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Elite Traveler – ET Insider – November 29, 2011

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ET Insider – November 29, 2011

Elite Traveler Insider –

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November 29, 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. Most UHNWs to Increase 2012 Spending on Luxury: New Prince Research

2. Burberry, Richemont Look to TLCs to Boost Growth: Financial Times

3. Lies, Damn Lies, and More Research on UHNWs… or At Least $25 Trillion

4. Boom, Bust, Boom: The Ups and Downs of Being Super Rich

5. In London, The Corinthia is Attracting Elite Travelers…

1. Most UHNWs To Increase 2012 Spending on Luxury:  New Prince Research…

Two separate surveys by Prince & Associates show that despite the bumps in the economy impacting aspirational consumers, UHNW consumers plan to continue spending on hotels, resorts, spas, villas, private jet aviation services, watches, jewelry, luxury automobiles and SUVs, wines and spirits, and real estate in 2012.  Many of these wealthy consumers – all of whom fly by private jet – have definitive plans to spend more next year.

In a survey of over 150 Executive Directors of Single Family Offices (SFOs), these top level money managers predicted a continued outflow on baubles, high end timepieces, fashion, home improvements and travel.

SFOs are money management offices for a single family; the ones in the Prince Survey had a minimum of $100 million in investible assets, with an average of $415 million in assets.  These numbers represent the wealth of the single family they manage affairs for.  These family offices help the UHNW family they work for in many areas, so they generally are the ones to receive invoices and credit card statements so they are tuned in to what is being bought.  Families represented included the Americas, Europe and Asia with 56 percent U.S. based and 44 percent international.

One CEO of a New York-based SFO speaking about his family said, “They don’t need to make choices.  They buy what they want when they want.”  Another commented, “Except for big yachts and planes, they don’t really think about how much it costs, and I find they can justify pretty much anything they want to do or buy.”

All of the families in the survey had ownership of at least one private jet, but Russ Alan Prince, President of Prince & Associates, noted: “Most of them have multiple private jets, or if they only own one jet they also have fractional shares, jet cards or charter.  These families may not necessarily fly together, but they are flying by private jet, even if it is sometimes on separate private jets.”

In every category, 80 to 89 percent of SFO managers said their families are expected to spend more on various luxury categories or at minimum the same as 2011.  Particularly heartening to luxury providers:  51 percent expect to increase spending on personal travel in 2012; 46 percent will buy more jewelry and watches; and 48 percent will spend more on fashion and accessories.

A separate survey directly with 155 owners of private jets and fractional jets provided even more good news, with over 90 percent of respondents having already planned leisure travel for 2012.  With the importance of TLCs – Traveling Luxury Consumers  – grabbing headlines (see Item 2), the fact that these elite travelers are planning to increase their globe hopping means more top spenders coming to a flagship store near you.

“The private jet traveler has never been more important to global luxury brands,” Prince noted. “This is a recession resistant market that represents a huge market potential for brands that design a specific strategy to stand out with them.”

For a copy of the survey, please email me at doug.gollan@elitetraveler.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. ============================================================

2. Burberry, Richemont Look To TLCs To Boost Growth:  Financial Times…

Who would have thought two of the most successful and sophisticated luxury groups in the luxury business would be looking for lots of TLC?  While they may also want some Tender Loving Care, recently uber CEO Angela Ahrendts gave elite travelers a nice label that fits like, well, a hand-stitched leather Burberry glove.

Burberry, the British luxury brand she runs, was continuing to be punished, at least with its stock price, according to The Financial Times, as investors worried “that slowing economic growth will impact high-spending Chinese and European consumers who pay a premium for its totes and trench coats” despite “half-year results revealed a 24 percent rise in pre-tax profits and a 45 percent jump in retail sales.”

According to the FT piece, ‘Ahrendts, Burberry’s chief executive, believes investors should switch their focus from China to the “TLC”. Shorthand for the “travelling luxury consumer”, she argues that this is a more powerful force than the Chinese market alone, which accounts for 10 percent of Burberry’s total sales.

