October, 2011 – This article from The Fiscal Times features data about the growth for the wider luxury industry (http://www.thefiscaltimes.com/Articles/2011/10/07/9-Must-Have-Status-Symbols-that-Say-Im-Rich.aspx#page1).

By Drew Gannon

Take walk down Fifth Avenue, Michigan Avenue or Rodeo Drive, and you might think Louis Vuitton had finally had a sale. Block by block, the signature brown bags fill the streets. Never mind that the bags in the Spring 2011 collection start at $2,930 for a small clutch, and go up to a whopping $35,500.

With sales up 23 percent from last year to $23.4 billion, Louis Vuitton is setting the tone of growth for the wider luxury industry. In 2011, spending on premium items and services is expected to rise 8 percent over last year to $359 billion, according to an annual survey by American Express Publishing and Harrison Group.

But the big players are not just the barons of Wall Street, sports, and entertainment.

“America’s top one percent – a little over one million households with a net worth of six million plus – are spending on luxuries,” says Ron Kurtz, president of the American Affluence Research Center. “But the bigger growth has come from the BRIC markets – Brazil, Russia, India and particularly China.”

China, the deus ex machina of the luxury market, is expected to account for 20 percent (roughly $27 billion) of global luxury sales by 2015, according to research by McKinsey, as the Chinese shift their consumption preferences from generic goods and materials to the status of internationally well-known brands. China’s unprecedented wealth has bolstered consumer confidence throughout the country; the fifth annual China Luxury Summit in December 2010 was aptly titled “China Luxury Market: An Oasis of Hope and Possibility.”

In the U.S., despite the belt-tightening across most of the country, wealthy Americans are starting to enjoy the good life once again, buying high-status items and services they had cut out of their 2009 and 2010 budgets. Indeed, rich Americans’ expenditures on luxury are set to rise $26.6 billion this year.

Whether such optimism will trickle down to the middle class is to be seen. Overall spending is still at a standstill, with consumer confidence declining sharply in August. Online shopping and social media may be the key to bringing up luxury sales in the United States as well as abroad. A recent study by Italian luxury foundation Altagamma found online sales (now only 2.6 percent of the market) growing at a rate of 20 percent a year as luxury brands multiply their friends on Facebook and activity on other social media sites.
Here are nine popular purchases helping wealthy consumers live high. Some people just can’t live without their Louboutins.

1. Swanky Strollers
Think a stroller is just a way to transport your kids? Think again. The mommy wars are being played out on the playground, with parents sizing up each others’ wheels. High-end strollers like those by the Bugaboo brand are flying off the shelves, and run anywhere from $500 to $2,000. One Bugaboo model that converts from a single stroller into a side-by-side double has a $1,659 price tag, and a waiting list to buy one. Another stroller by Kid Kustoms has a vinyl leather seat and optional iPod speakers, for a mere $3,500. Celebrities like Naomi Watts and Gwen Stefani have been spotted pushing around expensive Bugaboo prams, and their popularity has spread to suburban streets across the country.

2.Specialty Bikes
Biking became more popular in the last year, with bike sales rising 15 percent between 2009 and 2010, according to the Bicycle Manufacturing Association. But the bikes that are gaining the most popularity? Pricy, custom-built bikes. Specialty bike retailers command only 14 percent of the market, but 44 percent of the dollars, according to the National Bicycle Dealers Association. For example, custom bicycle company KGS Bikes does an elaborate three-hour fitting session, and has sold bikes for as much as $32,000. “I’ve seen growing demand,” says KGS Bikes’ owner Kevin Saunders. “My customers want a bike that is perfect for them.”

