ET Insider – June 9, 2009

Elite Traveler Insider –

June 9, 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. Making The Case for Luxury Spending: An Interview on CBC Radio One…

2. Danziger: Luxury Marketers Face Long Haul with Aspirational Consumer Recovery

3. Need Some Good Counsel? Two Places I Recommend

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. Making The Case for Luxury Spending: An Interview on CBC Radio One…

Recently Wall Street Journal Wealth Reporter and Author of the book Richistan, Robert Frank, and I were interviewed on CBC’s National Radio Program Q, which is broadcast across Canada every weekday at 9 a.m. and repeated at 10 p.m.

The interview was a follow-up to my Jan/Feb President’s Letter in which I wrote that our wealthy readers shouldn’t be shamed into not spending by all of the negative depictions of the wealthy in general media. I noted that if they could afford the expenditures, and wanted to spend the money, they should, and that an added benefit was that it would help the economy.

With luxury spending way down, below is an edited transcript from the interview.

JIAN GHOMESHI: Hi there, I’m Jian Ghomeshi. This is the June 3rd edition of Q.

On your program today, should we hate the rich? We’ve admired wealth and power for generations, but in this recession, rich people make attractive scapegoats. It’s a Q panel with author and journalist Robert Frank, and the man behind Elite Traveler magazine, Doug Gollan. This is Q.

JIAN GHOMESHI: (Scene from the movie Pretty Woman) Well, that was Julia Roberts in a scene from the movie Pretty Woman, one of many Hollywood films from the 1980s that played into audience’s glitter-filled notions of what it be like to be rich. Back then, the Reaganomics-induced fever on Wall Street was expressing itself in movies like Trading Places, Brewster’s Millions, and Arthur. Indeed, the eighties were a decade where many aspired to the good life, from the top of their Tilley hat right down onto their Ralph Lauren Docksiders. Flash forward, and today our collective attitudes towards the rich have changed dramatically. From the time that the housing bubble burst last September, the media has been looking for a scapegoat, especially from among the ranks of the wealthy and powerful.

Last month, Harper’s magazine reprinted a letter written to subscribers of Elite Traveler magazine, a particularly rarified periodical aimed at those who own a private jet and have an average household income of around $5.3 million. In the letter, Elite’s editor-in-chief argued that the current recession was not created by the wealthy, but by consumers spending far beyond their means. This caused a firestorm of debate on the internet. Superficially, it was about the current economic crisis, but in a broader sense, it revealed much about public perception of the super-wealthy and how they are represented in mass media. Doug Gollan is the president and editor-in-chief of Elite Traveler magazine. He wrote that letter, and he’s in our studio now in New York City. Hello, Doug.

DOUG GOLLAN: Hi, good morning, Jian.

JIAN GHOMESHI: Good to have you on the program.

DOUG GOLLAN: Thank you.

JIAN GHOMESHI: And Robert Frank is the author of the best-selling book, Richistan, and he writes the Wealth Report blog for the Wall Street Journal, and we’ve reached him by phone, also in New York. Hello, Robert.

ROBERT FRANK: Good morning.

JIAN GHOMESHI: Good to have you on the program.

ROBERT FRANK: Thank you.

JIAN GHOMESHI: Doug, let me start with you. What was your original intent when you wrote that letter for the high-flying readers of Elite Traveler magazine?

DOUG GOLLAN: The key point was I understand how important their spending is to the economy. And my point was – if you’ve earned the money, if you have the money, and you can afford to do it, go ahead and spend it. So if you cut back doing that lavish 40th birthday party for your wife, and you can afford to do it – you’re not hurting yourself, the rich person. The people who get hurt are the caterer, the waiter, the busboy, the bartender, the florist, on and on – security, the decorators, the entertainers, the people who set up the entertainment. In a very difficult economic situation, you want to throw your wife that lavish birthday party. You can afford it. By all means, don’t be shamed into not doing it, because it’s really important to the economy now that you spend the money.

JIAN GHOMESHI: And that little letter has turned into – has gotten quite a reaction. First of all, what kind of reaction were you expecting, Doug?

DOUG GOLLAN: I wasn’t really expecting any specific reaction except that I see both sides. I see our readers’ side of it, but I also see when I travel to Italy to family-owned factories that make the jewelry, make the clothing – multiple generations of tailors, uncles, and nephews, and brothers, and fathers, sitting all side by side. So I understand that a lot of the money that our readers spend – it’s not going into some multi-national corporation. It’s spent supporting a lot of small and medium-sized businesses. So I really wasn’t thinking as much about the reaction, except to say to our readers that if any way you’re feeling guilty about spending, don’t feel guilty, go ahead and do it.

