ET Insider – March 21, 2007

Elite Traveler Insider –

March 21, 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, that 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.

CONTENTS:

1. Simon Cooper Jets Ritz-Carlton to New Territory…

2. Four Points Budget Hotel Makes Conde Nast List…

3. Airbus Sells a Private Jet A380 Version…

4. Soneva Fushi Hosts British Tycoon’s Birthday…

5. Lufthansa Private Jet Proves a Pleasant Surprise for the Chairman…

“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

1. Simon Cooper Jets Ritz-Carlton to New Territory…

One of my questions for Simon Cooper, the president and COO of The Ritz-Carlton Hotel Company, was going to be about taking over from legendary founder Horst Schulze in 2001. Schulze not only built the company from scratch, but led Ritz-Carlton to become the first hospitality entity to win a Malcolm Baldrige National Quality Award in 1992, also one of the smallest companies to be acknowledged with the honor.

After mass hotelier Marriott’s purchase of the luxury group from founder Bob Johnson, Cooper (who was head of Marriott in Canada) was tapped to take over from Schulze as the new parent decided to exert control over its adopted child.

Stepping into such big shoes and inheriting a deposed general’s loyal army had to have been an enormous, almost un-winnable battle, or so I imagined. I thought it might be interesting to talk about the transition. However, the British-born Cooper is such a sparkling personality it was easily apparent within minutes of sitting down with him how he won over the troops. We ended up going through a myriad of other subjects during our 45 minutes.

Frankly, Cooper is just pretty darn good at getting people to like him very quickly. This was the first time I had really met him for more than those passing platitudes you have at industry events, and he is so amiable, my questions about the transition never really seemed to fit.

He is pro-active in knowing his audience, at least judging by our time together. By that I mean he was quite up-to-date on Elite Traveler and the private jet market, making it easy to see how his warm and conversational style would engender loyalty with any team member. I was quite shocked when he referenced a story we had on one of his properties in a several months’ old copy of the magazine I had put down on the coffee table before our meeting. Later in the lobby of The Ritz-Carlton Berlin I saw him chatting up one of the chefs who was laughing at whatever the big boss had to say, so I assume his people friendly techniques do quite well for him.

I had the chance to see him later at a reception and let him know if the hotel business ever bores him — it has been his career since getting out of school — his suave demeanor could easily be parlayed into rating points as a network newscaster.

One of the reasons I wanted to sit down with Cooper is that I noticed we are doing more coverage of Ritz-Carlton in Elite Traveler, mainly because of his success in expanding the company’s hotel locations and growing product lines. Under Cooper, the company has become global with 63 hotels currently operating, 26 more to open in the next three years and 28 Residences and Clubs. There will also be the first Ritz-Carlton community, a development in suburban Washington, D.C. of freestanding homes where Ritz-Carlton will manage the clubhouse and provide concierge services for the homeowners.

I have to say, until sitting down with Cooper, I was a bit put off by all the reports of Ritz-Carlton’s move to become more contemporary and my perceptions that they were in danger of losing that mystique about service that always makes staying at one of their hotels an elite experience.

Cooper was well prepared to make his case. Naturally his analogy was the private jet market. “Twenty years ago if you looked in the FBOs (private jet terminals) it was folks like us,” Cooper told me, providing a flattery that I might somehow classify as an influential CEO, Chairman of some meaningful conglomerate or a business baron. Cooper points out that today FBOs and private jets are filled with families, top executives of both genders and an extensive range of ethnicities and ages. “We see the same thing in our hotels,” he says.

The change to take some of the rigidity out of Ritz-Carlton’s service rules means empowering front-line employees to understand the level of service a guest wants. Cooper gives the example of a couple having a romantic dinner on the terrace of a resort. “In that case, give them every one of the 53 service points that is going to make that experience special,” versus “a businessman on his cell phone. In that case, serve him the meal and get out of his way.”

