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It's 2010: Do You Know Where the Luxury Travel Market Is?

‘Frugal Fatigue' Sets In and

The Affluent Are Ready To Spend
More On Travel

 

Early into the economic recovery and with fresh studies in hand, we decided it was time to revisit some of the companies and people we looked and spoke to in the throes of the recession for a reality check. We asked them the following:

  • How did the luxury market change during the crisis - both the customer in their behavior?
  • Were some of those changes permanent?
  • Where do we go now?
Here's a look at what we heard from these luxury marketers. And we have to note that much of it tracks with what we are seeing, which is that travelers are: 
  • Being more responsible in their choices in not looking for glitz and lavishness
  • Seeking a sensible, experiential vacation. They want comfort, but also the opportunity to drink in local culture (and not necessarily exotic culture.).
  • Open to easy family vacations
  • Favoring a new, anti-glitz simplicity.
 
Guess Who's Leading The Way To Recovery? Luxury Hotels!
Nuggets From 2010 ALIS - Luxury Segment Panel - By Harvey Chipkin
 
  • Terry Stinson, president of Mandarin Oriental hotels, said that the much-vaunted "AIG effect" is "fading away, market by market." He said that even group business was returning to luxury hotels, though again with an ever-diminishing booking cycle.
  • Homi Vazifdar, managing director of Canyon Equity which owns properties at the very top of the market like Amangani in Jackson Hole, said his hotels had actually raised rates last year and except for the occasional value-added element for a regular customer, had not discounted at all.
  • In a post-panel interview with LT360, Robert Lowe, Jr., president of Lowe Hospitality Group (Destination Resorts), said that a number of trends in luxury pre-dated the recession including the move to vacations as "memorable and meaning experiences that are local, cultural and authentic" - and that the recession had only enhanced that trend.. "The only change since the recession," he said, is that "value has been added to the equation. Guests are abandoning "extravagant, showy vacations."
 
Pessimism Takes A Holiday...

And "Gluttonomy" Has Passed As Affluent Look To Spend Generously - But Differently - This Year

Latest research from American Express Publishing and Harrison Group reveal that affluent and wealthy American families "look to one another" for holiday joy as they watch holiday expenditures. The new normal? It's all about spending that's based on relationships.

 

  The latest Survey of Affluence and Wealth in America, produced by American Express Publishing and researchers Harrison Group, is a snapshot of families with a "household discretionary income" of $100,000 and above - with results broken into the super Affluent/Wealthy (250K+) and the Upper Middle Class/Affluent ($100K to $249)

  The overall takeaway for the holiday season: Optimism has risen, fear of not surviving the financial crisis has declined and household financial management has been reinvented.

  And what does it mean for travel?

 

 
SURPRISE! Demand for High-End Hotels "Surges" In Third Quarter

Demand leaps back to pre-crisis levels. The problem: Supply keeps coming.

   Smith Travel Research, the record-keepers for the hospitality industry, recently announced a stunning development: a huge jump in room night demand for the three highest priced hotel segments: luxury, upper upscale and upscale. "What makes this turnaround even more dramatic," said Mark Lomanno, STR's president, "is that it has gone largely unnoticed and ignored by both industry analysts and the industry itself."

   The paradox, says Lomanno: "This demand rebound has been largely masked by very high levels of supply growth, which have resulted in occupancy levels and percent changes that have resulted in declining numbers...

   While many analysts have looked to the "midscale" categories for relief, they are in for a rude surprise.

 
Hail to the Affluent! Bringing New Life to Luxury Marketing-New Research

IF THE AFFLUENT DON'T LEAD US OUT OF THE RECESSION,

THEN WHO WILL?

 

That is the question raised by the results of the 2009 Ipsos Mendelsohn Affluent Survey, which deals in depth with the patterns and plans of affluent consumers. We were privileged to attend the presentation and, while the survey deals in many product categories beyond travel - it demonstrates the power of this market base. And, through conversations with Bob Shullman, who heads up Ipsos Mendelsohn, we were able to get specific insights into travel.

And why should we care about the affluent? As Shullman said, "While one in five households in the U.S. have incomes of $100,000 and higher - they represent half of all income; and 80% of wealth. They are 2.3 times more likely to buy upscale and luxury goods; and they will spend four times more on these products."

The upshot, concludes Shullman: "I can't say unequivocally that the affluent will lead us out of the recession, but they are poised to do so and the next few months will tell the story. Meanwhile, there are millions of them with plans to spend - and these are people whose expenditures have remained high through this economy. They are a positive thinking group."

           

More highlights from the presentation:

The Travel Picture-- Patterns and Plans

  • 14.8 million affluents plan to take a cruise or a trip/vacation outside the U.S. in the next 12 months.
  • In 2008, affluent households spent an average of $8741 on all travel - with $5,582 on personal travel and vacations; and $7,245 on business travel. They spent $6,037 on travel within the U.S.; $7,436 on travel outside the U.S.
  • There has been a "dramatic change" in how the affluent manage their travel. While many still believe the affluent are not as Internet-oriented as others, in fact 98% of them are online - compared to 70% of the rest of the population.
  • Discretionary expenditures on travel comprised 16% of the total spend by the affluent - up from 14% in 2008. --very close to the leaders in all purchase categories --- personal insurance (18%) and home related (19%)
  • Destinations visited by the affluent for vacation/personal reasons in past 3 years:
    • Canada/Mexico/Central or South América - 6.4 million families and individual travelers
    • Caribbean and Bermuda - 4.9 million
    • Europe - 4.0 million
    • Asia - 1.4 million
    • Pacific Rim: 0.5 million
    • Middle East - 0.4 million 
    • Africa - 0.3 million
  • What motivates 7.6 million Globalist Affluents in travel planning:

 
Ring Out the Old, Ring In the New: Regroup, Reinvent, or...POOF!
By Harvey Chipkin

Luxury Interactive's June 2009 Conference in NYC heard speakers from across the luxury brand spectrum talk about how it's no longer business as usual - but time to regroup and  reinvent in order to rebound. One example: Ritz-Carlton lets employees take care of guest problems - even if it costs $2,000. Another: Montage CEO All A- Twitter.

This year, in the midst of a luxury letdown, speakers shared ideas on coping and curing.  Following are highlights.

Luxury Institute's Milton Pedraza Offers New Rules for Old Luxury Marketing
He began with how luxury operators have been doing business - and then how they should be doing it.
  • Customers must be welcomed and nourished - not met with arrogance and snobbishness.
  • A price premium has to be earned, not imposed
  • Traditional luxury marketing (and that should now include internet) should be aimed at generating word of mouth and referrals (for more, visit www.luxuryinstitute.com)

 
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From the Editor

Ipsos Mendelsohn and American Express Publishing-Harrison Group
Offer Fresh Insight on Consumer Behavior in 2010


According to new studies from two blue-chip research sources, Ipsos Mendelsohn and American Express Publishing - the affluent are not only ready to travel -- they are frequently going to spend more on it. While the Ipsos study focused on intent and American Express Publishing on mindset, they both point to a surge in affluents taking to the road (Amex sees an increase of 6 to 8% in spending on all luxury categories). Interestingly, both studies agree on a positive attitude despite lingering concerns about the economy. Here's a look at the highlights of both 2010 studies.

LuxuryTravel 360 has long looked to the affluent as a burgeoning market in business and leisure travel, fueling growth in more affordable, common sense luxury - less glitz and glamour, but ready to pay extra for memorable family experiences and genuine local culture.

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