JIAN GHOMESHI: And were you surprised when this got reprinted in Harper’s and a bunch of Harper’s readers or those following it online took umbrage at the idea of the editor – you and your magazine – counseling rich people to continue to lavishly spend?

DOUG GOLLAN: I guess in hindsight I wasn’t surprised, because – listen, if I were a politician or I were running for office, trying to explain to people I wanted to vote for me why rich people are good is probably not a winning campaign issue. So everybody looks in any crisis for scapegoats, and I think it’s easy to label any group as being good or bad.

JIAN GHOMESHI: Let me bring Robert in here. Robert, you’ve written about Doug’s letter in your wealth blog at the Wall Street Journal. It’s fair to say that most of your readers are not currently flying in Learjets, I would assume. How would you describe the range of opinion you’ve seen since you began reporting this story?

ROBERT FRANK: Well, there was a wide variety of opinion. I mean, a lot of my readers are wealthy. The Wall Street Journal, of course, reaches some of the sort of wealthiest leaders in the world. But I was surprised that even some of those readers are saying that conspicuous consumption right now, i.e. buying Rolls Royces, large jewelry, very expensive watches, building the biggest house on the block – you know, that kind of conspicuous consumption, the fling with bling, so to speak – even the wealthier think it’s time to be a little quiet with our wealth. And I think that’s a smart thing.

I take Doug’s point about the wealthy do support jobs, but there are ways to spend money supporting jobs – he mentioned parties – I mean, the wealthy are continuing to entertain at home. They are not, however, buying jewelry, buying Rolls Royces, taking private jets, buying yachts the way they used to, because they’re very sensitive to the fact that a lot of Americans and people around the world are losing their homes and losing their jobs.

Now, I have no doubt this will come back. I think the media is partly to blame for this idea of luxury shame and shaming the wealthy. But the American people are also justifiably angry, specifically at Wall Street, for ruining our financial system and then having taxpayers bail them out. When you have the head of GM fly to Washington in a private jet and then have the company go bankrupt, when you have Northern Trust take bailout money from the federal government and then host a big boondoggle for wealthy golf clients in Pebble Beach – that’s the kind of thing that the American public is angry about, and perhaps justifiably so.

JIAN GHOMESHI: And Doug, what do you say to that? I mean, when you say the rich are being scapegoated, doesn’t the general public have the right to bring the super-rich when they read stories about how companies like AIG paid out $218 million in bonuses after it received $170 million in taxpayer bailouts?

DOUG GOLLAN: Over 85 percent of our readers are self-made entrepreneurs who own their own private companies. So I certainly wasn’t trying to defend companies coming up to Washington for TARP money in private jets. My message was simple. What I said is, if you don’t spend the money – if it’s your money, you earned it rightfully, you can afford to do it – go ahead and spend it. And just when I was waiting to come on, one of your colleagues down here in New York was talking to me – his uncle from South America makes the handles for handbags that are sold by a designer who sells in Neiman Marcus. And his business is way, way down. So that just goes back to my point about the importance of continuing the consumption. And I always say, except for Donald Trump, I don’t know anybody else who has their name on the side of their private jets.

JIAN GHOMESHI: Iron Maiden do, as well. (laughs)

DOUG GOLLAN: Okay, so two. I was never talking about conspicuous consumption. I do agree with Robert that now is not the time to go off and show your new $100,000 watch. But if you want that watch, you appreciate it and you want to buy it for yourself, why shouldn’t you?

JIAN GHOMESHI: You’re not absolving certain wealthy individuals of their responsibility for this recession, you’re saying that the culpability of the super-wealthy has been exaggerated in the media, Doug?

DOUG GOLLAN: You can look at anyone – if we looked at everybody who’s listening to us right now across Canada, there are certain people who probably have committed illegal acts, and hopefully the criminal justice system in Canada will hold them to account. So across Robert’s readership of the Wall Street Journal, certainly there are people who have done things that they shouldn’t have, and the same thing with our readership. I was talking in a much more general sense.

JIAN GHOMESHI: But in the letter, you also do say, Doug, that you do not think the rich are necessarily responsible for this recession. Who is?

DOUG GOLLAN: I think if you went back, you see a lot of people who, over the last five to ten years, played a part in it by buying houses that they really couldn’t afford, by running up credit card debt that they couldn’t afford to pay. And you talked at the beginning of the show about an aspirational society, and there are a lot of people who, unfortunately, want to have those rewards before they can really pay for it. And that’s a bigger issue than what I was talking about with my readers.

JIAN GHOMESHI: Robert, you write for the Wall Street Journal. You’ve seen first-hand some of the carnage down on Wall Street. Do you think the media has unfairly blamed the wealthy this time for this recession?

