ET Insider – November 29, 2007

Elite Traveler Insider –

November 29, 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, 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. Report from The Luxury Marketing Summit – Cars, Jets, Watches, Handbags, etc.

2. 60 Percent of Consumers believe a Recession is Coming

3. And Florida’s Luxury Resort is: Ft. Lauderdale

4. Russia’s Rich Princesses – an Elite List

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, MMR

1. Report from The Luxury Marketing Summit – Cars, Jets, Watches, Handbags, etc.

Call me a pessimist. From nothing more than what I read, and talking to small to medium size luxury focused companies that, in my mind, are closer to the business than some of the conglomerates, I think the mortgage mess is going to have a considerably deeper impact than any of us would hope. And I’m not just talking about the US. What about those factories churning out exports for the U.S. masses that may no longer be buying? Certainly, the Conde Nast “trading up” affluent reader is going to be trading down as their adjustable mortgages increase, energy prices rise and their real estate “investments” where they were hoping to make a quick buck go south.

On the other side, the world’s richest 1% of consumers who control some 50% of the globe’s assets will not be impacted, at least to the extent that they will continue to live the same uber-lifestyle they have been living (buying a $10,000 watch or $2,000 handbag to these folks is like me going to Starbucks for a coffee). That obviously is good news for the advertisers in Elite Traveler, as our over 575,000 readers will provide a steady source of sales growth via our global reach aboard private jets in over 90 countries. Of particular interest for advertisers, I believe, are our readers with a Net Worth of $25 million +. This is where in my estimation the lifestyle protection begins.

Toward the end of the recent Luxury Marketing Summit at The Broadmoor in Colorado Springs, I remarked to Luxury Marketing Council founder and CEO Greg Furman I felt like I was standing on the deck of the Titanic with people still saying the great ship was “unsinkable” after it hit the iceberg.

A recent American Express survey claimed that Mass Affluent consumers are still whistling a happy tune and presumably racking up charges on the Platinum and Gold cards. Centurion, from my point of view, is more the card of the small business owner who runs most charges through her/his small business, as opposed to the Super Rich spender that Amex would like us to believe.

Of course, Amex, as reported in The Wall Street Journal, has significantly increased its reserves to protect itself against future write offs for customers who default on their cards. I guess that’s something their publishing division which puts out Mass Affluent magazines forgot to mention. “The new less affluent customers (aspirational consumers trading up – remember that book) are now proving vulnerable to a variety of economic factors that don’t appear to faze the very rich,” Vanessa O’Connell wrote in a Wall Street Journal piece which predicted luxury brands will begin to focus on the Super Rich.

I heard the term “fish where there fish are” a number of times in Colorado; however, I was surprised by how many marketers were still focused on the Under $250,000 Household Income market that Polo would site days later as why they cut their full year earnings estimate. Roger Farah, Polo Ralph Lauren’s President, was quoted in Women’s Wear Daily as saying “Customers at the high end continue to shop” but citing “the better and moderate customer being pinched due to the tightening of credit and the troubling home market.”

My guess is if the conference was held a week later, the tune might have been a bit different.

All in all, the conference was very interesting and provided some great networking and interesting insights.

I particularly enjoyed a presentation by Keith St. Clair, Corporate Manager of Lexus Global Brand Strategy. It provided some great insights into why Lexus has been such an amazing success story, including how critical it was to create a separate environment from mother ship Toyota by providing separate offices so that the new luxury brand could develop its own unique culture.

It is a challenge Keith is now working on outside the U.S. where there are still shared showrooms and in smaller regions, Toyota and Lexus teams are shoulder to shoulder. Judging by the style I saw from Keith in our brief time together, I believe he will be very successful in his charge.

