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Elite Traveler – ET Insider – March 26, 2008

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ET Insider – March 26, 2008

Elite Traveler Insider –

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March 26, 2008

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.

CONTENTS:

1. SPECIAL OVERVIEW: Auto/Home Sales Projections Fall; Credit Card Debt Moves into the Spotlight as Struggles Hit Mass Affluent

2. Lufthansa Goes Private (Private Jet that is)

3. It Can Be Confusing to Be Young and Rich

4. Unity Marketing: ‘Trading Up’ Luxury Consumers Will ‘Trade Down’ from the Luxury Market in 2008

5. Private Jet Travel Set for Big Boost in Southeast Asia

Advertise in private jet terminals for as little as $1,000 per month. Ask us about Luxus Networks! Email us at sales@luxusdn.com

1. SPECIAL OVERVIEW: Auto/Home Sales Projections Fall; Credit Card Debt Moves into the Spotlight as Struggles Hit Mass Affluent

J.D. Powers last week lowered its annual sales forecast to 14.95 million vehicles from the 15.7 million in projected in December. Yesterday’s home sales report showed home sales falling to their lowest level in 13 years. A story in last Thursday’s New York Times reported that “the affluent, too, are struggling as mortgages adjust upwards,” citing “consumers with annual incomes of $100,000 or more who are increasingly being ensnared in the home mortgage crisis.”

Over 10 percent of this group who had jumbo adjustable rate mortgages – at least $417,000 – had been foreclosed, were in foreclosure, or were at least two months behind on their payments. Many of these borrowers live in upscale neighborhoods in California, Florida and other states in homes that had been, at the peak of the market, valued at as much as $1.5 million. Some of these homes are now on the market for less than half the top values, and the homeowners who often took out second mortgages to start businesses, improve their standard of living (read “Trading Up for the Luxury Lifestyle” story below), and other spending sprees are now in a literal state of shock.

Of course the mortgage crisis has overshadowed the next big shoe to drop. According to a report in The New York Times:

“Since the early 1980s, debt has gone from 80 percent to 133 percent of disposable income, according to Kathleen Keest of the Center for Responsible Lending.

“But the rate of increase in credit card debt actually slowed at the beginning of the century. Why? Because the housing bubble had begun, and with it came a shift from credit card debt to home equity loans. From 2000 to 2006, Americans borrowed a staggering $1.3 trillion from their homes. By comparison, credit card debt rose much more slowly.

“By the end of 2006, however, the housing bubble had ended, and so had the ability of homeowners to use home equity loans. But it was hard to turn off the debt spigot entirely because so many people had become accustomed to living beyond their means.

“Sure enough, it was right about then that credit card debt began climbing. In 2004, for instance, credit card debt grew at a rate of $6.25 billion a quarter. In just the fourth quarter of 2007, it grew by $20 billion. Total credit card debt stands today at about $950 billion. That is still not close to the $11 trillion in mortgages, but it’s within spitting distance of auto loans.

“It is that rapid rise in credit card debt that has the bears worried. ‘Never in history has the American family skidded into recession with so much debt,’ Ms. Warren said.

“‘It is unsecured debt,’ said Daniel Alpert of Westwood Capital. ‘Eventually people are going to hit the wall.'”

Unity Marketing’s Luxury Spending Index is at historic lows and Pam Danzinger has listed “trading down” as a main agenda item for mass affluent consumers, particularly those with less than $150,000 Household Income.

At the same time, private jet travel and delivery of new private jets is at record levels. As Bear Sterns was melting down, both Merrill Lynch and Citigroup were handing out multimillion-dollar “retention” bonuses to top executives.

Naturally, some of the Bear folks who lost virtually everything will not be flying on private jets in the near future, which reminded me of an interview a few years back with the owner of Beverly Hills Motors. When asked how the recession impacted his business, he said, the names on the mailboxes may change, but whoever is living in those big houses buys his luxury cars.

It is the same formula with private jets. In these hard-to-predict and turbulent times, the folks on the private jets have the means to be your best customer and make up for sales lost to “trading down” mass affluent consumers. With distribution aboard private jets and mega-yachts in over 100 countries worldwide via our BPA-audited circulation, and over 315,000 readers every issue with at least a $1 million + Household Income, Elite Traveler keeps your brand top-of- mind wherever these big spenders happen to be. Additionally, with presence in more than 100 of the busiest private jet terminals in North America, Luxus Networks enables you to drive traffic and sales in specific markets. For more information, check out http://pr-dbetmg-elite-traveler.pantheonsite.io/business/home.html.

YOUR BEST CUSTOMERS ARE HERE: Elite Traveler delivers more readers (318,000) with a $1 million + Household Income than Departures (34,000), Robb Report (30,000), Town and Country (47,000), Vanity Fair (44,000) and The Wall Street Journal (128,000) combined. Source: Prince & Associates

2. Lufthansa Goes Private (Private Jet that is)

The German airline Lufthansa continues to impress me with its well thought out program targeting high-yield front-of-the-plane travelers. After all, with roundtrip first-class tickets between the U.S. and Europe selling for as much as $14,000, it makes sense to understand what these high-profit customers want and ensure that they get it. With discount economy fares as low as $400, this means one first-class customer is equal in revenue to as many as 30 back-of-the-plane travelers.

