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ET Insider – March 12, 2014

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 $40 trillion, I hope you will agree elite travelers should be a key target for your marketing!

Follow Doug Gollan on Twitter: https://twitter.com/EliteTravelerDG

In This Edition:

1. Among the Rich, The Very Rich Get Much Richer, The Rich Get Richer, Everyone else, not so much 

2. New Private Jet Sales Increase 24% to $23.4 billion; Second Best Year in History

3. The Wall Street Journal: Mass Affluent Consumers Cut Back as Luxury Prices Rise

4. Gulfstream Expands its Presence and Offers Custom Interiors in Singapore

5. More Super Rich Chinese Send Children Overseas To Secondary School

 

1. Among the Rich, The Very Rich Get Much Richer, The Rich Get Richer, Everyone else, not so much…

According to tax return data analyzed by MarketWatch, the top 1-10th of 1 percent – about 120,000 households in the U.S. saw their Household Income increase by 413% in the last 40 years. They have a Household Income of over $6 million. The Average Household Income for the next 9-10th of the 1 percent increased by 213 percent to over $1 million average. The entry point is slightly under $500,000 household income. Now for everyone else check out that seemingly flat turquoise line that goes across the bottom seemingly just above 0. That’s everyone else. Since 1970 the other 99 percent saw income rise just 7 percent.

The Average Household Income to be in the Top 1% is $1,264,065—and one needs a minimum Household Income of $400,000; since 2008 the 1% have captured 95% of all income gains, according to The New York Times… Is your media plan reaching consumers who are heavy users of luxury?

2. New Private Jet Sales Increase 24% to $23.4 billion; Second Best Year in History

According to results released by the General Aviation Manufacturers Association, 2013 billings for private airplanes worldwide increased to $23.4 billion, up 24 percent from 2012, when they totaled $18.9 billion. Billings in 2013 were the second-largest number recorded after 2008, when billings were $24.8 billion.

“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. The Wall Street Journal: Mass Affluent Consumers Cut Back as Luxury Prices Rise

From The Wall Street Journal:

“In the past five years, the price of a Chanel quilted handbag has increased 70% to $4,900. Cartier’s Trinity gold bracelet now sells for $16,300, 48% more than in 2009. And the price of Piaget’s ultrathin Altiplano watch is now $19,000, up $6,000 from 2011.

“Such increases for some of the world’s most expensive indulgences far outpace inflation and contrast with the middle and lower end of the retail market, where even small increases can turn off shoppers.

“At the high end of the market, a higher price can add to a product’s allure, according to one economic theory. But the practice is seen by critics as a flimsy platform on which to build sales growth, one that already could be reaching its limit and might prove precarious if the economy sours.

“Luxury brands are at risk of losing customers who cannot or do not want to pay more,” said Claudio D’Arpizio, a partner with consulting firm Bain & Co.

Connie Oclassen of Mill Valley, Calif., said she couldn’t buy as many pairs of Jimmy Choo flats as she used to, since prices climbed to $650 a pair from $495. In the past she would buy four or five pairs a year. This year, the retired marketing executive will limit herself to three.

“Prices have gotten really crazy,” she said as she browsed at New York’s Henri Bendel recently.

“The higher prices are masking weaker growth in volume. ‘Companies are selling fewer units,’ said Luca Solca, an analyst with Exane BNP Paribas. An economic theory holds that for certain goods, higher prices increase desirability and drive sales, rather than suppress demand as they would for ordinary products. Economists refer to such luxury products as Veblen goods, named for American economist Thorstein Veblen, who described the phenomenon.

“One reason ultraluxury brands are raising prices is to distinguish their products from entry-level luxury goods that are fast picking up market share.

“The more Tory Burches and Michael Kors there are, the more the Chanels and Louis Vuittons will try to price up,” said Milton Pedraza, the chief executive of the Luxury Institute, a research and consulting firm.

“The unintended consequence could be that the luxury brands drive even more customers toward less-expensive rivals.

