ET Insider – November 15, 2011

Elite Traveler Insider –

November 15, 2011

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. From the Eurozone, UHNW Consumers Now the Top Target

2. In Gary, Indiana, Private Jets are Keeping the Economy Humming

3. If You Don’t Believe Me About the Economy, Believe Our Readers

4. In Switzerland, Super Rich Keep Spending

5. And My Next Personal Appearance…

1. From the Eurozone, UHNW Consumers Now the Top Target…

German Chancellor Angela Merkel recently commented that it will take a decade for Europe to dig out of its debt crisis. And last Friday as I picked up the papers in London, the headlines trumpeted the EU cutting the 2012 growth forecast from 1.8 percent to 0.5 percent.  It was a significant downgrade by any stretch.  At the same time, the outlook was for home mortgage rates to rise while wages would stagnate.

However it is a different story for the “heavy users” of luxury products and services – elite travelers who fly by private jet:   Eurocontrol predicts near double-digit growth for private jet travel in Europe in 2012 and that private jets will account for close to 15 percent of all movements! In other words, slightly one in six flights across Europe will be by private jet.

While I won’t claim to be an expert on Euronomics, it does have the look and feel of what happened in the U.S. economy with the aspirational market making draconian spending cutbacks as they tried to stay afloat (i.e.- mortgage payments, then new BMW, credit card splurges back in the bonus days).

From a marketing perspective, Elite Traveler provides perhaps the most efficient and effective way ever invented to target global UHNWs.  With circulation to over 100 countries, and 99 percent split between Europe, Russia, CIS, Middle East, Africas and the Americas, one placement provides a brand exposure to over 630,000 HNW and over 400,000 UHNW consumers with two months exposure for a single placement.

When chatting about ad programs, I always make the point that Elite Traveler is hardly the major buy on the budget for global luxury brands.  That said, despite the relative low out of pocket, in these challenging times I would want to make sure my brand is front and center with consumers who have the financial means to buy my product.

============================================================ ONLY ELITE TRAVELER – Elite Traveler is the ONLY publication targeting and reaching private jet travelers to have its circulation successfully audited.  View our BPA statement here. ============================================================

2. In Gary, Indiana, Private Jets are Keeping the Economy Humming…

My friends in the luxury industry, be it hotels or handbags, understand the value of the UHNW consumer to their business.  So I thought another example of how these UHNW customers help the economy would be welcome.

Commercial airlines have come and gone to this Northwestern Indiana city which provides easy access to Chicago.  But while general media may bash private jets and their well heeled cargo, the folks in Gary are happy about their landings and takeoffs.

Recent reports show private jet flights have almost doubled at the airport in the past four years, despite the headwinds offered by the deepest economic recession in decades.

From Northwest Times:

“We are in the right place,” said Wil Davis, owner/operator of the Gary Jet Center, the airport’s fixed base operator. “It’s all about real estate.”

Gary/Chicago International Airport is benefiting from congestion at O’Hare and Midway airports, as charter operators and corporate jet owners look for faster ways to get in and out of Chicago, Davis said.

In all, there were 4,290 private jet landings and takeoffs at the Gary airport last year, compared to 2,214 in 2007, according to the Jet Tracker database.

Charter operators account for much of the increase, but jet-owning tenants at the airport also are driving it.

The Boeing Company, which bases its corporate jet fleet there, has more than tripled its flight activity during the past four years, according to the Jet Tracker database. In 2010, the aircraft maker notched more than 1,000 landings and takeoffs there for the first time.

Those aircraft include a Boeing 737 airliner outfitted as a flying office suite and a number of Bombardier jets. Other companies with jets based in their own hangars at the airport are Fortune 500 utility company NiSource Inc., White Lodging Services and Burrell Professional Labs.

“It affirms that is a place we should be spending our energy,” said Bill Hanna, executive director of the Northwest Indiana Regional Development Authority. “It also affirms the strength of the Chicago aviation market.”

The recession-proof surge in jet traffic may help Hanna and others make their case even after last week’s debacle where a “major airline announcement” was scheduled and then abruptly canceled. The airport has not had scheduled commercial air service since Skybus Airline folded after flying out of Gary for only 23 days in the spring 2008.

Private jet traffic began to grow exponentially in the United States at the beginning of the last decade as the idea of fractional jet ownership caught fire, according to Kyle Kuebler, Porter County Regional Airport director. Fractional ownership gives individual companies access to jets, which they can use for a certain number of hours per month, by purchasing a share in an actual jet.

It’s still not cheap. Fractional ownership in a nicely fitted-out eight-passenger jet can be had for less than $1 million if only limited use is required, but it can cost up to several million dollars for heavy users.

Fuel sold directly to plane owners accounts for about one-third of the airport’s self-generated income, Kuebler said. Land leases to jet owners that maintain hangars at the airport also generate income.

Gary/Chicago International earned $302,650 in 2010 from fuel, landing and parking fees, according to airport records.

Although the value of jet travel to the local economy is not tallied at each airport, the airports are known to generate significant economic activity overall. The most recent report from the Aviation Association of Indiana tallies the Porter County airport’s overall economic impact at more than $27 million and Gary’s at $153 million.

The airports also generate significant employment, with about 50 people working on the airfield at Porter County Regional and more than 160 at Gary/Chicago International. About 120 of those at Gary work at two jet-servicing facilities, the Gary Jet Center and the Boeing flight center.

