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.).
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."
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.
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.
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:
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)
Ipsos Mendelsohn and American Express Publishing-Harrison Group OfferFreshInsight 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.
Resource Center 
