ET Insider – February 20, 2007

What Luxury Marketers Should Know About Very Light Jets (VLJ’s)

February 20, 2007

1. The Father of Very Light Jets Speaks, and Luxury Marketers Should Listen.
2. “Speaking of Very Heavy and Big Private Jets.”
3. Marriott, Hilton, Forte, …and Lebua?
4. No Limit of Spending for Super Rich.

“We have made two significant sales based on leads from your magazine… The total value of the pruchases is over $15 million! .”

–Myles Newell, – The Ginn Company

The Father of Very Light Jets Speaks, and Luxury Marketers Should Listen.

Sitting in his trade show booth some 8,000 miles from Albuquerque, Eclipse Aviation founder Vern Raburn wasn’t showing any signs of jet lag during his first appearance at the Asian Business Aviation Conference and Exhibition (ABACE) in Hong Kong.

Raburn is “The Father of the Very Light Jet” commonly referred to as the VLJ. And having recently delivered the first of his offspring into service, Raburn predicted that by 2011, 50 percent of VLJ sales for Eclipse will be international, with Asia and Europe being key markets.

One of the first employees for Bill Gates (a major backer of Eclipse) at Microsoft, Raburn has also served as General Manager of Lotus Development Corporation, Chairman and CEO of Symantec and President of the Paul Allen Group.

For luxury marketers, I’ll predict Eclipse will become an important brand partner, and to that end there have already been small partnerships with Jaguar based on personal relationships; when I suggested he team up with a watch company to do an Eclipse timepiece, Raburn lifted his cuff to show a Breitling with an Eclipse logo he gives as gifts to owners. However, the current version is really a corporate gift, not a marketing partnership such as Breitling for Bentley.

Having taken 10 years to move from an idea to development, regulatory approval and now production, Raburn seems to have a keen sense of the opportunities for Eclipse to position itself as part of his target’s lifestyle. The company recently exhibited at Barrett-Jackson auto auction in Scottsdale near where Raburn has a house and has attended the show in the past. Over the show period, Raburn’s sales team collected five firm orders valued at $1.4 million each.

The VLJ is another reason, in my opinion, to sell your airline stock. It is targeted at travel in the 200- to 600-mile range, a distance that is a bit too long for convenient auto travel, but in many markets, lacks direct and frequent air service. An example might be Jacksonsville to Talahassee, which would normally mean a connection via Orlando or Atlanta turning a 40-minute flight into a five-hour ordeal when connections and airport check-in are factored in.

Raburn counts some 125,000 service companies (law firms, consultants, etc.) with revenues of $10 million + as targets to buy the Eclipse or the growing number of competitive VLJ offerings. In addition, there are some 50,000 pilots who currently own turboprops or older twin-engine jets that need upgrades. He believes the price point of the VLJ will make his aircraft attractive. Profiles of owners are quite diverse, ranging in age from 25 to 80, with most individual purchasers being owners who plan to fly the plane themselves for work and/or leisure.

However, while much of the press has played VLJs as the “democratization” of private jets, Raburn sees his target as being extremely affluent, and he comments that they will not be buying his planes at the expense of another house, boat, car, watch or some other toy, making Eclipse a potentially complementary marketing partner for a variety of luxury brands.

In fact, Raburn sees an application for remotely located high-end hotels and resorts. He cites the Four Seasons properties in Lanai where the last leg of getting there – from Honolulu to Lanai City – can be the most wearing with long connection times, delays and poor service. His vision would be a rapid planeside transfer from one’s inbound commercial flight to an Eclipse. Raburn notes “a thousand bucks is about two rounds of golf” in making a case for the additional expense of convenience. “There are about a hundred examples like that,” he continues.

A major market for VLJs is a concept called Air Taxis that to me has always been a bit fuzzy, since I have heard about five or six different concepts for how this would work. Raburn cleared it up for me by telling me, “It’s all over the map. Everyone has a fundamentally different view of this model.” From his perspective, this is a good thing, as it gives the idea multiple ways to develop and succeed.

Looking into his crystal ball, Raburn thinks the two most likely concepts to succeed will be a one-way ad hoc charter in which one VLJ picks you up and drops you off, and another picks you up to return, and a higher priced option where the plane sits and waits for you.

The variations are quite wide now, however. Andrew Broom, Eclipse’s Director of Public Relations, outlines a version where the customer based in Ft. Lauderdale, for example, says, “I need to be in Jacksonville by noon.” The more flexibility the customer gives the taxi operator, the lower the fare. For example, if the customer is willing to fly as early as 9am, the fare would be lower than if he said, “I need to be there by noon but can’t leave before 10:30 am.” Additionally, in one taxi concept, the plane might stop in Daytona Beach to pick up or drop off other passengers, as long as it gets to Jacksonville by Noon

One player in the Air Taxi game is Pogo, chaired by former American Airlines Chairman and CEO Robert L. Crandall, long considered one of the best airline executives ever. So while Crandall gives the air taxi concept added credibility, it will be awhile before we see how it evolved.