One thing that shocked me however was when he reeled off some research that the Rich don’t buy luxury cars. The numbers he presented were for new car sales for Household Incomes greater than $300,000 (not exactly Super Rich, I know, but getting above the Mass Affluent). Number One was Ford F-series pick ups, then Chevy Suburban followed by BMW 3 Series, Toyota Camry then Chevy full size pick ups. Our list from 2004 Prince Research was a bit different: BMW, followed by Volvo, then Mercedes, Porsche, Aston Martin and Lexus.

The questions were a bit different and our minimum Household Income was $400,000 + (and close to 70 percent of the sample was $1 million +), but I think the most significant part may have been that we screened our sample with “I travel primarily by private jet.”

My take was that clearly while the multi-millionaire next door may be alive and well (the person who has the money but doesn’t spend it), the wealthy folks aboard private jets are not among them.

Ricky Sitomer, the CEO of private jet broker Blue Star Jets, backed this up when he entertained the audience by reading a letter from a customer’s personal assistant describing how his Grey Goose vodka was to be served: “kept in the freezer until syrupy and served on ice cubes made from bottled water, Fiji preferred.” Ricky who kindly gave me a lift back from the conference, later joked he didn’t think many (or any) of his clients who spend into the millions of dollars annually chartering jets from him owned Camrys or Suburbans. He did say Bentleys, Porsches, Mercedes, BMWers, Lexus, etc. were definitely part of his clientele’s mega-fleets of automobiles stretched between their various homes.

The sound advice of “look for the real deep pockets” was articulately confirmed by Furman, who told the story of Burt Tansky, who some years back moved from CEO of Saks to Neiman Marcus, which also owns Bergdorf Goodman.

When Tansky arrived at Neimans, he immediately recognized many of the same names of ladies who were on Saks list of top customers. He found these same women on the Bergdorf top spenders list.

The fact that luxury marketers need to really target the deep pockets of the Super Rich (consumers who have a HHI of at least $1 million + per year) is underscored by another Furman gem: Just 35 brands account for 65% of sales in the $165 billion luxury market.

What that means is for the many small brands that operate in the space (Swiss conglomerate Nestle, for example, is larger than the entire Swiss watch industry) is that they need to pinpoint their efforts if they want their marketing dollars to gain share of voice. Mass brands that spend hundreds of millions of dollars in large circulation magazines (over 750,000 copies) and television simply will overwhelm their messages. Furman strongly advised luxury marketers to get more targeted – more on that later.

Jose Chan, Director of Isaac Mizrahi, which is introducing a new high end line, provided two great case studies from his tenure at Tag Heuer and Loro Piana that focused on training at the sales associate level. One client, a female Hedge Fund Manager, never comes in the store. Her sales associate sends her PDFs of items she thinks her customer will like to wherever in the world she happens to be. The typical order is $100,000 + and Chan made it clear more high-end customer sales don’t happen in the office. Top sales associates often meet customers in their homes, offices and even fly to meet them overseas so they can shop when they want where they want, of course producing mega orders that make it well worth. Understanding how a customer wants to be sold to is critical today.

My position for luxury brands has always been that gaining a couple extra customers like the type Jose described is what gets you to the next level when aspirational consumers are cutting back.

Denzil D’Sa, Manager of Creative Marketing for Bombardier’s Business Aircraft Division (Globals, Challengers and Learjets), unveiled some of the best advertising I have seen from an aircraft manufacturer to support its new positioning of Learjet. “It’s not about where you’re going, It’s how you get there” is the tag line to the new creative which has a great lifestyle feel. D’Sa told the audience that Learjet finally realized it was a “luxury brand,” an important revelation in a segment where most marketing focuses on business efficiency.

For the upcoming introduction of Learjet NXT, the largest Learjet to date, D’Sa noted potential customers “can buy anything they want.” To interest them, Learjet is teasing them, and then asking them to sign a non-disclosure agreement to peak their interest. Once they sign the NDA, they get access to a password-protected section of the NXT site that hopefully sells them further now that they are presumably hooked. If the purpose of advertising is to create interest, I think this approach is definitely very creative, and should be effective in enticing customers’ desires before the salespeople and demo flights to close the deal.

