ET INSIDER – August 13, 2013
More than ever private jet travelers, or elite travelers as we like to call them, are the most lucrative market for luxury brands and service providers. With readers spending $10,000 per hour to fly privately, the over 600,000 readers Elite Traveler reaches each issue provide you a great way to make sure your message is in front of consumers who have the money to be good customers. With our Asia Edition, Elite Traveler Superyachts, our over 60 Elite Traveler Destination Guides at Elitetraveler.com, our global database of private jet owners and our award-winning custom marketing team, we would welcome the opportunity to be of help to you in making sure you get a bigger share of our reader spending.
With a Net Worth of more than $25 trillion, I hope you will agree elite travelers should be a key target for your marketing!
In this edition:1. Forbes: A New Way to Look at Visitor Value for Destinations2. About $38,000 Handbags and Regular Folks3. Heidi Klum: Adopt Me, Please!!!4. In Australia, More Super Rich Than Ever5. Super Rich Don’t Plan To Retire. What Does it Mean for Luxury Marketers?
1. Forbes: A New Way to Look at Visitor Value for Destinations
“For many years travel industry destination marketers elbowed each other to be on the bucket list for mass affluent consumers (household incomes between US$100,000 and US$400,000). The problem was that if per chance they were successful in getting mass affluent consumers to go to Australia this year instead of China, Alaska, Peru, Tahiti, South Africa, India, fill-in-the-blank, the net effect was that these consumers were unlikely to return to these destinations. They had spent a couple thousand bucks, checked it off their list. On the flight back home, they were already thinking about checking off the next box.
On the other hand, Ultra-High-Net-Worth families who visit a destination not only are prone to come back to explore more, but they have a growing tendency to purchase real estate if they really like the location, and many times end up investing in local businesses or creating joint-ventures with local partners.
Based on research with family offices, another implication is that some of these Ultra-High-Net-Worth families have made investments in countries where the initial introduction was via a vacation. In a number of cases, the investments were in the US$100 million or greater range while many started with smaller investments of US$1 million to US$10 million.
“Former basketball player Julius Erving invested in South Africa after traveling there on vacation; Jack Welch brought General Electric facilities to Barbados after visiting the island on vacation. Larry Ellison became such a fan of Hawaii he bought an entire island, Lanai, including two Four Seasons hotels,” said Douglas Gollan, Editor-in-Chief of Elite Traveler, a magazine that is found aboard private jets and caters to Ultra-High-Net-Worth consumers. He says these stories while not the rule, are not exceptions either. “One of the guys in our office used to run the advertising agency for the Jamaica Tourist Board. He talks about how Ralph Lauren first came there on vacation, then bought a villa and then started manufacturing there. He created several hundred jobs and really boosted the economy.”
Gollan says while global capitals continue to attract Ultra-High-Net-Worth families, countries such as Ireland, Spain, Portugal, Greece and Italy are well positioned to tap into these flows of capital. “The Super Rich go on vacation, have a good time, then they see there are opportunities for value purchases in the residential real estate market,” he noted. “That’s one more trip back to really look and maybe make a deal. By the third or fourth trip, they are starting to think about the business investment opportunities.”
Of course, the payoff of attracting wealthy private jet travelers comes with the first visit. Private jet travelers spend an average of US$70,000 at each destination they visit, excluding jet fuel, airport and landing fees. The number includes accommodations, sightseeing, shopping and activities.
“Recently we had an American customer who walked in with a copy of Elite Traveler and booked two suites that been directly featured in the magazine. The value of the booking was in the region of $200,000.” – Tony Potter, Corinthia Hotels
2. About $38,000 Handbags and Regular Folks
Oprah Winfrey made news recently when she was rebuffed at a store in Zurich while looking to buy handbags. While each side has its own story, the center of attention was a $38,000 handbag.
An article about the incident by the Associated Press pointed out, “for the richest sliver of the global population, like Oprah Winfrey, it’s a realistic option – and buyers aren’t short of choices. In the upscale boutiques of Singapore, New York or Zurich – where Winfrey claims a sales clerk refused to show her a luxurious bag – purses priced in the four figures are common.
Of course, designer handbags are also available at more attainable levels, the piece points out: “A budget of about $1,000 to $2,000 will buy one of the cheaper bags by luxe labels such as Prada, Hermes, Fendi, Chanel or Louis Vuitton.”
Now of course while the lower prices are attainable, a recent study by The Washington Post shows even affluent consumers can’t afford such purchases ($1,000) on a regular basis.
Looking at affluent households in high-end, white-collar communities outside Dallas, Chicago, Miami, Washington DC, Los Angeles and New York showed how strapped Mass Affluent households are.
Starting with a Household Income of $250,000 and taking into account mortgage payments, insurance, car payments (two non-luxury cars), gas, parking, taxes, health care, child care, utilities, food and staples and pets, this white picket fence family was left with a total of $3,000 on all gifts, including birthdays, and $2,955 for all clothes for all four family members. In other words, a $1,000 handbag would have taken up fully a third of the annual budget.