Speaking of Burberry’s 25 “flagship markets” including London, New York, Dubai and Hong Kong, she said: “At any one time, 25 percent of transactions in those stores could be coming from Russian, Chinese or Middle Eastern consumers. It all depends what cultural holiday is taking place – Diwali, Ramadan, Chinese New Year or Christmas – as that’s when they travel.”‘

Adding, ‘Whilst the biggest spending nationality might vary, “there is a consistent influx of tourists into these 25 markets.” This gave her confidence that Burberry would be “not immune, but sheltered” from any forthcoming economic shocks.’

Separately, RBS retail analyst John Gray pointed out: “Richemont reported last week that sales to domestic European customers are slowing, but travelling luxury consumers continue to be resilient, which mitigates the downside risk,” he said.

Elite Traveler Insider fully agrees with Ahrendts and the Richemont results, specifically something we have always said:  When elite travelers touch down in their private jets they represent the prime high value consumer for the destinations they visit.  And with elite travelers projected to have a boom year for travel in 2012 (See Item One), we believe there are some amazing opportunities for top thinking luxury brands and service providers.

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

3. Lies, Damn Lies, And More Research on UHNWs…Or at least $25 trillion…

Elite Traveler Insider is a vociferous consumer of research on UHNW consumers, so it was with eager anticipation we were able to reserve a weekend couch (with football games on the adjacent flat screen) and Wealth-X’s first ever Global UHNW Survey of UHNWs under the mantra that we were doing it all for you.

Hoping you enjoyed your weekend of leisure while Insider worked on your behalf, the study, intended mainly for private bankers trying to cruise a few new billionaire and centimillionaire clients, and yes even double digit ones too, is a must read for luxury marketers, or at least your Research Department.

While many of us and our former customers look longingly at the lesser zeros on their bank accounts and the higher minimum payments on their frozen credit cards, Wealth-X notes there are some 185,000 UHNW families globally controlling over $25 trillion in wealth, a record according to the firm.

UHNW are defined by families with a net worth of at least US$30 million.

Key findings of this unique analysis include the following:

• Wealth-X estimates there are 185,795 UHNW families globally, with a total net worth of US$25 trillion.

• North America is home to 62,960 UHNW families, and constitutes the largest concentration of UHNW wealth in the world. This region accounts for nearly 33% of the total $25 trillion held by the world’s UHNW segment.

• Europe currently has the second largest population of UHNW families. The region’s 54,325 UHNW individuals have a collective fortune of $6.8 trillion.

• Wealth-X forecasts that the UHNW population in Asia-Pacific will surpass that of Europe in 2024 and overtake that of the U.S. in 2032.

• Asia-Pacific, with its 42,525 UHNW families, represents $6.2 trillion.

• While the Latin American UHNW has captured considerable attention, its 15,100 UHNW individuals with $2.3 trillion in assets represent roughly a third of the Asian market.

• Wealth-X estimates there are 1,235 billionaires globally, with a combined net worth of $4.18 trillion. 2.5% of the total UHNW population around the world are worth $500 million and above, and they control 25% of the total fortunes of the super rich.

The report notes that these UHNWs (we can call them elite travelers) should be a top target for “not-for-profits and luxury brands to target, particularly with the American and European Mass Affluent so unsettled.”

============================================================ 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. Boom, Bust, Boom:  The Ups and Downs of Being Super Rich…

On my (commercial) flight to Paris I started reading Robert Frank’s new book, “The High Beta Rich.”  Robert of course is the Wealth Columnist for The Wall Street Journal and authored the must-read book Richistan that clearly labeled global elite travelers as their own nation.  The theory, roughly, was that that the Russian elite traveler, the Chinese elite traveler, the American elite traveler and the Saudi elite traveler had more in common with each other than their own countrymen.  After all, while neighbors might not normally pop in (gates and walls tend to prevent that), these global elite travelers and their families regularly meet and socialize with each other in Davos, Formula One Races, political fundraisers, Olympics, Super Bowls, World Cups, marinas in Cannes and Sardinia and so on. In other words, the Chan, Smith and Popov children had such a good time in Gstaad and Aspen last winter, the Smiths have invited the the Popovs and Chans to be their guests at The Super Bowl in Indianapolis before they all fly (on separate jets) to Davos.