Dean Andrews, vice president North America for Orient-Express Hotels, told the group how customers are becoming more and more demanding in the knowledge they want from their luxury providers. His telephone sales staff are now not asked “What is there to do?” in particular location, but “What is there to do the week I’m there?”

Instead of employing $10 per hour talking heads, OEH invested in trained sales specialists who focus on particular hotels and make annual trips to the hotels they are selling. The result is a 100% premium over bookings from other channels.

Spas continue to be an area of growth, with some hotels generating as much as 20 percent of revenue from the category (an unsurprising figure since the latest Prince Research shows the average Elite Traveler reader is spending over $100,000 per year on hotel and resort spa services).

Baume & Mercier Head of Marketing Larry Califano shared with the group a great look at channel management for the Swiss watch company whose core target is consumers who buy watches between $1,000 and $10,000, a target that only in the world of luxury could be considered entry level.

After years of fretting as to whether Bloomingdale’s or Macy’s had a high-end clientele, Baum opened both stores in New York and San Francisco in addition to their existing retail partners (high end jewelry and watch stores). Sales increased dramatically in both markets without cannibalization of its previous doors.

Califano noted that with 90 percent of the wealthy having created their own wealth, many times through events such as selling their businesses, they don’t automatically change where they shop — their budgets just go up. “It’s not like you wake up one day and say I’m a Neiman Marcus customer,” he said.

Of course one of the talking points I always hear from Greg Furman is “voice of the customer” and to that end, Brett Keating, Marketing Director for Bertram Yachts, did a marvelous job showing how she is making her customer (they all have a Net Worth of $10 million +) better heard in the engineer- and design-ruled world of yachting. Keating actually has her team visit customers on their yachts with their captain and tapes them as they talk about what they like and where they would like to see changes and improvements. She then brings the video back so the designers can get it straight from the mouths of the Golden Geese.

Larry Pimentel, Chairman and Co-Owner of Sea Dream Yacht Club, showed once again that people will pay for an extraordinary experience. One of the fastest growing segments of his business is full ship charters by both families and companies where the memories are much more important than the price. These charters cost hundreds of thousands of dollars, but Larry, who may be one of the best sales and marketing people I have ever met, has his team humming. I’ll give some more space to Larry in an upcoming newsletter as my notepad overflowed from his presentation.

Of course I have to give a special thanks to Sara Montefiore, the General Manager for Camper & Nicholsons. After my session which Greg had titled, “Niche Publications, The New Sweet Spot for Luxury Advertisers,” a member of the audience asked how we know those Super Rich uber luxury consumers riding their private jets actually read Elite Traveler. Of course we have a ton of research, testimonials from private jet companies and advertisers who sell product through our magazine, and of course our circulation is audited.

Before I could dig into any of my material, Sara told the group, “Our customers have boats that cost upwards of $60 million, and we hear directly from them, they read Elite Traveler.” Thanks Sara, and thanks to Greg for helping put together such an interesting group. There are now some 17 Luxury Marketing Council Chapters stretching from India and Dubai to London and Miami, and I can easily say I owe a significant part of Elite Traveler’s success to both the contacts and information I have gained from Greg and the Council.

SUPREME LUXURY: 91% of Elite Traveler readers consider us “higher quality” than other magazines. Source: Prince & Associates

2. 60 Percent of Consumers believe a Recession is Coming

According to America’s Research Group, six in 10 consumers say a recession is likely in the next three to six months, according to a survey on holiday spending released last week.

In a telephone survey by America’s Research Group, 45.7 percent of 1,000 respondents said a recession was “somewhat likely,” and 14.3 percent said it was “very likely.” The interviews were conducted November 1-4. The error factor is plus or minus 4.3 percent.

Recession fears ahead of the holiday shopping season have been kindled by concerns about jobs and the U.S. housing meltdown.

The survey found the number of consumers who feel worse off financially this Christmas season has risen to almost 33 percent of all Americans, almost doubling from 18.5 percent last year.

