While luxury travel marketers look to current economic conditions –
and there is plenty to consider – other analysts are looking ahead and
finding trends and forces that might turn the entire travel industry on
its head – and in the not too distant future.
What really happens when a global tourism explosion in developing
countries--China, India, Russia, Brazil, for starters—runs into a
massive meltdown in air transportation for all of us?
Insights from two recent articles compel our attention when it comes to fundamental changes in travel: 1) “The Tourism Time Bomb” – (Harvard Business Review
April 2008 and follow up LT 360 interviews with Authors Paul Nunes (an
executive research fellow with the Accenture Institute for High
Performance) and Mark Spelman (global managing director of Accenture’s
strategy practice, based in London.)
These analysts see a world where so many more people are traveling that
“a scarcity of place” will result. That means higher prices, rationing
(perhaps decades- long waiting lists for important attractions). In
turn that may result in the creation of real and “artificial
destinations” in developing areas. 2) “The End of Aviation”: (The New Republic, August 27, 2008)
Here, reporter Bradford Plumer sees a potential “aviation apocalypse”
as high fuel prices and the threat of climate change could result in
dramatic cuts in service and routes, and tremendous changes in travel
patterns. (See story below)
First, Tourism Time Bomb: You Can Already Hear It Ticking
In last week’s interview with Nunes and Spelman, the researchers offered elaboration on their thesis, particularly as it might affect the luxury travel sector. Selected Highlights
• Nunes-
What prompted the article “was not just the intersection of the trend
of growth of income, and travel demand from emerging economies, but
also the recognition of physical constraints on travel and certain
destinations, which is the shocking aspect.”
• Spelman sees parallels with Japan’s economic rise in
the 1970’s. ”But it’s not just about emerging economies, it’s about
interdependence and tremendous opportunity. As the incomes of residents
of China, India, Russia and Brazil grow, people will be looking to
travel well beyond their borders. Their travel ambitions will be global."
• Nunes - “Luxury” will be a relative term for many
new travelers. “We may not consider a bus tour through Europe as
luxurious. But to a newly arrived middle class Chinese person, the
ability to travel to France would be luxurious.”
The latest Wealth Survey out of The Luxury Institute trumpets an explosion of participation by US affluent in online social networks – soaring from 27% in January 2007 to 60% a mere year later.
Luxury Institute CEO Milton Pedraza thinks marketers might be lagging behind that march, saying, “While some in the luxury industry are still debating e-commerce, search and banner ads, the majority of their customers have leaped into the online dialogue.
“Luxury,” asserts Pedraza, “needs to catch up quickly.”
In February of this year we gave high praise to Nancy Cockerell, who led the team that did the research on international travel spend for International Luxury Travel Market (ILTM) in 2007 and arrived at the $200 billion tally for luxury which we found quite credible.
We also talked about democratization of luxury, affordable luxury, massclusivity, and persuaded her to lend her voice to the subject in a future Lux 360 column.
Well, here it is, under the title, Has Luxury Become Too Affordable? We are most pleased to have her as a contributor. (special advisory - Note Nancy’s description of the ‘Chav’ effect, in which luxury goods brands like Burberry’s are trying to reduce sales of their products to the ‘wrong people’)
Has luxury travel become too affordable?
“The democratization of luxury travel is here to stay”, Dana Thomas wrote in her best-selling 2007 book, How Luxury Lost its Luster. But what about luxury travel?
We ended our March 4 interview with Pam Danziger of Unity Marketing with a promise to post some of her ’passionately positive‘ thoughts about luxury travel and some highlights on key trends :Democratization, affordable luxury, and the new power of casual luxury, at www.luxurytravel360.com --
Here are some ‘headers’ to guide you on that bonus journey
*Frigid formality is out, casual is in. Happy to pay the price.
Democratization is real. Comfort in an artificial community.
You can tell a luxury hotel from the curb, But a luxury consumer? Not necessarily.
The U.S. market is a global bellwether of luxury trends We are going more experiential
Luxury is really not about what you have and what you own – it’s more about how you experience life.
In her just released report on luxury market challenges in 2008, Pamela Danziger of Unity Marketing, and author of Let Them Eat Cake: Marketing Luxury to the Masses as Well As the Classes, offers important insights on how luxury consumers will adapt to what she calls a dismal outlook for the near term in luxury goods.
We interviewed Danziger this past week about how the changed climate would impact the luxury travelers she calls X-Fluents, Butterflies, Cocooners, and Aspirers. Here are a few excerpts from our conversation:
Less affluent consumers with lower levels of income (less than $150,000) – what many call the 'trading up' segment – will be 'trading down and out' of the luxury market for most of 2008.
While the 'trading up' consumers will stop buying the premium luxury brands for now, they have developed a taste for luxury that they are not going to give up completely. That means they will turn to ‘little luxuries’ rather than indulging in big-ticket purchases.
Many luxury consumers will focus on domestic travel as opposed to traveling overseas, with the exception of cruises (But those high end Z-Fluents and Butterflies in travel? A little bit of wait-and-see in that department.)
We saw Danziger’s longer term view for luxury travel as passionately positive, and our conversation moved on to some of Lux 360’s favorite issues: Democratization of luxury; Affordable luxury; The new power of casual luxury; the ‘mighty math’ of luxury travel, and finally, her view that “ from an international perspective the U.S. market is a bellwether of trends coming across the world, across the globe.”
For someone whose title is “assistant dean,” NYU’s Lalia Rach gets the kind of audience reaction more closely associated with professional entertainers – overflow crowds and even standing ovations.
The reason: Rach is on top of hospitality trends; she’s not afraid to tell her listeners what they don’t want to hear; and she’s laugh-out-loud funny. Typical Rach performance took place recently at a meeting of the Big Apple chapter of the Hospitality Sales and Marketing Association, comprised of sales and marketing directors for New York hotels. Here are the bullet points:
Credit card crisis makes 2008 “the year of living dangerously.”
Recession? Don’t repeat your head-in-the-sand attitude of 2001
Technology for web networking will impact meetings in 2008
You have become ‘product lovers,’ -must become ‘people lovers’
It’s all about techmobility. The iPhone will revolutionize travel
Economic downturn - Do your salesman know how to sell?
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.
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