In Asia, Raburn said he has raised interest in the Eclipse from several commercial airlines. He said in China, airlines see the Eclipse as a great tool to use as a connector to long-haul services for VIPs to make quick and easy connections to regional cities. Another use, he believes, is for the airlines to use Eclipse on a straight charter basis.

Other potential markets that may evolve for Eclipse and VLJs are fractional operators and corporate flight departments

A report by Honeywell projects as many as 10,000 VLJs in the next 10 years, and with the category’s focus on flying under 600 miles the VLJ could be a nice “second plane.” It also fits nicely into how people travel. For example, while one might have a Maybach, they probably drive their Rover down to the grocery store. In this case, why take the G-V to Martha’s Vineyard from Boston when a VLJ will do.

“All of our people, including Shaquille O’Neal, Bo Derek, Maria Shriver and Reba McIntire love the book. We put them on all of the private jets. Great book!.”

–Tammye Johnson – FBO AvCenter, Louisville, KY

  And Speaking of Very Heavy and Big Private Jets  

If VLJs are a hot topic, VBJs are another hot item. I’ll admit, I just made up the term “VBJ” – but Very Big Jets for private use are becoming more and more popular. Boeing has sold at least four of its new model 747-800s for private use, and Airbus as well is selling private versions of commercial models that might carry as many as 350 passengers the way I typically fly.

Speaking in Hong Kong during ABACE, Airbus executives told us they are close to finalizing their first sale of the A380, the world’s largest commercial airline for private use. To date, Airbus has sold 80 of its ACJs (Airbus Corporate Jetliners) which are derived from its popular A320 model and another 40 private models of commercial aircraft ranging from the widebody A310 to two new orders last month for long-haul A340s.

Standard on these flying palaces are private bedrooms, showers, lavish dining and living areas, cinemas and of course separate areas for staff and entourage. In fact, traveling parties often number as high as 50 so the huge planes are configured with private areas for the family, separate areas for business associates and then other areas where traveling staff such as nannies, cooks and drivers can be seated. Among the interesting features are karaoke machines and full bars, massage tables and other amenities more closely associated with land-based homes .

Airbus lists a number of countries that operate Airbus planes in VIP or Head of State configurations, including the Czech Republic, Azerbaijan, Brazil, France, Italy, Oman, Qatar, Thailand and the United Arab Emirates.

Depending on aircraft type and how lavish the interior, a single plane can range from $45 million to the hundreds of millions of dollars. Of course, Elite Traveler is pleased to be aboard private jets, including these lavish Airbus private jets via our BPA-audited distribution in more than 90 countries!

“Women have complimented the jewelry. The following companies keep Elite Traveler in their aircrafts – Net Jets, Charter Communications, Lockheed Martin, US Dept. of Treasury ”

–Anah Joffroy – Signature Flight Support, Englewood, CO

Marriott, Hilton, Forte, …and Lebua? .

Sitting with hotel expert extraordinaire Mary Gostelow 64 floors above steamy Bangkok, I waited as she struggled to find an answer to the question, “were there any hotel groups founded and named after their female owner à la Marriott, Hilton and Forte. Mary is a better source for most hotel related questions than google or wikipedia, so her “no matches found” response re-affirmed that we were perhaps both at the start of something special.

Mary is of course the proprietor of The Gostelow Report, the monthly newsletter which is the first read of hotel owners and investors, and with great fortune is also our International Hotel Correspondent

Rattawadee Bualert is the 30ish-year-old owner of Lebua Hotels & Resorts, the only child of one of Thailand’s most successful female entrepreneurs. Rattawadee could easily be on the cover of Elite Traveler as on the cover of Forbes, and in less than three years she has already made an impact on the global hotel scene. It certainly took Lord Forte quite a bit longer from his origins with a milk stand, but then again, we live in a world where Bangkok and New York are a nonstop flight away.

Starting by shaking up Bangkok’s restaurant scene, Rattawadee and her Managing Director Deepak Ohri, who by way of disclosure, I will say has become a good friend, have now emerged as a force in the five-star hotel arena in the Asia Pacific arena with sights set farther afield.

Interestingly (like Forte and Marriott) for Rattawadee, food was the lead in. She launched Sirocco with its al fresco dining atop The State Tower, often called The Dome because of its bulbous top. For a country that was know for its spicy Thai food and not much more on the epicurean side, Rattawadee and Ohri, a former executive with hospitality giant Carlson Companies, have changed the way high-end travelers view Bangkok.

We are targeting just three to five percent of the worldwide market,” Rattawadee claims, and a dinner at Sircocco or Mezzaluna, the second restaurant in State Tower, runs considerably more than the $200 per night a room at a five-star hotel in Bangkok costs. Most recently Rattawadee and Ohri hosted the second Epicurean Masters, this time bringing eight Michelin chefs with a combined 23 stars.

Considering most in Bangkok thought the pair foolish for trying to put five-star restaurants on top of a skyscraper in a market known for cheap prices where riverside venues were considered prime real estate, the two created even more raised eyebrows by kicking out Meritus, the Singapore company that was running The Tower’s guest accommodations on the 50th to 57th floors as four-star serviced apartments.