3. Designer Fashion
Last year, Carolina Herrera reported that, to her pleasant surprise, her $7,990 gray sequined ball gowns were “selling like hotcakes.” Other top designers have also reported stellar earnings, including Louis Vuitton (up 23 percent from 2010 to $24.3 billion), Hermes (up 41 percent to $11.9 billion), and Chanel (up 23 percent to $6.8 billion). The king of American style, Ralph Lauren, has seen his $13 billion-valued company’s stock grow 150 percent in the two years since June 2009. Sales for Ralph Lauren’s heritage Rugby brand jumped 34 percent last year after an online-only fashion show where online shoppers could purchase items in real time. High-end department stores and online designer sale sites have snagged some of the profits as well. Saks reported quarterly earnings up 50 percent and sales up nine percent ($726.7 million) in May this year, thanks in part to a boost in full-price sales.

4. Fine Wines
Forget two-buck chuck. Nielson Co. reporting a 4.1 percent rise in total U.S. wine sales to $9.32 billion this year, but wine priced $20 plus saw an even larger increase in sales (11 percent), demonstrating that pricier wines are becoming more popular. In its 22nd Annual Restaurant poll, Wine & Spirits magazine found the average price for the most popular wines in restaurants was $62. One of the magazines’ most popular restaurant brands, Duckhorn Vineyards, boasts an array of reds, including a 2007 estate-grown Rector Creek Vineyard Cabernet Sauvignon, which goes for $95 per bottle.

5. The Fur Effect
Fur is in, according to America’s top fashion magazines. Many September issues– including long-time fashion bible Vogue – featured fur and faux fur as the next big thing for the coming cold. According to them, fur goes with and on anything, from apparel like vests and coats, to accessories like purses and even shoes. Global retail sales for fur were up 5.4 percent to $14 billion in 2010, according to the International Fur Trade Federation. Alexander Wang’s fur sandals sell for $895 a pop. And while just this month West Hollywood becomes the first U.S. city to ban all fur sales, fur’s popularity continues to rise as the temperature falls.

6. …to Furry Friends
American pets are living the good life – sometimes even better than their owners. In 2010, Americans spent a record $55 billion on their pets, according to research firm Packaged Facts, more than the gross domestic product of many countries. Gourmet pet food tasty enough for humans to eat (think duck and quinoa) and premier pet care facilities like the Barkley Hotel and Day Spa, are popping up everywhere. Packaged Facts estimates that pet insurance sales, which rose 27 percent from 2008 to 2009 to $303 million, will reach $881 million by 2014. By the end of 2010, one in five Fortune 500 companies offered pet insurance by Veterinary Pet Insurance (VPI), the industry’s largest provider. Expensive designer dogs, like “teacup” dogs as well as hybrids between two breeds are growing more and more popular, and can cost thousands of dollars. Celebrities buying into the designer dog trend include Mischa Barton with her Shih Pom (cross between a Shih Tzu and Pomeranian) and Jessica Simpson with her Maltipoo (cross between a Maltese and Toy Poodle). But pure breeds have also kept their place on the upper crust. An 11-month old red Tibetan mastiff named Big Splash became the world’s most expensive dog after being sold to a Chinese millionaire for 10 million yuan, or $1.5 million.

7. Fast Cars
Despite the doom and gloom in Detroit, the luxury car sector is revving its engine. In July, Mercedes-Benz reported its highest monthly sales growth (16.7 percent) since 2006, with 21,065 cars sold. Still, BMW outsold its competitor that same month by over 5,000 vehicles, an 11.7 percent increase from sales on year prior. BMW’s SAV, a midsize SUV starting at $37,000, led the pack, with sales up 56 percent in 2011. And the high-end Z4 Roadster was BMW’s third highest selling vehicle, up 92.4 percent in July from the previous month. U.S. News & World report named the Z4 one of the best luxury cars of 2011, describing it as a car suited for drivers more interested in luxury than performance. The Z4 sells for between $47,450 and $62,500.

8. Cruising Through Life
An estimated 73.7 million Americans will travel outside the United States in 2011, estimates Business Monitor International in last month’s United States Tourism report. And while air travel sales remains on a perpetual roller coaster of ebbs and flows, cruises have grown more popular for wealthier Americans this year. Business Monitor International reports that in 2011, 9.6 million will have traveled outside of the United States by cruise. The Cruise Line International Association plans to welcome 22 new ships to its 25 lines, including the 3,690-passenger Carnival Cruise Lines’ Carnival Magic, launched in May 2011. A 12-night stay in the Mediterranean on luxury cruise liner Celebrity Solstice costs $9,299 per person.