Cooper claims that the transition from highly scripted service to service uniquely tailored to the happiness of guests who often spend $5,000 or more during a stay is going well and “guest engagement” scores have increased. Examples of this re-focus were evident to me during my recent stay at The Ritz-Carlton Berlin, such as when our dinner party at Thomas Kellerman’s Michelin-starred Vitrum could never quite quiet down for the waiter to introduce each course of our tasting menu. Instead, he worked his way around the table, informing our group in twos and threes rather than by interrupting the various conversations. Still, Ritz-Carlton was able to pass one of my strict service tests: handing over my laundry without filling out a chit. Just saying what time I want my clothes back, and that my shirts should be folded with no starch, in my opinion, should suffice. On the third day in Berlin, as I was handing over my wash, the young lady smiled and asked, “Folded, no starch by 4 pm?”

On the subject of celebrity chefs and other co-branding exercises, Cooper is following an interesting strategy pursuing partners who “have as much to lose as we do.” Obviously the goal is to keep more revenue in the hotel, and so Cooper is happy that in Grand Cayman, guests who want to eat at Le Bernardin’s Eric Ripert’s newest restaurant are going “downstairs instead of down the street.” Other dining partnerships include luring Dean Fearing from The Mansion in Dallas to the new Ritz-Carlton, a hotel and residences affair opening midyear. Spago is going into Bachelor Gulch, BLT will be the new restaurant at New York’s Central Park South property, Il Mulino is at San Juan and Michelin chef Heinz Winkler will headline in Ritz-Carlton’s long-awaited Moscow flagship, also to open later this year.

On the spa front, Ritz-Carlton has three partners — La Prairie, ESPA and Six Senses — as well as non-branded spas. In choosing which partner to bring to a specific location, Cooper notes “La Prairie has a strong New York following,” making it natural for Grand Cayman, whereas Espa’s UK roots made it the choice for Dublin, while Six Senses’ Asian following fit well in Doha.

In addition to a year of big openings in places such as Moscow, Beijing, Dublin, Dallas and Tokyo, Cooper says a big story line for the company is the massive amounts of money that are being spent renovating and updating current hotels. Palm Beach was completely closed and has just re-opened. Kapalua, Rancho Mirage, Cancun and New Orleans either have or will undergo the same treatment while Barcelona, Osaka, Shanghai, Laguna Nigel, Naples and Amelia Island are all getting major overhauls while staying open. In addition to a new contemporary feel to fit the lifestyles of Ritz-Carlton’s ever more diverse customer base, Cooper notes that the hotels are being re-stocked with a larger percentage of suites. He figures that 33% of his target audience now make an annual multi-generational trip, up from 19% several years ago.

As Ritz-Carlton attempts to extend its lifestyle to more types of experiences, Cooper notes that it is not necessarily bringing hotel service to residences, but offering “the best level of residence.” By having more projects that are not tied to hotels, Ritz-Carlton has vastly opened up its opportunities. He cites Baltimore as an example, where a Residence project is coming onboard in an upscale residential location that would not support a hotel.

Putting the Ritz-Carlton name on a real estate project drives premiums of 25-40% “if you ask our partners” Cooper says, meaning that developers are more willing to hand over hefty fees to be able to use the Ritz-Carlton lion.

However, developers don’t seem to be alone in wanting some Ritz-Carlton. Cooper notes that on customer surveys, 54% of guests say, “I can’t imagine a world without Ritz-Carlton.”

“I’ve seen a lot of people reading Elite Traveler; they love the magazine they can’t believe our FBO gives it away for free” Carol Hammonds — Hammonds Air Service, Houma, LA

2. Four Points Budget Hotel Makes Conde Nast List…

We know that elite travelers spend a lot of money at hotels. The most recent research by Prince & Associates shows that private jet owners spend over $400,000 annually on hotels, resorts and spas. And of course, with an Average Household Income of $5.3 million, we know Elite Traveler readers enjoy luxury accommodations and have plenty of money to spend when they check in.

Of course, the Mass Market travel magazines like to position themselves as more upscale than they really are — perhaps aspirational would be a good term. After all, with most readers having household incomes below $150,000 BEFORE taxes, there really is a limited amount of money to spend on luxury travel.

With that, it was interesting to see Four Points by Sheraton, the Sheraton budget hotel group, was voted as one of the top hotels in the Caribbean in a poll of 28,000 Conde Nast Traveler readers.

