Elite Traveler – ET Insider – Sept 4, 2007
ET Insider – Sept 4, 2007
Elite Traveler Insider –
Sept 4, 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.
In this issue:
Your Guide to Richistan
Does Elite Traveler work? Ulysse Nardin sold “at least” two $86,000 Sonnerie en Passant watches from its ad in Elite Traveler’s January/February issue
Your Guide to Richistan
I hope the summer was as nice for you and your loved ones as it was for me. Getting a bit of downtime, like many of you, I traveled, and one of the most interesting places I visited is a country without borders.
It is Richistan, an imaginary country with very real and very rich people explained in the book Richistan (Crown Books).
Richistan, according to author Robert Frank, the Wall Street Journal’s Wealth Reporter, has become its own country of the world’s Super Rich. Increasingly less tied to their local communities and ever more global as they search the corners of the earth for new ways to make money, Frank captures a number of Super Rich in living color, providing a great window into their lifestyle of spending. Like visiting any country, particularly a new one, a guidebook is helpful; having just toured Richistan, I wanted to highlight particularly relevant items for luxury marketers.
I’ll call my cultural learnings “The Richistan 25 – factoids every luxury marketer should print out and put on the wall next to their desk.”
I strongly recommend that you buy this book; there are some great chapters on educating the offspring of the wealthy, hiring help, the influence of the Super Rich on politics, Super Rich self-help groups, and the changes in the way they view philanthropy that I won’t even touch. My highlights to navigating Richistan are below, with the following words from John Kenneth Galbraith, who once wrote, “Of all the classes, the wealthy are the most noticed and least studied.” In this book, Frank provides some great insights for marketers.
- Think targeted: By 2004, the richest 1 percent of Americans earned $1.35 trillion – greater than the total national incomes of France, Italy or Canada.
- Think new money and entrepreneurs: Only 3 percent of multimillionaires are celebrities and less than 10 percent inherited their money.
- Think younger than ever: “Before the 1990s, most of the wealthy… were in their 60s or 70s…now, they’re in their 30s and 40s. They have a lot of runway left in front of them.”
- Beware of what they say vs. what they do: The newly Super Rich love to say they’re middle class people, even if they happen to own four homes and a Gulfstream. The phrase Frank uses is “Faux Populism.”
- A new take on spending: While old wealth prided itself on modesty, tradition, public service, charity and sophisticated leisure, Richistanis pride themselves on their middle class ethic, self-made fortunes and big spending (think high end jewelry, watches, luxury resort suites, fancy clothing and accessories, expensive champagne and wine – the more expensive the better.
- Have your business development efforts kept up with the times? Old money is getting older and less important: A DuPont or Rockefeller in Palm Beach with $7 million today would no longer be a flag bearer of wealth; he or she would be the poorest person on their block. While Old Wealth may still have estates, many have fallen into disrepair as high inflation at the upper echelons of luxury make it harder for them to maintain their inherited lifestyles.
- New money can be quickly cleansed: A million dollar donation will put a new Super Rich as the chair of an important charity, bumping out a long-serving member of the no longer so wealthy Old Guard.
- A new customer can quickly become one of your best customers: One New Super Rich Palm Beach bachelor estimates he spends $80,000 to $100,000 on gowns, jewels and other “ballroom battle gear” for his current girlfriend during the relatively compact Charity Ball season. He had bought a $35,000 necklace for a previous girlfriend to wear to an important ball and was surprised to see three or four other women with the same necklace.
- Fish where the fish are and cast as many hooks as you can – there is plenty to catch: The richest ½ of 1 percent of Americans spend some $650 billion a year on luxury products and services.
- The rich spend to show they can – and they often don’t track it closely: One Super Rich noted he and his wife were shocked at how much they were spending on travel, entertaining and luxury goods when they did a review; however, they didn’t cut back once the shock wore off.
- Price is never an object when the object is something the Super Rich customer desires: One private jet owner spent $8,000 for an alligator toilet seat cover for his plane. Another owner, a woman, went with her designer to personally pick the actual wood (from lumber) for her jet interior – the trip alone cost over $30,000.
- They live a different life than the merely affluent: A typical email from a household manager to a Super Rich: “Please approve $8,000 to repair the aerator in the North Pond.” Another notes that he got a bill to fix the windshield in his plane – cost: $60,000. Conditioned to expect these type of expenses, many luxury goods and experiences that might be a once-in-a-lifetime dream for the Mass Affluent are impulse purchases for the Super Rich.
- A Super Rich few can Drive Sales to New Heights: The share of US wealth controlled by the top 1 percent rose from 20 percent in the late 70s to 33 percent today.
- Rethink Mass Media strategies – is the return worth it vs. what you can get at the top: The top 1 percent have a higher Net Worth than the bottom 90 percent, yet most magazines and media don’t effectively reach the top of the pyramid; their events and merchandising are targeted to audiences that don’t have the money to spend on more than a wallet or a tie.