9. The Bling
Rolex, recovering from a 14 percent decline in brand value last year, is making a comeback. Sales are up 11 percent to $5.3 billion this year, making it the sixth most powerful luxury brand according to consulting firm Millward Brown. The Rolex Presidential Day-Date watch has long been considered a quintessential luxury item, worn by celebrities and several U.S. Presidents from Roosevelt to Reagan, and costing upwards of $35,000 depending on its materials and dealer. Rolex’s signature men’s watch has now opened its doors to women, with InStyle featuring Jennifer Aniston and Courtney Cox among others wearing the brand. Other jewelers have also seen strides in the last year. Milward Brown ranks French jeweler and watchmaker Cartier fifth on its luxury list, up 34 percent to $5.3 billion net worth. Tiffany & Co.’s American sales rose 22 percent in the first half of 2011.

Posted in Affluence Research, Apparel, Automobiles, Cruises, Entertainment & Recreation, Fine Jewelry & Watches, Luxury Market & Goods, Travel, Vacations | No Comments »

This is an article from Fox Business featuring AARC research about the latest trends in affluent travel (http://www.foxbusiness.com/personal-finance/2011/06/10/adventures-in-affluence-how-billionaire-vacations/)

By Kathryn Glass

Published June 10, 2011

Recent market performance notwithstanding, the return of glitzy globetrotting for the super wealthy is back, travel connoisseurs say, as the days of cutting back to seem “recession-chic” slowly become a thing of the past.

According to the American Affluence Research Center, 35% of America’s wealthiest households plan to spend more on domestic vacations this year, and 31% plan to spend more on vacations abroad. That means the rich are planning to do some serious spending on everything from private jets to private islands.

If you have ever wondered how the most affluent travelers go about planning their perfect summer getaway, you can be sure they don’t sit online and compare hotel suites like the rest of us. When money is no object, the rich and famous call a high-end travel agency, or concierge service, as it’s more appropriately dubbed, which specializes in fulfilling the sometimes bizarre, always lavish travel and service demands of the elite. These service-providers boast having achieved near-impossible feats in order to accommodate their clients’ needs, and achieving the impossible doesn’t come without a price. Bill Fischer, long-known as the coveted New York travel advisor with the famously unlisted number, charges new clients a one-time initiation fee of $100,000, and annual service fees of $25,000; he says business is booming.

FOX Business got the ‘what,’ the ‘where,’ and the ‘how’ from Fischer and more of the industry’s most exclusive travel connoisseurs on the trends and tips the jet-setting crowd adhere to when booking their joyful jaunts, so you can travel more like the billionaires this year.

Trend 1: Avoiding the Airport

Airport security, both at home and abroad may be a necessary evil for most of us, but for the super rich, it’s just another inconvenience money can avoid. Private jets–through both shares and ownership–allow rich travelers to skip the lines and hassle of security.

“A lot of people who can afford it will go by private plane because it’s getting more and more difficult to go through the airports—not only in the U.S., but especially coming from overseas back to the U.S.,” says Rudi Steele, a sought-after Naperville, Il.-based travel specialist.

Even if flying by private plane is not an option, affluent jet setters will often go the “meet-and-greet” route, where they are met by someone at the airport who expedites processing through airport security and customs, says Dallas-based luxury travel consultant Jim Strong.

“We make sure we have on-arrival or on-departure, someone there to hold their hand and expedite them through the customs lines and the diplomatic lines and there are services offered to get this done,” Strong says. The service generally runs between $200 and $500, according to Strong, but he says it’s well worth the price. “In the Rome airport, or Heathrow, it can save you hours.”

Trend 2: The Multi-Generation, Multi-Room Requirement

Perhaps one of the biggest advantages of being able to fly private is that you don’t have to worry about cramming the kids into coach. More of the rich and famous are bringing the whole family along when they take a trip, creating quite the booking task for travel advisors.