While Lufthansa didn’t invent the private jet connection to commercial flights, they today are the most aggressive in expanding the service and marketing it. For aviation buffs, you may remember that Pan Am dabbled in the private jet market in the 70s, British Airways was preparing to give it a try before 9/11, and currently Austrian Airlines, Qatar Airways, Saudi Airlines, and Korean Air all offer private jets that can be used to connect from their mainline flights to wherever the customer wants.

Lufthansa, which launched its Lufthansa Private Jet program in conjunction with NetJets, has now decided to operate its own fleet of private jets. While the jets won’t have Lufthansa logos on the outside, they will have some subtle branding and they will have customized interiors that will reflect touches of the airline’s highly regarded First Class Terminal in Frankfurt, a private facility separate from the main terminal which feels more like a private club that an airport. The FCT, as it is known, even has its own Duty Free store as well as a gourmet sit-down restaurant area and a Cigar Room. From there passengers are taken to their flights in private sedans.

Demand for Lufthansa’s private jet service, which launched in 2005, rose by 26 percent in 2007 and during peak months exceeds capacity by 60 percent. The LPJ fleet will feature nine aircraft from Cessna and Bombardier with the first, a Cessna Citation CJ3, due for delivery in March and the entire fleet scheduled for delivery in the following months.

Thierry Antinori, Lufthansa’s Executive Vice President Marketing and Sales, noted, “In the premium segment, we offer our passengers unparalleled flexibility and exclusivity, and with the LPJ service we are once again setting the pace within one of aviation’s niche growth areas in Europe.”

Once the fleet is complete, Lufthansa and SWISS customers can choose between four different aircraft types: three Cessna Citation CJ1+ (light size, seating four passengers); two Cessna Citation CJ3 (small size, six passengers); two Cessna Citation XLS+ (mid size, seven passengers, for which Lufthansa will be the first commercial operator in Europe); and two converted CRJ 200s that are similar to the Challenger 850 (large size, 12 passengers).

According to the carrier, passenger satisfaction ratings for the service are consistently high at over 90 percent and bookings from customers throughout the world – from the U.S. to New Zealand – continue to increase. Overseas customers mainly utilize Lufthansa’s seamless booking capabilities by coupling the LPJ service with long-haul flights operated by Lufthansa and SWISS through their Frankfurt, Munich and Zurich hubs. Demand for aircraft especially in the mid- to large-size category, accommodating seven to 12 passengers, rose disproportionately in the past year. It was at its strongest among customers from Germany, Scandinavia, France and Italy, who used the LPJ service primarily for point-to-point flights. Almost any connection is possible: Customers can choose from more than 1,000 destinations in Europe and the Russian Federation.

In addition to operating its own private jet fleet, Lufthansa will coordinate with two to three certified partners to ensure its ability to respond to demand peaks. This will include current partner DC Aviation (DCA), which Lufthansa enlisted in December 2007 after ceasing its cooperation with original partner NetJets.

Passengers can travel point-to-point as well as in combination with a Lufthansa or SWISS long-haul flight at an attractive, fixed price that is based upon the distance traveled and includes all charges and costs, irrespective of the number of passengers on board the aircraft. The entire itinerary is organized by an event manager and a personal service team is available to passengers around-the-clock. Catering and in-flight entertainment is tailored to individual requirements and passengers enjoy the use of the airports’ First-Class facilities provided by Lufthansa, SWISS or Lufthansa partner airlines.

It surprises me more airlines haven’t jumped onboard. Of course, I am pleased to let you know my favorite magazine will be aboard Lufthansa’s private jet fleet!

Advertise in private jet terminals for as little as $1,000 per month. Ask us about Luxus Networks! Email us at sales@luxusdn.com

3. It Can Be Confusing to Be Young and Rich

A recent story from the Fort Lauderdale newspaper reviewed some of the differences between the very rich and folks like me. The paper rightly reported, “The lifestyles of people in these stratospheric economic brackets can be hard for many Americans to imagine.”

In an interview, wealth advisor Peter Friend-Ross recalled a client who owns a private jet. The woman’s child was so accustomed to this type of travel that when the family boarded a commercial flight, the youngster became confused and asked: “What are all these people doing on the plane?”

The story also noted something I think many luxury marketers have missed. “Most of our era’s super-rich weren’t born that way. Only 8 percent inherited their wealth,” according to the Harrison Group, a Connecticut-based marketing research firm. The majority, the firm’s survey found, made their money by starting a business or growing someone else’s.

The newspaper reported, “Even in Palm Beach, an area known worldwide for its ‘old money’ residents, new money is starting to take over. As you go further south, into Broward and Miami, the money becomes younger and more ostentatious. One advisor noted she had arranged for etiquette courses for overnight millionaires and explained opera to clients who had never been outside the small, rural South American towns in which their parents made a fortune.

