ET Insider – January 10, 2006

Elite Traveler Insider –

January 10, 2006

Elite Traveler Insider

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

First of all, Happy New Year and Best Wishes for a wonderful 2006!!! 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. Ritz-Carlton Cayman – A Case Study In Luxury Partnerships

2. Credit Card Minimum Payments Increasing…

3. Aspen Backlogged By Private Jets…

4. Mainstream Travelers Turn Negative…

5. Private Jets Increase In China And The Middle East…

6. Tom Cruise Gives Katie Holmes A Sky High Gift…  

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.

1. RITZ- CARLTON CAYMAN – A CASE STUDY IN LUXURY PARTNERSHIPS

Most of the time luxury hotel owners choose a brand partner to provide expertise in managing their hotel, and, to benefit from global brand recognition and sales networks; and then they disappear into the background. While The Ritz-Carlton Grand Cayman is no exception on the first three counts, the last area is a significant difference, which is proving an interesting incubator for Ritz-Carlton.

I first met Michael Ryan, the energetic and boyishly charming owner and developer who has had a series of successes in luxury real estate in Canada and Costa Rica in 2001, the original year the project was supposed to open. Delayed by a hurricane, the official Grand Opening of the $500 million resort was held last weekend, and if anything, the delay enabled Ryan and his team to learn a number of valuable lessons. Most of all, he ended up assembling a very interesting series of luxury lifestyle brands as part of the resort experience that may over time be picked up by other Ritz-Carlton properties – or at least should be.

The General Manager, Jean Cohen, noted that “asking for forgiveness” was a staple of her journeys back to Ritz headquarters outside Washington D.C. as she and Ryan pushed the envelope and cut past corporate bureaucracy, while staying true to the Ritz-Carlton brand. In fact, over 300 of the hotel’s 1,000 strong employees, or as she says, “ladies and gentlemen serving ladies and gentlemen” came from other Ritz properties.

It was thereby fitting that even though Cayman became the 60 th Ritz-Carlton, it was the first to be opened with a gala weekend-long celebration (several insiders estimated that the total cost was close to $6 million when taking into account the lost revenue of closing the hotel for VIPs.) clearly showing that this Ritz-Carlton was a bit different.

Ryan, while utilizing the tools that his alignment with Ritz-Carlton has brought him, wasn’t shy to check out best practices on his own. For example, the third phase of the development will be a 64-slip mega-yacht marina to open in 2008 or 2009. Before finalizing plans, he and Cohen assembled their team, got into a private jet and went island hopping across the Caribbean checking out all the great yachting destinations and marinas to provide them ideas they could incorporate into their project. He was particularly impressed by Casa de Campo – both the marina and their FBO.

He notes while Cayman is a major registration point for mega-yachts, most of them don’t visit, and it is the visits that bring countless millions to the local economy. In my opinion, Cayman tourism should hold a parade for Ryan and then figure out a way to use his project as a model to better attract more high spending travelers.

A meeting with Donn Davis-who runs Exclusive Resorts for Steve Case-five years ago provided Ryan and his group the insight and expertise of the vacation club in designing the 250 residences that will adjoin the Greg Norman golf course in the second phase. As Ryan and Davis worked to strike a deal that would give Exclusive’s homes an exclusive concept, they created a private island in the series of canals that run through the nine-hole championship golf course. On it, Exclusive ended up buying 16 units. Their members will be shuttled from Owen Roberts Airport on a private boat directly to their home. For Ryan, it was a big sale, and Exclusive also bought another five condo residences in The Reserve, which is essentially a private wing of the hotel.

Some of the knowledge Davis was able to bring to Ryan was based on what Exclusive had learned from their existing 2,000 members in terms of their likes and dislikes. Ryan says based on Davis’s input, outdoor space was doubled. Davis notes club members like to “eat outdoors, read outdoors, play with their kids outdoors.” Each of the four-bedroom villas were designed with private gardens and private infinity pools, while indoors a Great Room with comfortable seating for 10 was incorporated “so everyone can get a good view of the flat screen television.”

Davis says Ryan’s customer-focused approach is paying off handsomely. When Exclusive opened its inventory for reservations several weeks ago it was booked out immediately for the next two years. Considering that Davis notes the average net worth for an Exclusive member is $15-20 million, it is quite a statement since they are certainly not short on vacation options.

For his part, Ryan notes that he will now incorporate some of the design features of the homes he built for Exclusive into the next phase of homes, where prices will start at $4 million.

In terms of partnerships, Ryan assembled an all-star team of luxury lifestyle vacation partners whose names are of course brands unto themselves. And while the Greg Norman Golf Course may be the most apparent feature, the Nick Bollettieri tennis center, Ambassadors of the Environment by Jean-Michel Cousteau family program, Silver Rain La Prairie spa and two restaurants by three star Michelin chef Eric Ripert, the co-owner of New York’s Le Bernadin, not only take the Ritz-Carlton brand to an even higher level and give countless public relations opportunities, they also afford the hotel a number of very interesting hooks for the incentive market which will provide a very significant part of the 365 room resort’s revenue.