Was this family spending money on lavish trips? Total travel budget for the year was $4,000. When one considers the average domestic airline ticket is $453, clearly this family isn’t checking in to five star resorts on a regular basis.
So not including a potential splurge on the $1,000 “entry price” handbag, without luxury cars and without luxury travel, how much did these families have left at the end of the day?The family in Dallas had $1,963 left; however, all of the other families were under water – the family in New York spent $27,380 more than they earned! In other words, if they merely wanted to break even, the New York family would have had to cut spending by nearly $30,000!So who buys $38,000 handbags? Even Oprah said she might have taken a pass given the opportunity! Who buys $1,000 handbags? Clearly aspirational customers do save and splurge, however for Ultra High Net Worth elite travelers, the $1,000 price point is an impulse purchase, a nice distraction after a relaxing lunch.
“Elite Traveler is a key media source for us with well over $200,000 in sales we can track directly back to our ads in your magazine over the past year.” – Charles Krypell, Owner, Charles Krypell
3. Heidi Klum: Adopt Me, Please!!!
Yes, she’s a supermodel and a super successful businesswoman. Her net worth is estimated to be $70 million. She also apparently is a Supermom too!
In New York, foodies have been lining up for hours to try a Cronut, a concoction made from deep fried thin layers of flaky croissant dough filled with Tahitian vanilla cream. Orders are normally limited to two per customer, but by pre-ordering two weeks in advance, one can snag up to six. Klum set her team in motion, and having successfully timed her pick-up with her flight back to Los Angeles via private jet tweeted a picture, ‘Flying back home with a box of #cronuts for my loved ones,’ posting a photo of the Cronut box safely buckled in its own seat.
“From the Summer Edition of Elite Traveler Superyachts, as well as the Asia Edition including the May/June issue we are happy to report sales ($437,000) of the timekeepers we advertised” – Patrik Hoffmann, CEO Ulysse Nardin
4. In Australia, More Super Rich Than Ever
When people think about Asia/Pacific’s Super Rich, China usually is at the top of the list; however, a recent report by WealthInsight also showed in the land Down Under Ultra High Net Worth population.
There are now 2,768 Ultra High Net Worths (Net Worth $30 million +) in Australia, 23 percent more than five years ago and by 2017, that will reach 3,649, according the UK-based researcher.
And despite the focus on billionaire mining magnates such as Gina Rinehart and Clive Palmer and property barons like Frank Lowy, Harry Triguboff and John Gandel, most of the Super Rich are making their money in the financial sector.
“Financial services is becoming the new bastion for Australia’s wealthy,” according to WealthInsight.
Here’s the profile:
* Male* Aged 58* Australian citizen* Net worth: $121 million* An entrepreneur* Working in financial services* Living in Sydney* Holds a bachelor of commerce/business from the University of Melbourne or Sydney* Married* Three children
ONLY ELITE TRAVELER – Elite Traveler is the ONLY global publication targeting and reaching private jet travelers to have its circulation successfully audited. View our BPA statement here .
5. Super Rich Don’t Plan To Retire… What Does it Mean for Luxury Marketers?
The Super Rich plan to work longer than ever and may never retire, meaning that they will continue to be luxury consumers living the private jet lifestyle for many years. Typically mass affluent consumers who retire have to carefully live within their budgets based on retirement investments, medical costs and so forth.
Noted UHNW authority Robert Frank recently reported that while you and I are likely to have our minds on the day we can retire and step away from the rat race, the Super Rich relish being on the top of the heap and have no intention of stepping back.
According to Frank, “The ultimate American dream used to be to get rich young and ‘retire by 40.’ Now the goal for the rich is to retire past 70 – if they retire at all.”
He cites a new survey showing that America’s highest earners don’t plan on retiring until they are at least 70 years old. Lower-income groups – and even those considered “affluent” – plan to retire much younger, according to the study from Spectrem Group, a wealth research firm.
When asked, “At what age do you expect to retire?” nearly one-third of those with annual earnings of $750,000 or more answered: “over 70.” Fifteen percent of them say they never plan to retire.
Frank notes, the Spectrem survey is backed up by other, previous studies. A 2010 study from Barclay’s Wealth found that 54 percent of millionaires say they want to continue working in retirement. Globally, 60 percent of those with a net worth of $15 million or more plan to stay involved with work “no matter what their age.”
All the best,
Douglas D. GollanGroup President and Editor-in-ChiefElite Traveler, the private jet lifestyle magazine Elite Traveler Superyachts, the superyacht lifestyle magazineElite Traveler Asia, Asia’s private jet lifestyle magazineElitetraveler.com, the private jet lifestyle onlineElite Traveler Update, our weekly e-Newsletter to private jet owners worldwide
Doug.Gollan@elitetraveler.comElite Traveler Magazine708 Third Avenue, 10th FloorNew York, NY 10017 USA