OUR READERS LIKE WHAT THEY SEE: 88% of Elite Traveler readers like our “design and format”. Source: Prince & Associates

3. And Florida’s Luxury Resort is: Ft. Lauderdale

That’s not a typo. Yes, the wine on the flight was good, but you read right. Even a couple glasses of a nice red didn’t impact my analysis. Yes, that is the same Ft.Lauderdale that was once upon known as the epicenter for college students partying up on Spring Break. Remember, the formula: Sun, Sand, Beer and Babes.

Now the formula is a bit different. The Sun and Sand are still there, and actually so are the babes. But instead of college freshmen, it’s billionaires and centi-millionaires. Add to the mix mega-yachts, private jets, luxury resorts and condominiums and you have today’s Ft.Lauderdale.

In fact, when it comes to private jets, Ft.LauderdaleExecutiveAirport ranks as the Number One airport in the state. And while we are on the subject of toys of the rich and famous, the recent Ft. Lauderdale Boat Show continues to hold the crown as world’s largest mega-yacht event by a considerable margin.

Super Bowl XLI last February was a boost for the tourism industry in Greater Fort Lauderdale as well, and certainly gave the city an opportunity to showcase itself as a destination ready to host celebrities, big company CEOs and the like. The Greater Fort Lauderdale Convention & Visitors Bureau reported an average daily rate (ADR) of $180.06 in February 2007, a 22.7 percent increase. Bed tax collections for the month rose 12.15 percent to $5,497,557.58 and Greater Fort Lauderdale’s hotel occupancy was 84 percent, well outpacing Florida’s statewide figure of 74.1 percent.

The dramatic increase in February’s ADR is a direct result of the destination co-hosting Super Bowl XLI and its surrounding activities but with annual events like the Boat Show, its recent King Tut exhibit and more five-star hotels, the figures are expected to continue inching higher.

Nicki Grossman, the charismatic President of the CVB, was elated when we spoke to her several weeks ago. Her team had just booked a major medical group that will bring over $5 million in incremental revenue, beating out some other 30 cities.

The payoff of Grossman’s 20+ years remaking the image of Ft.Lauderdale is that the destination is now becoming a year round destination for affluent travelers, challenging Miami for the summer market of Latin American travelers.

Grossman says Ft.Lauderdale’s trek from budget traveler to billionaire playground started in 1985 with “20 of us in a room thinking we need to do something.”

A Performing Arts Center that opened in 1990 showed the group was serious. And “many, many” meetings with developers led to a number of new resorts, including the Westin Diplomat, Luxury Collection’s Atlantic, a St. Regis which also includes a residence component, a completely renovated Pier 66 and talk of a Ritz-Carlton and other luxury brands on the way.

A sign of the times is that Ft.Lauderdale now has the state’s top selling Porsche dealer (you got to have something to drive from the private jet to your mega-yacht!).

And while Grossman and her team have been able to renovate and repackage Ft.Lauderdale as a luxury destination for tourists, the CVB boss notes the only benefit for locals isn’t the revenue the visitors bring. “Because of the affluent travelers, we have upscale restaurants and shopping here we would not otherwise have had.”

BULLSEYE FOR YOUR AD DOLLARS: Only Elite Traveler delivers to luxury advertisers the Super Rich wherever in the world they happen to be via BPA audited distribution aboard private jets and mega-yachts in over 100 countries worldwide!

4. Russia’s Rich Princesses – an Elite List

Courtesy of The Daily Mail, we give you a look at the next generation of elite travelers from Russia who are transiting the world by private jet and spending lots of money. Remember, Elite Traveler is distributed aboard private jets in Russia, and our second largest country for private jet distribution (after the U.S.) is the favorite second home spot of Russians, the United Kingdom.

