite Traveler work? Felix S. Sabates, Chairman of Trinity Yachts recently bought six Girard-Perregaux watches that he had seen in Elite Traveler
5. In Saudi Arabia, (Air) Fields of Private Jets join Oil Fields…
Saudi Arabia’s National Air Services (NAS) recently announced it would raise cash from Islamic bonds to help finance a major fleet expansion.
NAS will also borrow from local and foreign banks to finance its previously announced acquisition of up to 38 A320 aircraft from European plane maker Airbus, and up to 60 private jets which will cost a total 15.5 billion riyals ($4.1bn), Chief Executive Taher Agueel said in local reports.
NAS signed an agreement with Airbus to buy 20 A320 aircraft with an option for 18 more in a deal that could be worth 9 billion riyals.
The delivery of the Airbus aircraft will start in 2012, Agueel said at the time. Earlier, NAS inked a pre-purchase agreement with French Dassault Aviation for 20 Falcon 2000LXs.
NAS also agreed with Gulfstream Aerospace Company to buy three long-range Gulfstream G450 business jets with options for 17 more, which if exercised will bring the contract’s value to $693 million.
In January it ordered 20 passenger planes from Raytheon worth $267m. The agreements are part of NAS’s plans to add 98 new aircraft over the next five years to reach a fleet of 142 by 2012.
NAS operates a luxury airline firm called Al Khayala and provides private aviation services by renting and offering part ownerships of jets in the Gulf Arab region.
Does Elite Traveler work? A reader booked the Presidential Suites at The Mandarin Oriental, Washington DC directly from the pages of Elite Traveler
6. You Can Get This One…The $100,000 Lunch Arrives…
From a report in Forbes, in a world of exclusive restaurants of the moment and lavish expense-account meals, those looking for a taste of something particularly luxurious and expensive have a new choice on the menu.
Corporate entertaining veteran Billy Harris, master mixologist Tony Abou-Ganim and celebrity chef Mario Batali will throw you the ultimate lunch or dinner for $100,000, plus expenses. Among other things, you’ll get a cocktail named after you and a customized multi-course meal, but you’ll have to book well in advance.
IBM, for one, has, taken the plunge.
For those who thought hiring yesterday’s rock star to perform at a celebratory function was the thing, it looks like there is another rung on the ladder.
Does Elite Traveler work? A reader of Elite Traveler recently made a four night, $40,000 booking at Soneva Gili!
7. Enjoy the Rest of the Summer…
Why I thought this would be a relaxing summer I’m not sure. From trips in early July to Riviera Maya to check out the new Rosewood and Mandarin Oriental properties opening this Fall (read my report in the September/October issue of Elite Traveler) to speaking at The European Wall Street Journal/European Luxury Marketing Council Luxuria Summit in St. Moritz, a one-day trip to Los Angeles, a weekend of the lovely but hectic Hamptons lifestyle, a hop to Boston, a weekend jaunt to check out the Bacara Resort in Santa Barbara followed by a grueling New York-Honolulu-Maui-Washington D.C. triathlon, I will happily be on vacation from the time you get this till the end of the month. I’ll be sailing the Med with my three children and I’m quite looking forward to traveling with them.
I hope the summer so far has been spectacular for you and hope you enjoy these last few weeks of summer.
As you start thinking about 2008, I hope you will keep Elite Traveler in mind and as always, it would be our pleasure and privilege to work with you in your efforts to market your company to our audience of over 425,000 Super Rich readers.