What Price Luxury? The Bottom Line for High End Travel Marketers
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.
A large portion of the sales in the US of true luxury products is made
to international visitors. As a result, this, together with the
anecdotal research of the media about the sales of very high priced
luxury goods, gives a false impression of the actual size of the US
affluent and luxury markets.
Surveys that attempt to measure spending on “luxury” items are useless,
at best, and dangerously misleading, at worst, if “luxury” is not
precisely defined by specific price points. The same appears to be true
for surveys that attempt to identify “luxury” brands without specifying
price points to define “luxury”.
Luxury Price Points Data in Travel
* Caribbean Resort In Winter: For men the median value was $300 a night while it was $250 for women. The highest price was $3,000 (men) and $1500 (women) while the lowest were $50 (men) and $80 (women.). Only a third named the brand they would most likely purchase with Marriott (20%) and Ritz-Carlton (9%) the two most frequently mentioned.
* Hotel Room in New York City: The median value was $300 for both men and women; the highest price was $1,000 for men and women while the lowest was $50 for men and $100 for women. Again, a third mentioned the brand they would most likely purchase with Marriott (27%) and Hilton (18%) most frequently mentioned.
* European Cruise: Median value for men and women was $300 per night per person; lowest price was $80 (men) and $100 (women) Highest price was $10,000 (men) and $20,000 (women.) Less than a quarter named the cruise brand they would most likely purchase. Among the most frequently mentioned were Royal Caribbean (18%) and Princess (17%).
The Affluent Market Tracking Study is a national survey representative of the wealthiest 11.2 million households; average income of survey participants is $304,000 and net worth, $3.1 million.
Kurtz points out that the word “luxury” appears to have a rather ambiguous meaning for the affluent. That is evidenced by “the broad range of price points that the affluent use to define luxury in many products and services.”
We began our recent report on ‘Family Travel Rising’ with the following:
“All the evidence -- whether you are looking at the Amex-Harrison Group study we reviewed in our last issue, or the Ipsos Mendelsohn Affluence Report completed in September, -- shows Family First when it comes to disposable dollars.
We believe family focus is going to be front of mind for a long time to come, long after the punishing economic climate has subsided. Provider brands will be hard pressed to provide much more than kiddie or junior, or young adult activities. Smart travel agents will have to rise to higher levels of creativity and performance on the family front to sustain customer loyalty and earn the benefits of word of mouth in the neighborhood.”
And last week we caught our favorite global traveler-editor-writer-commentator during a quiet moment at home in England, the home of The Gostelow Report. She shared these thoughts:
• The hotel industry has been very slow to realize that this big expansion in family travel was going to happen. We’ve had “connecting rooms and you can put the kids next door”. They moved on to two swimming pools rather than one. One was kid friendly and one was not. But we really haven’t had anything more than that.
• We are seeing more and more bigger family groups. Operators are having a real challenge coping with such groups because it’s not a group per se, but they form their own groups. They want to be private. They want their own thing. .They tend to do their own excursions. They suddenly want a bus to take them all out. So it’s a real, real challenge. And so far the hotel industry has not realized this is happening. Now, it’s not only families. We’re also seeing more and more groups of friends traveling. And the hotel industry is not incentivizing enough – say a pair of DINKs come- Double-Income-No-Kids. There’s no incentive to them at the moment to bring along two other friends or even four other friends. And there’s big potential on the marketing side there.
Everybody knows her, but her bio is worth repeating.
Mary Gostelow, president of Gostelow Travel: Hottest Hospitality News Worldwide, is an inveterate traveler on the road more than 300 days a year. She owns and publishes the definitive Gostelow Reports, monthly market intelligence briefings to the top levels of the hospitality industry. She is the editor of KIWI's online Wow! Magazine, and also sends out a monthly update to top travel professionals worldwide.
At the same time, she is contributing editor to such publications as Elite Traveler, enRoute, Hotels and Le Magazine.
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.
Issues & Insights 