Because Ryan said he chooses his partners not only on their stature but also on personal rapport he was able to develop with them, he says that they all feel very connected to the property and are willing to do something spectacular to help woo big incentive groups. Certainly personal tennis lessons from Bollettieri would be an attractive incentive to get top performers to hit an even high-level. What about a cooking lesson from Ripert? Everything is possible. One of Ryan’s partners also relayed to me how after the opening of the resort was delayed by the hurricane, Ryan still paid the partner all his fees throughout the delay even though the final contract wasn’t signed. My guess is Ryan’s way of doing business has built some pretty strong loyalty that will pay off down the road.

So who have been the customers in the first phase of residences, The Reserve? Here’s a surprise. For those luxury marketers who believe wealth is limited to Manhattan, Beverly Hills, Palm Beach, etc., the top markets for the hotel have been Ohio and Illinois, although I also met a number of owners from Missouri. The profile is that they have a net worth of $30 million + and “one job, one wife.” The job is usually a family business in a non-glamorous business (think manufacturing medical equipment, etc.) and they fly by private jet. The average customer has four residences, including their primary residence. As a side comment, this is one of the reasons Elite Traveler has focused on global private jet distribution. There may not be a Louis Vuitton store in Oklahoma, but if you live in Oklahoma and have a private jet you are probably a Louis Vuitton customer.

The Opening Weekend was once again a chance for Ryan, Cohen and team to show their stuff. The Friday night concert was a black-tie gala headlined by Tony Bennett and Saturday featured Sheryl Crow, who played for over an hour and a half. The combination was both enticing and reflective of the Ritz-Carlton brand and its evolution. The Tony Bennett concert represented the traditional Ritz-Carlton where the brand made its name in the Eighties and early Nineties, while Crow represented the contemporary luxury Ritz-Carlton is aiming for today and the younger wealthy crowd. The hotel provides a nice mix of old and new Ritz atmosphere with Ritz’s always high standard of service.

As noted, this was the first time that there had been such a huge opening gala for a Ritz. Several insiders noted that Ryan astutely had noticed how Sol Kerzner had generated so much buzz with his star-studded launch of Atlantis in The Bahamas and One & Only Palmilla Los Cabos. Ryan’s approach, as with his best practices study in designing the marina was to hire the public relations company, M. Silver and Associates, that had launched Atlantis, but to make his celebration in-line with the Ritz-Carlton brand experience.

The Crow concert was also an opportunity for Ritz-Carlton, Cohen and her team to show why Ritz does such a good job with incentives. After warming up the crowd of nearly 1,000 media, celebrities, owners and local VIPs with a decadent beachfront buffet, guests were escorted to a lawn on the opposite side of the resort where they descended down a grand staircase onto a faux beach with imported sand. Instead of typical folding chairs, guests were seated in covered wooden chaise lounge chairs set two by two, divided by small tables set with ice buckets and champagne. As guests relaxed under the stars and listened to Crow while reclined on their loungers, the evening chilled slightly, and the Ritz’s attention to detail stood out once again. Elegantly folded on each chaise lounge was a pashmina shawl.

As I chatted with a very relaxed Ryan and Cohen on Sunday while they exhaled after their grand, command performance, I thought that on so many levels, any luxury marketer who wants to balance the regimentation of brand standards that companies like Ritz deliver so well with the entrepreneurship of developers like Ryan should make a field trip to Grand Cayman and spend some time with this dynamic duo.

“Our facility exclusively distributes only Elite Traveler because it’s the best high-end publication. We have lots of clients who request it.”

-Jim Allbaugh– Career Lab, Parker, CO

2. CREDIT CARD MINIMUM PAYMENTS INCREASING…

Luxury Marketers who have been tapping into the “trading up” consumer for sales, will soon be asking the question “what’s in your wallet?” The answer might be “not much”. As heating bills increase and the cost of energy continues to take a bigger chunk of wallet, minimum payments for consumers who carry credit card debt will be increasing too. Most of the top 10 credit card issuers have raised their minimum payments this year. And in most cases, they’ve done so this quarter. Regulators urged banks to adjust their minimum payments by the end of 2005. The banks’ delayed response to the guidelines issued in January 2003 means millions of people are being hit with higher credit card bills this holiday season. The increase comes just as energy bills are soaring and a new bankruptcy law has made it harder to erase debt.

Regulators didn’t require minimum payments to rise by a fixed amount. But they said payments should cover fees and finance charges, plus 1% of principal. Until now, some minimums didn’t even cover the interest owed, so debt would just keep growing. Some cardholders could see their minimum payment double, to 4% of the balance from 2%. On a $10,000 balance, the payment could jump to $400 from $200. In the long run, the change is healthy for consumers: It means they’ll pay off their credit cards more quickly. But at least at first, the higher payments could create financial hardship.