Virtuoso, a network of high-volume travel agents, reports in its January survey that 63% of its 6,000 members in North America predicted the biggest travel trend for 2011 would be “family and multi-generational travel.”

“I think since 9/11, people just don’t want to leave by themselves; they want to take their extended family with them,” Fischer says. “You could sometimes see four generations traveling at once.”

Traveling with an entourage requires multi-room accommodations, which is no easy feat. Depending upon the size of the client’s entourage, a three to four-bedroom suite at the Four Seasons may not fit the bill.

“We do a lot of private islands, but what our clients like the most is staying at a villa with butler service that is attached to a hotel,” Fischer says. “In other words, there is a hotel component, but the villa is separate and private so you’re getting all the accoutrements of the luxury hotel, but are staying in your own private space.”

Fischer recalls a situation where one of his clients needed a three-bedroom suite in a particular hotel that only had two-bedroom suites. After speaking with the hotel’s general manager, Fischer suggested they knock out a few walls, and sure enough, he got a call back from the general manager telling him, “Bill you have your three-bedroom suite.”

“We are catering to a client that can afford anything; [they] want what they want when they want it, and we’re always saying ‘yes.’”

Trend 3: Exclusivity and Privacy is Paramount

Because the super rich are often in the public eye, planning a getaway that is extremely private is of the utmost importance. This sometimes means staying away from big name-brand hotels and having back-up hotels booked in case the guest-in-question needs a quick escape from prying eyes.

The desire for privacy is also the driving force behind the popularity of renting a private island, experts say; it’s easier to guarantee privacy, and top-notch service when you know you’re the only guest there.

“When you are at a resort, you always wonder if you’re being treated as well as the other guests,” Strong says. “But when you buy the whole island, you know you’re king of the hill.”

Richard Turen, another Naperville, Il.-based travel planner who writes for industry publication Travel Weekly, says boutique and non-chain hotels have grown in popularity for this reason.

He says one of the more intriguing ideas to help provide that sense of seclusion and intimacy has come out of the Alessandro Rosso Group, which has been creating “one-room hotels” in some of the best cities around the world.

“Your key combination is sent to you, there’s a cell phone where you dial one number and you get your butler, and you actually have your own hotel,” Turen explains. “It’s a very interesting thing because you can stay in the best part of Paris or Rome and have it all yourself.”

Trend 4: Once-in-a-Lifetime? Yes, please.

A mundane vacation just won’t cut it for the super rich. Travel advisors say their clients are seeking once-in-a-lifetime experiences, like diving with sharks off the coast of Australia or a traditional Italian meal cooked by a famous chef in her home on the Amalfi Coast.

“These people want authenticity; they don’t want something that’s manufactured, or pushed upon them,” Strong says. “They want it to be natural, authentic, in a memorable scenario that they will treasure forever.”

Fischer says he’s coordinated parties where famed-tenor Andrea Bocelli gave a private performance, and just last weekend, he managed to get a client special tickets to the Grand Prix in Monte Carlo, along with entry to F1 Paddock Club and after parties.

Trend 5: Safety First

In some cases, travel advisors need to accommodate not just a client and the client’s multi-generational family, but the security detail as well.

“People when they have quite a bit of money, the most important thing they want is security,” says Fischer.”So we have people who work for us that we will send to take care of the families. They know the destinations; these are former CIA that work for governments and know the inner workings of the countries.”

In addition to sending the best private security personnel available, Fischer has sent top-notch doctors with clients on trips. For some destinations he has ordered armored vehicles for clients and registered them with the local police departments so they can be provided with a local police escort.

Trend 6: Access—to Any Place in the World

A luxury travel advisor has to be ready for last-minute requests to visit some of the planet’s most exclusive locales. While no corner of the globe is out of reach, the clear standout among this summer’s most popular destinations is Europe, with Italy being the top destination for the wealthy elite.

“You have the parents of teenage children who are very much aware of the educational value of travel, and they definitely want to take advantage of traveling to destinations where children are getting some education,” Strong says.