“In Europe and the U.S., brands have pushed prices higher in part to capture more money from Chinese tourists who buy luxury goods abroad to avoid tariffs that can add 40% to prices at home.

“But even for those who can afford it, higher prices are starting to bite. Jamie Moore, a homemaker in Cleveland, Tenn., said that on her annual shopping sojourn to New York, she usually splurged on a Prada handbag, for which even a basic nylon model can cost $1,230. Not this year.

“The prices have gotten so expensive that I’m not buying one,” she said.

“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. Gulfstream Expands its Presence and Offers Custom Interiors in Singapore

From The Financial Times:

Gulfstream, the US-based business jet manufacturer, this week bolstered its presence in Singapore with a new sales office where prospective buyers can customise the interior of a jet.

The move is one sign of the rude health of the market for business jets in Asia, where demand is being driven by a new generation of entrepreneurs mainly from China and Indonesia.

Last year 11 per cent of Gulfstream’s fleet was based in Asia, up from 3 per cent a decade earlier. Scott Neal, the company’s senior vice-president for sales and marketing, is unconcerned about signs of a slowdown in the Chinese economy.

“We take a long-term view of the markets where we compete,” he says. Demand is especially strong from Chinese businessmen for large-cabin, long-range jets that allow travel to destinations outside the country – as Chinese companies expand overseas. Of the 84 Gulfstream jets operating in China, 77 are the two largest models, including the G550, which costs $60m.

Embraer, the Brazilian aircraft maker, was displaying at the show not only its range of Legacy business jets, but an “ultra-large” Lineage 1000, which can fly to Dubai from Singapore in 10 hours. The company sells more of its larger jets in Asia than anywhere else. “Our buyers are entrepreneurs who need to use the jet as a tool. They can afford it,” said Marco Pellegrini, president of Embraer executive jets.

5. More Super Rich Chinese Send Children Overseas To Secondary School…

As we have said for the past 13 years since we launched Elite Traveler, elite travelers are global beings. This goes to their children.

According to a report from China Daily, “The Chinese super rich are banking on foreign education for their teenage children as an investment. Going overseas for a university degree has always been an option for the children of the wealthy, but now parents are sending their children overseas for secondary education also.”

“The United Kingdom is their first choice with the United States second, according to the Chinese Luxury Consumer Survey 2014, published by the Hurun Report, which polled 400 parents who each had at least 10 million yuan ($1.6 million) in disposable income.

“We have been keeping a keen eye on overseas education as it indicates a trend in emigration,” said Rupert Hoogewerf, chairman and chief researcher of the Hurun Report. “It is common practice for the rich to send their children overseas as a first step before they move to the country themselves when the children finish their education.”

“Cheng Wei, owner of the Shanghai Beizhili Tire Sales Co, sees company revenue hit about $300 million every year. He sent his daughter Cheng Sijia to study at Smithville District Christian High School in Canada three years ago when she was 16. Tuition fees were about C$20,000 ($18,200) every year, while living costs were about C$15,000.

“Canada is safe, politically stable and enjoys a multilingual environment. Many Asians have gone there, and there is no racial discrimination,” Cheng said.

All the best,

Douglas D. Gollan Group President and Editor-in-Chief Elite Traveler, the private jet lifestyle magazine Elite Traveler Superyachts, the superyacht lifestyle magazine Elite Traveler Asia, Asia’s private jet lifestyle magazine Elitetraveler.com, the private jet lifestyle online Elite Traveler Update, our weekly e-Newsletter to private jet owners worldwide

Elite Traveler (audited by BPA Worldwide) is the only audited publication delivered to global locations for private jet travelers. We have global distribution in over 100 countries aboard private jets and in private jet terminals. Each issue is read by over 630,000 Ultra Affluent consumers with an Average Household Income of $5.3 million (Source: Prince & Associates, 2011)

www.elitetraveler.com/business

Doug.Gollan@elitetraveler.com Elite Traveler Magazine 708 Third Avenue, 10th Floor New York, NY 10017 USA

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