60% of those polled by American Online said the increase in payments will “very/somewhat likely” cause them to cut back on spending, while 32% said they will now “very likely” cut back. At the same time, the rich are getting richer and certainly spending more. Read on…

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

-Tommye Johnson—FBO AvCenter, Louisville, KY

3. ASPEN BACKLOGGED BY PRIVATE JETS…

While mass luxury consumers – those making under $250,000 – are starting to fret, the elite affluent are apparently spending, spending, spending. As an illustration, the day after Christmas 350 private jets landed in Aspen. Over 100 had to be turned away because the airport ran out of room! Even more interesting is that in 2004 the number was 313 and in 2003 the number was 136. Of course, Aspen wasn’t the only hot spot for private jets. Private jets arriving for the Rose Bowl Championship College Football game outside of Los Angeles clogged the tarmac at Bob Hope Airport in nearby Burbank. Around 160 aircraft, mainly corporate jets, were parked compared to 30 or 40 on an average day, he said. “They are parking on two of our taxiways,” an airport rep said. “It’s private jets that have come in just for the game.” I think it’s safe to say these elite travelers are not being impacted by increases in their credit card payments!

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

-Samuel Huskin—Flower Aviation, Colorado Springs, CO

4 . MAINSTREAM TRAVELERS TURN NEGATIVE…

Reflecting negative consumer confidence and rapidly rising travel and gas costs post-hurricane season, it’s not surprising that the Travel Industry Association of America’s (TIA) fourth quarter 2005 Traveler Sentiment Index (TSI) dropped almost 6 percent from the previous quarter and 13 percent from a year ago to an unprecedented 83.8 — its lowest point ever. Strong consumer concerns about the affordability of travel and the finances they have available to travel weighed heavily on the decline. Suzanne Cook, TIA’s Vice President of Research, said that the TSI has been trending downwards primarily, it appears, in reaction to rapidly rising travel-related costs and consumers’ pessimistic views about the affordability of travel and their financial ability to travel. Consumers’ perceptions of the overall affordability of travel plummeted 24.6 percent to reach its lowest level since the beginning of the survey, while their ability to take pleasure trips based on their own finances also reached an all time low, dropping 14.3 percent.

Results from a recent American Express Travel survey show trip costs and payment are top of mind for consumers booking holiday travel. Travelers are deciding how to book travel primarily based on price (33%), discounts and deals (23%).  “Not budgeting wisely” was cited as the biggest money related worry (30%).

At the same time one Elite Traveler reader just spent $40,000 for a four-night stay at one of The Six Senses resorts in the Maldives!

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

-Anah Joffroy—Signature Flight Support, Englewood, CO

5. PRIVATE JETS INCREASE IN CHINA AND THE MIDDLE EAST…

The novelty of owning a private jet is catching on among the increasing number of wealthy people in China. One anonymous Chinese customer has reportedly placed an order with Airbus for three corporate jetliners (ACJs), making this the first sale of such aircraft in China. The deliveries of these Airbus ACJs, worth over $163 million will begin this year, according to a press release from the European aircraft company. Of the three Airbus ACJs, two will be equipped in the United States with “Prestige” cabin-layouts, while outfitting the third aircraft is yet to be decided. The ACJ family is stemmed from the Airbus A319 whose catalogue prices range from $54.4 million to $66.5 million. Whether for business or pleasure, manufacturers agree that private or business aviation is taking off in a big way. The number of Chinese who can afford their own aircraft is growing, according to Executive President of China General Aviation Net, an aviation business website that offers consultation services on aircraft procurement. Insiders forecast China’s business jet market will hit over $9 billion within 10 years, with the number of business or private jets based there expected to rise from 20 to more than 600.

A t the inaugural Middle East Business Aviation conference held at Le Meridien Dubai, predictions also call for rapid growth. Currently it is estimated that around 250 private jets are operated in the GCC – and forecasts are that this should reach 300 by the end of next year with continued 20% annual growth.

Elite Traveler reaches the world’s highest spending consumers who travel by private jet wherever they are from and wherever they are. Our distribution includes both the Middle East and China! It means wherever these high-spending consumers are, your ad in Elite Traveler is reaching the target. Just in December Elite Traveler has added nearly 500 copies in the Middle East and China.

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

-Donna Reed—YYJ-FBO Services, Canada

6. TOM CRUISE GIVES KATIE HOLMES A SKY HIGH GIFT…

Tom Cruise is reported to have recently purchased a $20 million jet as a wedding present for his pregnant fiancée Katie Holmes. The generous star has ordered a customized Gulfstream jet for Holmes, according to the National Enquirer.

An insider says, “Tom wanted to come up with the most amazing wedding gift ever, something that would make her life so much better than a big diamond on her finger.”

Tom Cruise is already the owner of three private jets, including a $40-million customized Gulfstream jet. Tom Cruise earned his pilot’s license in 1994.

The couple’s second date is said to have occurred aboard one of Cruise’s private jets, according to USA Today.