ET Insider – February 7, 2006

Elite Traveler Insider –

February 7, 2006

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 elite luxury market. This information is provided to offer a better understanding of how to target the Elite Affluent market, its impact on your business and other trends that affect you. Remember, that private jet travelers are paying up to $10,000 per hour to fly by private jet, so these uber wealthy 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. Mass Affluent Consumer Focus on Debt Repayment…

2. No Turning Back: The Super Rich, Super Salaries and Private Jets…

3. Elite Traveler delivers More Rich Readers…

4. Luxury Alliance Bullish on Luxury

Famous elite travelers recently spotted reading Elite Traveler in private jet airports: Gwenyth Paltrow, Jessica Simpson, Katie Holmes, Paris Hilton, Dave Matthews, Jennifer Lopez, Heather Locklear, Kid Rock, Jewel, Nicole Richie, Beyonce Knowles, Shakira, Salma Hayek, Arnold Schwarzenegger, Goldie Hawn, Jay Leno, Bill Clinton, Jerry Seinfeld, and Elton John.

“They love the magazine. We have people show up at the first of every month just to get the next issue and they even take a few back to their friends and family!

-Stephanie Nieves, Sebring Airport Authority

1. Mass Affluent Consumers Focus on Debt Repayment…

For those who subscribe to the “trading up” theory of luxury marketing, there’s more news that those who are down below don’t have the financial ability to be luxury consumers. The most recent survey by AC Nielsen reported Americans are among the world’s most cash-strapped people. Nearly a quarter (22 percent) of Americans have no money left once they’ve paid for their essential living expenses. That puts the United States at the top of a list of 42 countries for saving futility. The United States is neck and neck with Portugal. “Americans are legendary for incurring debt,” said Tom Markert, Nielsen’s chief marketing officer.

Some good news for Americans — the results were an improvement from six months earlier, when 28 percent of those surveyed had nothing left at the end of the month.

Nielsen suggests an attitude change may explain the improvement — 42 percent of Americans (up from 33 percent) now list debt repayment as their first priority for spare cash. What this means is that while the super rich are still spending freely on luxury, mass affluent consumers – those with a Household Income of less than $200,000 – are now more likely to pay off a credit card than buy a new handbag.

In addition, Americans are saving more cash by curtailing some of their discretionary spending. Nielsen reports that 61 percent have turned down the thermostat to save on gas and electricity; 61 percent have cut back on home entertainment; 54 percent on new clothes; and 47 percent do less driving.

“One factor for the increased emphasis consumers are placing on paying off debts and building savings may be the new bankruptcy law that went into effect in October 2005, making it more difficult for people to simply walk away from their debts,” Markert said.

“Other publications fail in comparison when compared to Elite Traveler magazine.”

-Samuel Huskin– Flower Aviation, Colorado Springs, CO

2. No Turning Back: The Super Rich, Super Salaries and Private Jets….

As chairman of the Public Company Accounting Oversight Board, William J. McDonough once made the comment that the compensation of top executives was “grotesquely” excessive. He also noted, the nation’s widening wage gap is a “societal issue” and “I don’t think it’s going to be reversed.” Mr. McDonough’s new job is as Vice Chairman of Merrill Lynch where CEO Stanley O’Neil has been paid over $80 million in the past three years, according to The New York Times.

Private jets are of course de rigueur for top executives at major corporations these days – and that translates to personal travel as well as business travel. Note the latest filing with the SEC by Tyco International. David Fitzsimmons, who serves as a Special Advisor the Chairman Edward Breen, racked up $271,111 last year in commuting costs aboard Tyco’s private jets. Companies typically account for private jet travel expense at the cost of a first class ticket, so if you use the most expensive possible fare – about $5,000 for a roundtrip commercial first class ticket between New York and Los Angeles – this would equate to 54 roundtrip flights! Of course, Breen used the Tyco jet to a tune of $131,805 for personal travel. American Airlines’ current full fare first class between New York and Palm Beach is $700 roundtrip, so on that basis there would be some 185 personal trips for which he used the jet. Elite Traveler’s research shows our reader makes on average 41 trips per year, but as the above statistics show, many private jet passengers are flying even more. I think it is one of the reasons the distribution of Elite Traveler aboard private jets makes the magazine such a smart way to reach these rich, always on-the-move executives.

“I always make sure the magazines are in my view. What an amazing magazine. I look forward to each new issue, the covers alone are something to look at.”