So far, so good. In February 2006, Lebua at The State Tower was admitted to Small Luxury Hotels, and now, Lebua is planning to rock the Thai capital by building the most extravagant penthouses in Southeast Asia – each a triplex with an infinity pool near the top of the hotel. The design is sketchy at this point as Rattawadee and Ohri prepare for a “penthouse tour” in March that will take them to Rome, Paris, London, New York, Miami and Hong Kong where the Lebua chief has already been impressed with The Intercontinental.

The proposed rate for the penthouses that won’t open before the end of 2008 is some $25,000 per night, which would rank them among the most expensive in the world. However, it certainly wouldn’t be surprising to see that rate climb.

Of course, Lebua is already more than a single property. A luxury, five-suite lodge launched last fall on New Zealand’s North Island was taken for six months by a wealthy Czech within weeks after it debuted. Now there is a plan for a tent camp with 50 units in the north of Thailand and a hotel in London where Rattawadee went to school and still has many cousins.

Shaking up the way foreign tourists view Thailand seems to be in her blood. She is looking at opening a New York or Vegas style nightclub in the basement of Lebua. She hopes the club will be a social center for Bangkok’s increasingly hip and stylish young crowd that flock to Siam Center’s boutiques such as Louis Vuitton, Escada, Gucci and Jimmy Choo as they mix and party with wealthy foreigners as happens in any other world capital.

Newly appointed Minister of Tourism and Sports Dr. Suvit Yodmani and Governor of Tourism Authority of Thailand Phornsiri Manoharn recently praised Rattawadee during a star-studded One Million Baht ($20,000) per plate dinner at Mezzaluna. The dinner featuring the eight Michelin chefs flown in from Europe attracted some 15 couples from Europe, the U.S. and Asia who arrived by private jet to celebrate a new chapter in Thailand’s culinary exploits, spending quite a bit of money during their stay.

Despite the larger emphasis on the hotel side, food still remains a top agenda item at Lebua. A 52nd floor outdoor seafood restaurant is jammed each night, again pushing pricing for fine dining in Thailand to new levels, and a French restaurant to compete with The Oriental’s legendary Normandy Grill is coming. Also planned is what Rattawadee describes as the first fine dining Thai restaurant. She envisions a much more detailed use of spices and flavorings and a greater emphasis on seasonal changes to the menu as opposed to the traditional noodle offerings.

While only time will tell if Lebua is placed along Forte, Hilton and Marriott, one thing is for sure: Lebua so far is importing innovation to Thailand, which in some ways is appropriate in this nation of entrepreneurs.

“We have many elite clients. We distribute Hamptons, Yachts and a few others. Everyone goes straight for Elite Traveler magazine. It’s that popular ”

–Lauren Denicolis – Long Island Jet Center, Long Island, NY

  No Limit of Spending for Super Rich  

From the Independent newspaper in London, “Spend! Spend! Spend! London is the new plutocrats’ paradise.”.

Art sales, the paper reports, are breaking records as wealthy collectors bid £210m in London auctions last year and the property boom hits new peak as buyers queue up to acquire £84m penthouses.

From frenzied bidding for art worth £400m to a stampede for fine French wine, London is in the grip of an unprecedented spending spree fuelled by £9bn of City bonuses and an influx of super-wealthy foreigners, according to the report.

The capital has long vied for the title of the world’s wealthiest city but it will this week cement its status as the boom town of a new moneyed elite with a seemingly unquenchable thirst for conspicuous consumption.

Britain has become a magnet for a select group of high rollers – international billionaires who are choosing London alongside New York and Dubai to make their multiple homes, some they will never even set foot in except to check on progress of renovations before retreating to palatial suites at five star hotels.

Works from artists including Francis Bacon, Andy Warhol and David Hockney are being offered by Sotheby’s and Christie’s and are expected to push takings from the traditional February sales week beyond £400m for the first time.

Sotheby’s, which set a record on Monday for its single biggest London auction when one sale took £94.9m, said the results were being fueled by wealthy Russian and Chinese buyers

Melanie Clore, deputy chairman of the auction house, said: “The results provide clear evidence of the depth of the market.”

The emergence of this rarefied world of nine-digit bank balances – far removed from the daily lives of all but a handful of Britons – has its roots in the strength of the City and London’s unashamed attempt to offer a haven to a new class of what the cognoscenti call UHNWIs – ultra-high-net-worth individuals.

Private jet movements at the multiple airports serving London’s elite travelers have risen by up to 50 percent, and Elite Traveler is there. The U.K. is our second largest country for distribution with nearly 20,000 copies of every issue and well over 60,000 wealthy readers who call London a pit stop on their world travels

All the best,

Douglas D. Gollan President and Editor-in-Chief Elite Traveler, The Private Jet Lifestyle Magazine Universal Media Building 801 Second Avenue New York, NY 10017 USA www.elitetraveler.com

Reaching the World’s Most Affluent Luxury Consumers 430,000 readers every issue in over 90 countries with an Average HHI of $5.3 million Audited by BPA

T 646 658 7512 F 212 687 8994E dgollan@elitetraveler.com or douggollan@aol.com