The daughters of Russia’s richest men are trying to make their names on almost everything – fashion industry, pop music, television and publishing. They always succeed because they always enjoy the support of their incredibly wealthy fathers. Fourteen-year-old fashion designer Kira Plastinina is among such girls. Her father Sergei is worth an estimated $700 million. Last week he reportedly paid two million dollars to fly Paris Hilton to Russia to endorse his daughter’s label at the Moscow Fashion Show.

Polina Deripaska Occupation: Publisher Age: 27 Father: Valentin Yumashev, a journalist who become Boris Yeltsin’s chief-of-staff and is now a London-based consultant. Polina was educated at top private school Millfield and in 2001 wed aluminum baron Oleg Deripaska, worth $16 billion, in Russia’s wedding of the century.

The couple has two children. Polina has her own business, which has been aided by not only her father but her husband.

Anastasia Potanina Occupation: Sports manager Age: 23 Father: Vladimir Potanin, the publisher of the Russian edition of Cosmopolitan whose $14 billion fortune makes him the world’s 38th richest person.

Anastasia is a former Russian champion in the extreme sport of aquabiking but retired from the pastime after breaking her leg and is now looking for a career in sports management. She should do well – her father is behind Russia’s successful bid for the 2014 Winter Olympics in Sochi.

Anastasia is a keen skier, not surprising given that her father built an indoor slope at his $14 million Moscow home.

Anna Anisimova Occupation: Property tycoon Age: 22 Father: Vasiliy Anisimov made his money in aluminum in the Nineties. He now has a $2 billion fortune and is a business partner of Arsenal shareholder Alisher Usmanov.

Anna once paid $520,000 to rent a house in America for the summer. Since then, she has snapped up a $5 million Miami penthouse as well as a New York apartment, for which her father paid $15 million.

Her private yacht is frequently seen off Sardinia. She came to America after her father’s business made it too dangerous to stay in Russia. She is being groomed to take over his empire.

Alsou Safina Occupation: Pop star Age: 24 Father: Ralif Safin, founder of Russian oil giant Lukoil. He is now a politician with an estimated $700 million fortune. Safin, 53, was determined that his children would become famous and has poured money into helping the career of his daughter, known as the ‘Russian Britney.”

Alsou says: ‘Any parent would help his child. I know that envious people keep calling me “a singing petrol station”.’ As a wedding present, Safin gave his daughter and her new husband a Moscow penthouse and a huge dacha outside the city.

Kira Plastinina Occupation: Fashion designer Age: 15 Father: Sergei Plastinin is president and a major shareholder of food giant Wimm-Bill-Dann and worth $700 million. Described as ‘the youngest designer in the world’, Kira launched her own clothing label in March, thanks to a $100 million investment by her father.

‘I usually draw sketches during maths lessons,’ she said. Even Paris Hilton is impressed with her work and said: ‘The fashion show was amazing. I am wearing her line right now.’

Daria Zhukova Occupation: Cosmopolitan businesswoman Age: 25 Father: Alexander Zhukov, owner of oil company Sintez.

Daria is as much at home in Moscow as at StamfordBridge with her boyfriend, Chelsea owner Roman Abramovich. When she first came on the scene, Daria was wrongly depicted as a model or a student.

In fact, she’s a businesswoman in her own right, running upmarket clothing brand Kova&T with old school friend Kristina Tang, daughter of billionaire David Tang. Their jeans are favored by many stars. Daria’s former boyfriend is tennis player Marat Safin. Kseniya Sobchak Occupation: TV star Age: 25 Father: The late Anatoly Sobchak, former mayor of St. Petersburg and mentor to Vladimir Putin. The presenter of Russian reality TV show, Home 2, Kseniya is known as Moscow’s Paris Hilton and no party in the capital is complete without her.

Kseniya, who has dated a string of millionaires, makes no apology for her lifestyle: ‘I’ve got a kind of level below which I would never go, therefore my circle of friends consists only of wealthy people.’

WOW: The Average Annual Household Income of the Elite Traveler reader is $5.3 million and Average Age is 41. Source: Prince & Associates