Of course for luxury hotel marketers who are interested in targeting the big spenders, Elite Traveler is delivered to the Super Rich aboard their private jets in over 90 countries. So where is your next big booking coming from?

“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 breathtaking.” Donna Reed — YYJ-FBO Services, Canada

3. Airbus Sells a Private Jet A380 Version…

Private jet bragging rights among the ultra rich have just taken a quantum leap to a lavish flying palace that is being created inside the biggest passenger plane ever built.

The plane is the Airbus super jumbo A-380, the double-decker that can carry up to 800 passengers if it is configured with only the cheap seats. There will be just 82 passengers in the private version.

Airbus will not identify the individual who ordered the $300 million plane. That price, incidentally, is only the starting point.

Edése Doret, a jet interior expert who is designing the A-380 for the customer, will only say that he is a “Head of State.” The New York-based Doret, who has customized jets since 1988, says his work will add another $150 million to the total cost.

The price tag includes the cost of modifying the fuselage for an “Air Force One Stairway” which allows passengers and crew to enter the plane directly from the ground through the cargo bay. That stairway leads to a lower spiral staircase which takes passengers to the entry lounge. Another wide sweeping staircase leads passengers to the grand lounge on the upper deck.

Doret says the buyer’s family and friends will occupy the upper deck, which by itself is 147 feet, five inches long, longer than the length of the Wright Brothers’ first flight. In addition to the grand lounge it will have a 600-square-foot master suite and other bedrooms, a Jacuzzi, a family dining room, a game room and offices. All of it, says Doret, “will be in a desert-like environment.”

According to Doret, that environment will be created by curtains that resemble Arab tents and a mosaic built with fiber optics that will look like shifting desert sands. The lower deck has an additional dining room and work space as well as seats for the crew and staff.

This is Doret’s biggest job (which will take about a year and a half), but he is working on a number of projects that are for the super rich. “There are a lot of billionaires out there,” he says. And above and beyond the cost of buying and customizing the A-380, its owner will face operating costs of about $25,000 an hour, including the crew of 16.

“Very beautiful magazine, our CEO’s wife loves it when the new shipments arrive, it’s her favorite magazine” Ronn Nelson — Northwestern Mutual Air, Operations Milwaukee, WI

4. Soneva Fushi Hosts British Tycoon’s Birthday…

So if budget hotel Four Points is a favorite spot of U.S. Conde Nast readers (see above), Soneva Fushi got the nod from British tycoon Sir Philip Green for his 55th birthday party.

The billionaire, according to reports, flew 200 friends to Cyprus for his 50th birthday, where Rod Stewart and Tom Jones performed, and there was a toga party on the final evening at which Green dressed as Nero

.

For his 55th birthday, Green is spending over $11 million to fly 100 friends to the Soneva Fushi for a four-day celebration in the Maldives. This is clearly a trend for Sir Philip; two years ago, he spent £4 million his son’s bar mitzvah in the south of France at the Grand Hotel du Cap Ferrat (Elite Traveler, March/April issue page 120) where he created a temporary temple!

Richard Hyman, managing director of market research group Verdict, said: “Philip Green’s a very hard-nosed businessman but he also likes to have a good party. To his friends and family he’s a very generous guy. He’s a hard man, but he’s loyal to his friends. “It does seem lavish, but when you’ve got £5 million, in the context of his wealth, it’s not really out of kilter. It wouldn’t surprise me if — as a proportion of his wealth — it’s less than an ordinary person would spend on their 55th birthday.”

The U.K. is the second largest distribution point for Elite Traveler where our readership continues to ride the growth of private jet travel, so perhaps Sir Philip will be selecting his next big event from Elite Traveler!

“I love to see our clients’ reaction; they go crazy for the magazine. It inspires us here to make it rich some day” Jennifer Masse — Sun Western Flyers, Bullhead City, AZ

5. Lufthansa Private Jet Proves a Pleasant Surprise for the Chairman…

A sunny March day in Berlin provided plenty of smiles at the Lufthansa stand during the ITB trade fair, world’s largest travel show that annually draws over 100,000 trade and consumer visitors. Germany’s flag carrier had just reported an $800 million annual profit for its financial year, and its pathway to achieving these record profits has been the exact opposite of the service deficient U.S. carriers. Instead of taking away pillows, meals and other services, Lufthansa has been focused on providing additional services to woo premium passengers, particularly in First Class, a segment many airline executives have predicted to disappear. In fact, most U.S. carriers have reduced or removed on their international flights over the past decade.