- Poor Yesterday, Super Rich Today: “Liquidity Events” are the most common source of wealth for the Super Rich – in other words, selling a business, an IPO and the like. This means many of these Super Rich consumers who grew up in Middle Class households have less knowledge about luxury brands and their positions than previous generations. In other words, luxury brands need to educate and position themselves to capture their fair share of spend.
- You are what the Super Rich perceives your brand to be: The Super Rich, being new to luxury and coming from Middle Class backgrounds, are very brand oriented, whether buying art or luxury goods. They are, I am glad to tell you, an advertising-receptive audience – particularly in the right environment. Mass Affluent magazines with ads for Chevy, Target, Wal-Mart, spaghetti sauce and cat food don’t provide the right environment.
- Your Super Rich Marketing Today will Pay off for the Next 50 Years: Households with at least $25 million Net Worth expect to leave at least 75% to their children, according to a Prince & Associates survey quoted. This means the brands these new Super Rich parents embrace today will be the legacies that their children will turn to when they have access to their inheritances.
- Spending Starts at the Top: About 20 percent of the Bush tax cut benefits went to the top 1/10th of a percent of earners.
- There is a big pie waiting: The Super Rich will pass $15 trillion to their children between now and 2052.
- Like Mother, Like Daughter: One only needs to look at the Moms on MTV’s “My Super Sweet 16” to see where the offspring get their affinity for luxury goods. The show is, of course, about how daughters of the Super Rich celebrate their 16th birthdays.
- There is a dichotomy in what the Super Rich say and what they do: 86 percent of Super Rich parents say it is important for their kids to learn the value of money through hard work, but only one-third encourage them to take after-school jobs.
- Is your Media Plan reaching real Richistanis? One needs an annual income of $500,000 to $1 million to cover the necessary expenses. This is just the ground floor! From a Net Worth standpoint, $10 million is the entry fee to be part of Middle Richistan and $100 million to enter Upper Richistan. The Lower Richistanis, who are increasingly losing ground to the Middle and Top, have a Net Worth of $1 million – $10 million but are continually financially fatigued and prone to cutting back spending. According to the latest MMR research, less than 10 percent of Mass Affluent publications readership (Town & Country, Departures, Robb Report, Conde Nast Traveler, Travel + Leisure, etc.) could be considered true Richistanis.
- The Real Richistan: While the Upper and Middle Richistanis may feign being “middle class,” their lifestyle is anything but, including dozens of staffers for their houses, fleets of cars – from basic Mercedes and Jaguars to Rolls – and more. Pointing to one of his Rolls Royces, one billionaire comments, “The two-tone one, that’s my restaurant car. You get a better parking spot (from the valets).” Seconds later, he was stressing his Middle Class roots.
- The Super Rich are so rich that if they tumble down, they are still Super Rich. For many, an 80 percent drop would still mean a Super Rich lifestyle.
- Think Private Jets as your marketing vehicle to reach the Super Rich: In Aspen, as many as 150 private jets each day have to be sent on to other airports to park once the airport runs out of space. Teterboro, serving New York, is out of storage space for private jets; owners now park their planes in Morristown and Oxford and have them flow in when they are ready to go. Private jets are the status emblem of being in the Super Rich club, or in other words, a citizen of Middle and Upper Richistan. According to the FAA, private jet flight hours will grow 300% in the next 10 years.
For luxury marketers, I think reading Richistan will also make it clear why Elite Traveler has become the media choice of the Super Rich. First of all, via our BPA audited distribution aboard private jets and mega-yachts in over 90 countries, we make our magazine easily accessible to the Super Rich.
What’s more, reaching them in the environment on their jet or yacht provides down time so that couples, families and friends can read and refer to Elite Traveler together as they survey the best of the private jet lifestyle. It is a true brand building experience – like being personally invited into their home.
From an editorial point of view, our service-oriented format of providing beautiful pictures of the best suites in an oversized luxury format, direct phone numbers and emails for General Managers of luxury hotels, the managers of luxury boutiques, the names of the best therapists at the spas we write about, or the best of the VIP tour guides in the destinations we cover, speaks to these time starved, cash rich consumers who are looking for advice targeted specifically to their needs – not a mass audience.
The result is that with 230,000 + readers who have a Household Income of $1 million +, Elite Traveler has twice as many Super Rich readers as Departures, Town & Country and Robb Report – COMBINED!
Most importantly, our global circulation brings advertisers’ messages to the Super Rich from around the world and wherever they happen to be!
I hope you buy the book and enjoy it!
Does Elite Traveler work? Felix S. Sabates, Chairman of Trinity Yachts recently bought six Girard-Perregaux watches that he had seen in Elite Traveler.