In his new book, Frank notes for some UHNWs wealth can be fleeting, coming, going, coming, etc.  Most research I’ve seen, including research from Prince & Associates we have collaborated on, show well over 90 percent of today’s global UHNWs are self-made, first generation wealth.

This significantly increases the challenge for luxury marketers.  After all, this means that today’s wealthiest and highest spending luxury consumers are new to luxury, often from poor to middle class backgrounds.

Now a Tax Foundation shows that entry into the millionaire club – admittedly not the highest rung on the ladder, can be momentary.

According to data from Tax Foundation, which followed the same Internal Revenue Service tax returns from 1999 through 2007, the data represent 675,000 taxpayers who were million dollar earners at some point during this period; this number serves as the benchmark for the percentages of million dollar earners who million dollar earners.

After the first year, roughly half of those who were million dollar earners (reporting over a million dollars in adjusted gross income) at some point between 1999 and 2007 were still million dollar earners. After two years, 15 percent – roughly 102,000 millionaires – retained that status as million dollar earners.

Frank’s new book shows some anecdotal similar stories at the billionaire section of the charts.

Elite Traveler Insider notes this means that luxury marketers need to be on top of, or at least in front of, ultra-high earners when they are earning and spending.  From that perspective, Elite Traveler’s global, audited distribution aboard private jets means that marketers are reaching consumers who no matter what the future may bring, are doing well at that time, and are in the best position to be a luxury spender.  Of course, the report notes the higher you are on the wealth scale, the harder to fall completely off it, meaning that many UHNW elite travelers can easily end up being customers for many years to come.

We of course fondly recall an interview with the owner of Beverly Hills Motors about 10 years ago, who, when asked if the recession was impacting his business, replied, “The names on the mailboxes may change, but whomever is living in these homes are my customers.”  A good way to think about elite travelers and their private jets in my opinion, and a particularly important segment – TLCs, elite travelers, private jet set – whatever you choose to call them as they jet the world privately.

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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. In London, The Corinthia Is Attracting Elite Travelers…

The most fun part of this business is the people I meet.  Particularly exciting is hearing about new business ventures and big plans.  My first trip to Dubai was timed to the announcement of the first Palm Island, a spectacular development my cynical side doubted would ever get off the ground, or should I say out of the water.  Well, that’s the excitement arriving a year later and seeing dirt already coming out of the Gulf.  Now there are a lot of projects and ideas I’ve been pitched on for coverage in Elite Traveler that never got off the ground.

A couple years ago, an old friend in New York Karen Bradford approached me about her client Corinthia Hotels which was planning a new five-star hotel in London.  I knew Corinthia was a company on the rise with a five-star hotel in St. Petersburg that was getting good reviews.  I also knew that if I had 15 minutes I would probably not be able to list all of the top hotels in the British capital without missing a few pretty good ones. In terms of elite suites, there are plenty, and the payoff for attracting customers willing to pay the rates can be huge.  Multi-hundred thousand dollar tabs are typical, so getting clients at this level often makes or breaks a hotel’s profitability.

The energetic and personable CEO Tony Potter was excited about the project, and his enthusiasm was contagious.  Hearing the level of detail underscored Founder Alfred Pisani’s attention to the little things that often separate one property from another.

Having stayed at The Corinthia London several times since the opening and having partnered with them on the launch, I was naturally thrilled that our relationship has brought the hotel multiple major bookings, including one client who walked in the lobby with a copy of Elite Traveler in hand and proceeded to spend over $200,000.

The hotel is already gaining a following with other elite travelers.  During my recent stay I was told about one elite traveler who over his five nights at the hotel was spending over $5,000 per night just ordering fine wine!  When one contrasts that against the recent Washington Post article that showed the typical budget-squeezed Mass Affluent family with a Household Income spends $3,000 on their annual family vacation, including air, dining and activities, plus hotel, it really puts into perspective the value the readers of Elite Traveler bring to the table for luxury providers.

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

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