The short viewpoint of competitors has been Lufthansa’s gain. Its private jet product offering seamless connections from long-haul flights to private jets for European connections has now extended its service range as far as Russia… and listen up Mssrs. Walsh and Spinetta (the respective CEOs of British Airways and Air France), the two top destinations for Lufthansa’s private jet service are London and Paris. Of course, there are plenty of folks connecting on to Sardinia, Cannes and other European capitals.

Dr. Gerald Wissel, Head of Lufthansa Private Jet and Special Products, notes that when airline chairman Wolfgang Mayrhuber launched the service he commented he would be happy with 20 flights a month, but in less than two years there are a growing number of days where private jet flights climb into the double digits.

Whereas other airlines have not been able to figure out how to combine the preference of Super Rich customers for private jet travel with the fact that most private jets don’t have the range for long-haul flights, Lufthansa has in typically efficient style created an innovative interchange product back ed by an efficient operational system.

For example, to connect its private jet flights to its regularly scheduled flights Lufthansa assigns an LH flight number to each private jet flight. To ensure that there is no such thing as a missed connection, Lufthansa LH assigns a member of its VIP service team that it cross-utilizes with its HON (Honored Guest) program to have ownership of every LH Private Jet flight from departure to arrival, which now includes limo transfers.

Lufthansa operates its private jet operations in cooperation with NetJets, but by taking control of the total trip, the airline adds a number of features that make the combined product hard-to-beat

.

For example, in one case, a private jet flight from Prague to Frankfurt was delayed by weather in the Czech city, meaning that the customer wasn’t going to make their Frankfurt to New York flight. Wissel notes as part of Star Alliance, Lufthansa was able to look for alternatives among Austrian, United and several other partners. Still finding no suitable routing, Lufthansa further utilized its airline advantage. It issued a new First Class ticket for its customer on a British Airways late evening departure from London to the Big Apple. With weather clearing in Prague, the customer was flown by LH Private Jet to London Heathrow where Lufthansa met the customer, gave her the new First Class ticket and checked her in with British Airways. In New York, LH Private Jet counterparts met their customer to make sure there was a happy ending.

Another example of LH Private Jet’s value is the Lufthansa First Class terminal in respective lounges in Munich. The stand-alone terminal means Lufthansa First Class customers never have to enter the regular terminals as they are driven to and from their flights via Porsche or Mercedes. The facilities have lounges, dining rooms with full a la carte restaurant, sleep rooms and shower/changing rooms. Wissel notes for a customer flying First Class say, Chicago-Frankfurt and then taking LH Private Jet to Milan, a time-pressed CEO can shower and change for business at the First Class terminal in FRA and then fly to Milan’s close-in Linate Airport and be at a meeting within 20 minutes of deplaning. All nonstop long-haul commercial flights would have landed at Malpensa, well over and hour a way in traffic, and the executive would still have had to check-in at his or her hotel, shower and change.

Marcus Casey, Lufthansa’s Director of Marketing for the Americas, says the LH Private Jet product is paying dividends in Hollywood. The airline’s First Class cabin on its 747-400s is on the Upper Deck, and more and more stars and studios are buying the entire cabin to create a widebody private jet experience, then using private jet to transfer to other cities. LH Private Jet also offers fixed zone pricing taking the hourly guesswork out of costs, and includes all landing fees and catering with certain exceptions.

Casey notes the results are clear. After years of stagnating traffic in First Class, Lufthansa had a 20% gain ex-North America in 2006 and has gained a number of leads for corporate account business after carrying company CEOs and Chairmen.

What’s next for Lufthansa Private Jet? More planes and a new five-year exclusive deal with NetJets have already been signed. While declining to comment, the natural extension would be for the German carrier to offer the service from interior points in North America to their gateways here, so a passenger flying from Cleveland to Frankfurt could fly LH Private Jet to Chicago and have the same type of seamless transfer to their trans-Atlantic flight.