Ron Kurtz provides impressive data, and key insights from new AARC Research
In this innovative study by The American Affluent Research Study, respondents were asked to specify the most, and the least they would imagine spending for various vacations—Caribbean Resort in Winter, European Cruise, Hotel Room in NYC . We summarizes some of those captivating price points later in this feature, but we quickly decided to fast-forward to CEO Kurtz’s 5 key implications of the AARC study. Here they are:
The affluent market, as defined by the wealthiest 10% of US households, is composed primarily of people with middle class backgrounds who continue to pursue a somewhat middle class lifestyle with middle class values. They spend conservatively and save carefully.
The market for the higher priced products/brands in the true luxury category is composed of a very small number of US households. It is probably the approximately 1 million households (top 1%) with a minimum $6 million net worth. Most of these people are also in the approximately 1 million households (top 1%) with an income of $500,000 or more per year.
This is a very difficult market to reach with conventional media, including the most upscale print publications, on a cost efficient basis. The cost per thousand qualified subscribers is staggering even for the most effective publications. This is why partner promotions with other upscale marketers, the internet, referrals from existing customers, and direct mail are among the best tools for marketing to this small audience.
The just released (October 17) Global Hospitality Report from HVS begins gently enough with the query:
What is Luxury?
How the luxury hotel product has changed over the years,
Demand Drivers in Luxury Hotels
Role of High Net Worth Crowd as Luxury Consumers
Emerging Economies in Luxury
Not until the last four pages do we come to What Credit Crunch? More Luxury for New Money. Following are highlights from those pages, followed by excerpts from an interview a few days ago by Harvey Chipkin with one of the authors, Arlett Oehmichen, associate director of HVS in London. – who updated the outlook because of the tumultuous changes in the few weeks since the Report was issued.
Latest Research Top Lines from Amex Publishing-Harrison Group September Survey
Over 71 percent of America’s affluent and wealthy consumers (10 percent of American families) said the real estate and banking crisis has affected their sense of financial security and the value of their assets, according to new research by American Express Publishing and Harrison Group. Nearly 6 in 10 survey respondents are now worried about running out of money, including 48 percent of America’s wealthiest families (up from 35 percent in April).
In early September Unity Marketing’s CEO Pam Danziger sent this bulletin to her subscribers:
For Luxury Marketers, Manufacturers, Retailers, Advertising Agencies, Investors and the Press…
Why the Luxury Market Will Never Be the Same
“Once the current economic crisis is over, luxury consumers will have undergone
changes that will profoundly affect the way luxury marketers do business
-- Going into the vital fourth quarter, luxury marketers are facing the toughest business environment in recent past. Spending by affluent consumers on luxuries is down and their expectations for future luxury indulgence is weak. Most pundits agree that the luxury market will eventually rebound from the current 'luxury drought,' but in the meantime the luxury consumer market is undergoing fundamental and structural changes. “ “Changes will be so wide-spread and far-reaching”, Danziger said, “ that the consumer climate marketers will face after the recovery will be very different than the one they dealt with before the current luxury drought. It also means that tried-and-true marketing and branding strategies that worked before may not work after wards.” We were privileged to tune in to a private luxury client webcast that followed later in the month on the subject “Finding the Silver Lining: Rainmaking in the Coming Luxury Drought”. Herewith a few nuggets in that compelling Danziger style:
Busting Online Travel Myths, Predicting Future of Agencies, Sorting Out Confusion – all at a forum led by analysts from PhoCusWright experts on online travel.
PhoCusWright has been following the trajectory of online travel since its inception. At a recent forum in New York, executives took at a look at trends and found: 3 Forces For a Perfect Storm
PhoCusWright CEO Philip Wolf sees three forces creating the “perfect storm”
1) Travelers Choice of Empowerment – with millions of consumers clicking million of times on millions of sites
2) A proliferation of business models that are blurring together: media sites for travel information; referral sites for referring to booking sites; booking sites; and itinerary sites that keep track of personal itineraries – all taking on elements of one another.
3) Traditional Value Chain Disrupted: It’s hard to tell who’s who anymore. Transaction sites look like advertising sites; search portals look like online travel agencies (OTA’s); supplier sites look like social media sites.
Melissa Bradley’s On My Mind message in the Sept-Oct issue of Indagare—family focused travel--just happened to be what was on my mind as I reviewed some of the most recent surveys on consumer travel behavior in a struggling economy.
In the November 3rd issue, covering the Latest Quarterly Survey from American Express Publishing/Harrison Group on Affluence and Wealth in America, is a most informative visit to spending in a troubled economy.
One thing that struck us, as we listened to the October 2 presentation, was how the term affluent covered so much territory - There is “ Bedrocks” Affluent, “Upper Middle Class” Affluent, “Pinnacle” Affluent, “Super” Affluent and finally, just plain Wealthy – all together, some 20 million households.
But Lux 360 Found a Brighter -and we think, Sensible Side-
From Harvey Chipkin’s report in the British online Hotel Report-a paid service from William Reed Business Media- http://www.wr-bi.co.uk/ - Reproduced here with publisher permission
At the first industry wide meeting following the fall financial meltdown and the recent presidential election, the consensus seemed to be that, yes, the industry faces a historically challenging situation that will last for awhile. But there was also a feeling that lodging is in a better position than other industries – and, happily, a few silver linings were perceived as well.
We’ve all heard the bad news over and over: global liquidity drought, drops in rate and occupancy, a dismal outlook for employment, and a possibly extended recession. But some leaders managed to find ways to take – if not a positive view -- at least a more nuanced one. Following are a few comments about why weeping and gnashing may not be the only appropriate attitudes.
Steve Joyce, who recently became CEO of Choice Hotels International, said he has been “the only optimistic person in the room at a number of events over the last few weeks.” I strongly believe,” said Joyce, “that there is a paralysis factor and that you can’t base projections on two weeks of hysteria.”
“Forecasts in this environment,” he continued, “are entertaining but not much use.”
Other ‘smart marketer’ insights from Joyce, Mark Lomanno of Smith Travel Research; Peter Yesawich, CEO of The Y Partnership; Michael Kaufman, Chairman of National Restaurant Association; Patrick Ford, CEO of Lodging Econometrics; and Roger Thomas, Steve Wynn’s design guru for many years.
Nat Ives, in Ad Age Online Sept 6, cites new data from Ipsos MMR which assures that well-off readers read print publications just as much now as they did 5 years ago.
Also, survey respondents making more than $100,000 annually said their average hours online had grown to 22.1 each week from 10.7, while the time they said they spent watching TV sunk to 18.6 hours from 23.7 in the 2003 survey. Read the full Ives story at http://adage.com/mediaworks/article?article_id=130685. Lux 360 attended the client briefing this week and will provide additional perspective in our Sept. 30 issue, interviewing Ipsos MMR President Bob Shullman.
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