Still, both airports have a way to go if they want to enter the jet port big leagues. Chicago Executive Airport, in Wheeling, Ill., hosted 12,604 jet landings and takeoffs last year, a 13.8 percent increase over pre-recession levels, according to the Jet Tracker data.

============================================================ ONLY ELITE TRAVELER – Elite Traveler is the ONLY publication in the world delivering 400,000+ readers with a Household Income of $1 million + ============================================================

3. If You Don’t Believe Me About the Economy, Believe Our Readers…

The good news for luxury providers is UHNW consumers plan to spend more in 2012 than 2011, according to a Prince & Associates survey of over 150 Family Offices.  Family Offices typically manage at least $100 million and often more for a single family or sometimes several families.

At the same time, private bankers who serve some of the world’s richest families are seeing clients pile money into “catastrophe portfolios” and real estate, seeking defensive positions that might help them weather a far-reaching economic storm that has roiled financial markets worldwide.

According to Reuters:

Super rich are creating “catastrophe portfolio” consisting of three equal parts: gold; blue-chip international companies; and bonds issued by developed nations. Another popular strategy is to buy real estate – particularly properties in London, according to the report.

A striking aspect of the story is that when it comes to paranoia and fear, it may be that the very rich are not as different from you and me as Fitzgerald thought. First, the move into gold and real estate satisfies a basic, highly unsophisticated urge: to purchase tangible things that are meant to have lasting value.

“They can see and touch a building. It gives them stability,” says banker James Fleming of Coutts, the Royal Bank’s private banking section.

And it seems that some of these well-heeled customers have been very stubborn about where their money goes – and what kinds of yields they expect.  For instance, more money is heading out of southern Europe, the bankers say.

And with today’s ultra-low interest rates and the turmoil brought on by a credit crisis and the Arab Spring, it’s tough to find a risk-free way to rack up profits. As Swiss banker Ivan Adamovich says, “We have to explain to our clients, it’s not about making money these days, it’s about keeping wealth.”

That’s certainly the point of an article from Friday’s Financial Times, which states that the old-fashioned saving method – cramming money under a mattress – is a viable option:

Cash has outperformed other assets beloved of wealth managers. Earlier this year, a report from the UK National Endowment for Science, Technology and the Arts showed it would have been better to have kept cash under the mattress than invest it in venture capital between 1998 and 2005.

As for the “catastrophe portfolio,” Adamovich says that only his most “paranoid” customers have shown any interest – but their numbers seem to be increasing. “It’s people who have been listening to their grandmother … They are not necessarily that old. It’s people who are really afraid,” he said – possibly revealing an anti-grandma sentiment that one can only hope is not shared throughout the world banking community.”

At the same time, while Grandma may be wrong or right in this case, the UHNWs apparently want to keep their lifestyle and plan to keep spending (on their comforts).  A comfortable note for those whose many jobs are created by them, less so if you are looking for some start-up capital.

============================================================ ONLY ELITE TRAVELER – Elite Traveler is the ONLY publication targeting private jet travelers with an independent editorial and design team, original photography, award-winning editors, designers and photographers. ============================================================

4. In Switzerland, Super Rich Keep Spending…

According to The Financial Times, Switzerland’s super-rich spent more on their lifestyles in the year to August, even though imported luxury goods were made cheaper by the strong franc, wealth management and advisory company Stonehage said on Tuesday.

The 1.2 percent increase in Stonehage’s Affluent Luxury Living Index (SALLI) for Switzerland beat the 0.2 percent rise in the Consumer Price Index in the same period and bucked a 6.2 percent drop registered in the SALLI in the previous two years.

“The cost of luxury living increased despite the continuing strength of the Swiss Franc against leading currencies, which cut the price of many high-end goods for consumers,” Stonehage said in a news release.

“The currency-linked price reductions of imported goods were counteracted by steep rises in living costs in Switzerland, particularly in terms of the rental market.”

The Stonehage report looked at Switzerland’s ultra-wealthy, families with disposable assets of more than $10 million. A recent report from Boston Consulting found 9.9 percent of Swiss households had over $1 million in disposable assets, the highest proportion in Europe and second in the world behind Singapore.

The SALLI is based on a basket of some 50 goods and services and includes items such as school tuition fees, property rental in Zurich and Geneva, ski holidays, fine wine and cigars.

Of course, Elite Traveler has over 1,000 copies of each issue distributed to UHNWs aboard their private jets in Switzerland.

============================================================

ONLY ELITE TRAVELER – Elite Traveler is the ONLY publication that delivers UHNW consumers on private jets from more than 100 countries with a single ad. ============================================================

5. And My Next Personal Appearance…

Perhaps it was because I was the only American willing to come to Paris on Thanksgiving Day to work, but in any case I am always flattered when I am asked to participate in top conferences.

With that in mind, if you are in Paris on “Turkey Day” The International Luxury Business Association, which is ably shepherded by veteran luxury executive Catherine Jubin, is hosting their annual conference.  Esteemed speakers such as Richard Mille and top executives from Fraser Yachts, Armani, Hermes and Boston Consulting will all be participating.

As a journalist I always like to dig below the frosting, and I think Catherine really hit the nail on the head by creating panels to look at UHNW spending in Germany, Japan and the USA – which despite lower growth numbers represent important components of luxury spending.

For more information on attending, contact Catherine Jubin at cj@luxurybusiness-asso.com.

============================================================ ONLY ELITE TRAVELER – Elite Traveler is the ONLY publication targeting and reaching private jet travelers to have its circulation successfully audited. View our BPA statement here. ============================================================

All the best,

Douglas D. Gollan Group President and Editor-in-Chief