ROBERT FRANK: Well, I think that’s partly the case. And I would agree with most of what Doug said. I would just add one sort of layer of context, which is that the reason that the wealthy are not spending right now is not so much because of the public relations or what’s going on in the press. It’s because they have lost huge amounts of money in the past year. The average millionaire in North America has lost more than a third of their fortune.

And more importantly, there’s still so much uncertainty in the economy. There’s a lot of uncertainty around taxes, what Washington is gonna do with income taxes. Local governments here in New York and elsewhere have already imposed millionaire taxes on those making $200,000 or more a year. And so I think it’s easy to say, well, the media’s responsible for shaming the wealthy into not spending. But I think the real issue is economics. They have lost huge amounts of money, and they don’t know what the future’s gonna bring for the economy. And like the rest of us, when they’re uncertain about the future, they don’t want to spend.

JIAN GHOMESHI: Doug, I’m curious what your community – or your readers, I should say, as a community, your very wealthy readers – what they’re saying about how they’re being depicted. How are they reacting to some of the ways they’ve been represented through this financial crisis? Do they care? What are you hearing from them?

DOUG GOLLAN: Just to add to Robert’s point and maybe delineate it a little bit more for my specific readership – there are people who were flying by private jet last year who are now hunkered down and – like Robert said – not spending money. And they’re not my reader anymore, because they’re not on a private jet. They parked the jet, they’re selling the jet, they’re not chartering a jet. But I’m speaking specifically to those people who are fortunate enough to be in a situation where they can afford it. They are optimistic enough about their own net worth and also their own business that they’re continuing to use the private jet. So when I look at my readers, I think that they’re people who, for whatever reason, whatever they’ve been able to do, are in a fairly good position, they have a positive outlook –

JIAN GHOMESHI: But do they think they’ve been mischaracterized or unfairly treated somehow by the media?

DOUG GOLLAN: I read the comments in Robert’s blog after he excerpted my letter – and it really ran the gamut. There were some people who said, I’ve been poorer than poor, I made the money, I’m going to spend it however I want. So it’s hard to generalize with any group, including my readers. And again, my point was that if you’ve earned it, you have enough money, you’re obviously feeling pretty good about your personal state if you’re still flying around on your private jet. If you want to throw your wife that 40th birthday party or buy her that diamond necklace – in addition to making her feel good, in addition to making yourself feel good, you’re really helping the economy when you do it. So that was really my point.

JIAN GHOMESHI: Guys, I thank you both very much for this. Thanks for making the time.

DOUG GOLLAN: Thank you.

ROBERT FRANK: Thank you.

JIAN GHOMESHI: Bye-bye. Robert Frank writes the Wealth Report blog for the Wall Street Journal. We reached him by phone in New York City. And Doug Gollan is the president and editor-in-chief of Elite Traveler magazine, and he was in our New York studio.

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. Danziger: Luxury Marketers Face Long Haul with Aspirational Consumer Recovery

Unlike in other economic downturns, luxury retailers are taking a hit along with the rest of the industry, according to Unity Marketing’s Pam Danziger.

In a recent release, she said, retailers have to be willing to make tough choices and clearly align themselves with the needs of the customer without just paying lip service.

She noted, the luxury goods industry has been hit hard by the downturn as consumers, worried about job security and the health of their economy, shied away from indulging in upmarket shopping.

According to Danziger, the most-seriously hit products have been big-ticket items such as Swiss watches, followed by jewelry and fashion apparel. Leather goods such as handbags and shoes have proven more resilient.

One of biggest questions for luxury investors today is whether demand from emerging markets such as China and Latin America will be sufficient to compensate for weak sales in more mature and saturated regions such as Western Europe, Japan and the United States.

She added, “Many also wonder if the industry will ever return to its historical growth levels or if it will remain at lower levels for the years to come. Perhaps we have entered an era of austerity and self-restraint which will hold back consumers from spending on luxury items.”

For luxury brands, this outlook means that focusing on the high net-worth customer who can easily afford luxury purchases without balancing the checkbook is going to be a key strategy moving forward.

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. Need Some Good Counsel? Two Places I Recommend…

Before we started Elite Traveler back in 2000 I first met Greg Furman, chairman and founder of The Luxury Marketing Council. Greg’s group brings luxury marketers and managers together to exchange ideas, get a sound check and develop synergistic relationships.

Milton Pedraza is CEO and Founder of The Luxury Institute, a source of impartial ratings that enables brands to see how high end consumers rank them. Milton can be found frequently in print, on the radio and television, commenting on luxury as an industry, and has been a major force behind getting luxury brands to jump into the e-era.

Recently I had the good fortune to talk to both Greg and Milton about the current challenges and get their insights. Links to the interviews can be found below:

Milton Pedraza

Greg Furman

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.