-Camela Hollin– Galaxy Aviation, Palm Beach, FL

3. Elite Traveler delivers Elite Household Income and Readers…

For advertisers who want to reach the uber wealthy, Elite Traveler continues to be the most effective magazine. The latest research from Prince & Associates pegs the Median Household Income of Elite Traveler readers at $1,724,000. To say there is no comparison with other magazines is an understatement! The 2005 MMR Survey shows Departures at a very distant #2 with a Median Household Income of $188,000, followed by Robb Report at $184,000. From there household income drops to $155,000 for W Magazine and $153,000 for the Wall Street Journal and $147,000 for the Sunday New York Times. Condé Nast Traveler (at $143,000), Town & Country (at $136,000) and Travel + Leisure (at $135,000) round out the rest of the Mass Affluent Magazines.

To get a better understanding of the buying power of Mass Affluent readers, take out about 50% of the above Household Incomes for taxes. Then calculate non-discretionary expenses such as mortgage and rental payments, basic food and clothing, including children’s clothing, school tuitions, basic repairs (you know, the gutter fell down from the roof), commutations, increases in heating and gas prices, credit card debt repayments that increased January 1, and what you will have left is the limited amount of funds for all types of discretionary purchases. In fact, a recent story in The Financial Times estimated it takes at Household Income to be a regular luxury customer.

On the other hand, Elite Traveler not only delivers the Highest Median Household Income of any magazine or newspaper, we deliver more rich readers! In fact, Prince Research shows Elite Traveler delivers 217,000 readers who have a Household Income of $1 million +. Wall Street Journal is next delivering 67,000 readers with a Household Income of $1 million +, and from there Sunday New York Times (55,000), Travel + Leisure (30,000), Condé Nast Traveler (26,000), Robb Report (10,000) and Departures (9,000).

“I’ve had to increase my copies because the magazine goes so fast. I try to keep one for myself when I can. The pictures inside are so breath-taking.”

-Donna Reed– YYJ-FBO Services, Canada

4. Luxury Alliance Bullish on Luxury…

The Luxury Alliance is a strategic marketing partnership of several well-known travel brands, including The Leading Hotels of the World, Relais & Chateaux, Orient-Express Trains & Cruises, Silversea Cruises, Crystal Cruises and Micato Safaris. Last month their top executives met for a think tank moderated by Greg Furman, Founder and Chairman of The Luxury Marketing Council.

The goal of the discussion was to examine the changing persona of luxury and its direction in 2006 and beyond, specifically looking at the travel industry on a global level.

So what were some of the key issues these top executives posited about?

At the elite end of luxury travel – the very top – luxury is not negotiable. Among the seriously rich, which this group defined as having a net worth of US $22 million +, they are virtually recession-proof and a luxurious lifestyle is perceived as a necessity.

The belief is the luxury travel market will remain strong – at least through 2010. The group cited significant new projects under construction or on the drawing board that are being encouraged by a relatively strong stock market and high return on private investment.

Luxury product offerings are more diverse than ever. It is relatively easy to rent a 50-room villa in Scotland or charter a yacht in the Med. Luxury suppliers have to be even more creative with customized experiences – for example, arranging for a celebrated pro to play golf with a group of customers.

Continued growth of private jet travel was discussed. At the highest end, it will mean even more demand for super elite getaways as the private jet traveler can easily access more destinations without being beholden to commercial airlines. For hotels and resorts, it will mean that they have to have a national and international focus to their weekend marketing as opposed to the local market approach.

Multigenerational travel, reunions and destination weddings are continuing to grow. In fact, at Elite Traveler our January/February cover story was on Private Islands.

Word of mouth will continue to be a strong driver for luxury marketers as high-end consumers seek “bragging rights” and “prestige” experiences they can tell friends and family about. Spa travel is expanding to including on-site physical check-ups and alternative medical treatments.

Today’s elite traveler looks different than the past. Among the new wealth are young athletes, rising celebrities and entrepreneurs, with women entrepreneurs representing a fast growing segment. At Elite Traveler, we are highly aware of this. A recent marketing mailing we did for Escada specifically targeted our database of women who own private jets. The program was a very big success!

China , Russia, the Arabian Gulf and India represent big outbound opportunities that at the same time are stretching marketing budgets. It is one reason Elite Traveler has global private jet distribution – in one advertising buy you reach the worldwide market of private jet travelers, who not only spend the most but have the most influence over the next hot destination or resort.

Choice is nice – but not just for the sake of a press release. The examples cited: Does a hotel guest really need or want a choice of eighteen pillow types? Does bottled water truly need a sommelier?

Among the “good business practices” the alliance recommends:

• Recognition trumps loyalty points
• Concern for the environment is important again
• Community support and philanthropy are important ways to give back and build bonds with customers
• Strategic alliances are mutually beneficial but need to be deeper than just adding two logos together

“Best magazine on the market.”

-Gerald Greene– Signature Flight