The concept translates this way for those marketing luxury goods: The Super Wealthy today are more likely to know where to find laundry detergent at Wal-Mart (from their pre-Super Rich days) than to recognize your brand as they walk along Madison or Worth Avenue or Rodeo Drive.

These self-made Super Rich are not yesterday’s “Trading Up” consumers. Yes they had debt, but it was not due to buying Hermes ties. They were borrowing to fund their business, and they were not reading GQ or Vogue. They were deeply ensconced in trade journals as they burned the midnight oil to make their business successful.

What this means is there is an entire generation of Super Rich consumers who have no idea what most luxury brands are about, what their heritage is or how they are positioned in the marketplace.

For these brands, it is more imperative than ever that they focus on the deep pockets of the Super Rich and create top-of-mind awareness, educating them on their brands so the next time the wealthy person is walking past the boutique, they will want to stop in.

The goal of Elite Traveler with our distribution aboard private jets and mega-yachts in over 100 countries worldwide, and Luxus Networks, with our proprietary programming on flat-screen televisions in the lounges of top private jet terminals in North America, plus various other advertising and marketing opportunities, is to enable luxury marketers to create a high-impact program that literally surrounds this Super Rich consumer and brings your brand front-and-center.

YOUR BEST CUSTOMERS ARE HERE: Elite Traveler delivers more readers (318,000) with a $1 million + Household Income than Departures (34,000), Robb Report (30,000), Town and Country (47,000), Vanity Fair (44,000) and The Wall Street Journal (128,000) combined.Source: Prince & Associates for ET, MMR for others

4. Unity Marketing: ‘Trading Up’ Luxury Consumers Will ‘Trade Down’ from the Luxury Market in 2008

According to Unity Marketing, “The less affluent luxury consumers, those with incomes under $150,000, will be considerably less active ‘trading up’ for the more expensive luxury goods and services in 2008. “Many luxury and near-luxury brands have seen much of their growth in the past five years generated by ‘trade up’ spending among less-affluent consumers.

“But while the ‘trading up’ consumers will stop buying the premium luxury brands, they have developed and nurtured a taste for luxury in their life that they are not going to give up easily. That means they will turn to the pleasures they derive from ‘little luxuries,’ rather than indulging in big-ticket luxury spending. So for example, instead of buying a new Guccihandbag, they will get their Gucci thrill from the latest perfume. They will shop sales and discount racks more aggressively, frequent designer outlet malls, and turn to the internet to find websites that offer luxury fashions for less.

“The rapidly expanding market for ‘cheap chic’ will also prosper this year selling to the ‘trading down’ consumer who craves fashion for less. Vera Wang in Kohl’s, Nicole Miller in J.C. Penney’s, Proenza Schouler at Target, H&M, Zara and the rest will draw newly budget-conscious affluent shoppers looking for a fashion pick-me-up.

“In the experiential realm, they will opt for drinks and appetizers at the latest ‘in’ restaurant rather than ordering a full meal, and they will take short-break domestic luxury vacations, instead of a week-long stay.”

In other words, luxury brands that want to sell $2,000 handbags and $10,000 bracelets need to target the people who still have the disposable dollars to buy them, particularly households with $1 million + Household Income.

Advertise in private jet terminals for as little as $1,000 per month. Ask us about Luxus Networks! Email us at sales@luxusdn.com

5. Private Jet Travel Set for Big Boost in Southeast Asia

Asia is getting more private jets, courtesy of NetJets. According to various reports from Southeast Asia, the company is starting operations in India and will look at a partnership in China as it taps fast-growing markets outside its traditional base of the United States and Europe.

NetJets, a unit of billionaire investor Warren Buffett’s Berkshire Hathaway, expects strong economic growth and rising incomes in Asia, the Middle East and Latin America will boost demand for private aviation.

NetJets, which sells fractional ownership in private jets to individuals and companies, operates more than 750 aircraft now.

“In India, wealth creation is taking place at a phenomenal pace,” said John Colucci, executive vice president, at a news conference with local partner Ashish Chordia, who represents luxury brands such as Porsche and Fendi in India.

“We think we’ll get to our first 100 customers in India very quickly, and that will be just the tip of the iceberg,” he said.

There has been a 400 percent increase in the number of NetJets business flights to and from India in the last four years, Colucci said, adding the firm will be targeting high net worth individuals as well as businesses in India.

“Our customer base is not affected by a market slowdown… break-even will be a few years down the line here, not many years,” Colucci said.

Tata Group’s Indian Hotels recently bought a stake in Singapore-based Briley Group’s BJETS, which also offers fractional ownership in private jets in India and southeast Asia. The venture has ordered 50 jets worth more than USD$600 million.

YOUR BEST CUSTOMERS ARE HERE: Elite Traveler delivers more readers (318,000) with a $1 million + Household Income than Departures (34,000), Robb Report (30,000), Town and Country (47,000), Vanity Fair (44,000) and The Wall Street Journal (128,000) combined. Source: Prince & Associates for ET, MMR for others

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