In addition to travel mainstays on the Mediterranean, safaris are also all the rage.

“Africa is one of those amazing destinations, especially east Africa and southern Africa, mainly for game viewing,” Steele says. “If you go on safari once, you would think you would get it out of your system, but when it comes to Africa and safari, it pulls you back; people go over again.”

Strong says more exotic destinations such as Morocco, China, Vietnam, Laos and Cambodia are all still very popular with clients.

For the beach-going set, places like Fiji and Bali are back and bigger than ever, according to Turen and Steele. Fischer expect travel to Brazil to ramp up as the country readies itself for the 2016 Olympic Games.

For the indecisive industrialist, a cruise may prove a better option, offering the flexibility of multiple port stops. Private yachts that sleep up to 30 people are popular with Fischer’s clients because they can accommodate multiple generations and an entourage.

Finally, for the wealthy with the most severe case of wanderlust, there’s The World. This seafaring sanctuary was referenced by both Fischer and Turen for clients that have the time to travel for longer periods. Turen calls it “the world’s top-rated ship,” and the 644-foot yacht, which launched in 2002, plans itineraries based upon the input of the owners, offering the utmost in luxury service and accommodations. The World boasts itself as the “largest privately owned yacht on the planet,” with 165 private residences, valued between $1.4 and $7.9 million, with about $240,000 in annual fees.

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This is an article from The Wall Street Journal by Christina Binkley (http://online.wsj.com/article/SB10001424052748703730804576317202215630540.html). The article references our Spring 2011 survey.

May 12, 2011
By Christina Binkley

Bentleys and Hermès bags are selling again. Yet the wealthiest Americans are emerging from the financial downturn as different consumers than they were.

Lyndie Benson says she now mentally calculates the “price per wear” of designer clothing. As the wife of saxophonist Kenny G, Ms. Benson, a photographer, can afford what she wants. She used to make a lot of impulse purchases, she says. But when shopping in Malibu, Calif., recently, she stopped herself before buying a gray Morgane Le Fay suit she’d tried on. “I walked outside and thought, ‘Hmmm, I don’t really love it that much,’” she says with contentment.

A number of surveys released in the past six weeks suggest Ms. Benson’s new selectiveness is widespread among the wealthiest Americans. Though many of these people might seem unscathed by the financial crisis—they didn’t lose their homes, jobs or retirement savings—they were deeply affected by what took place around them. “If you’re conscious at all, it just seeps in,” Ms. Benson says.

What’s showing up in the latest research is a broad-based caution—a sudden aversion to salespeople, a tepid response to ads focused on brand images, and a new interest in price-shopping. In Harrison Group’s first-quarter survey of consumers with a median income of $275,000, 38% said they wait for items to go on sale, versus 31% in 2010.

Indeed, obtaining discounts on luxury goods has become a competitive sport among many well-to-do consumers, including Jim Taylor, vice chairman of the Waterbury, Conn.-based Harrison Group. Though he is wealthier this year than last, he recently spent a week comparison-shopping for a suit. He ultimately bought his Michael Kors suit on Overstock.com for $185.

Laurence Geller, CEO of the luxury-resort-owning Strategic Hotels & Resorts, told me recently that his favorite place to shop is the Nordstrom Rack discount outlet in Chicago. Harrison Group researchers found Costco and Target were the favorite stores of the wealthiest Americans.

In fact, one time-honored tenet of the luxury industry—that discounted prices lower products’ prestige—appears to no longer be true, according to several studies. A survey released in April by the American Affluence Research Center, a luxury consultant based in Alpharetta, Ga., found that 60% of respondents said discounts didn’t affect their opinion of brands.

Items the rich do value at full price are one-of-a-kind clothes and accessories and experiences that create fond memories. Weekend getaways and vacations were the top two things the wealthy intended to spend more money on, Harrison Group says.

The new luxuries are things that are in limited supply and have an emotional quality, rather than just a high price tag. When I asked New York socialite Olivia Chantecaille about her luxury shopping, she cited a new Hermès Birkin bag—and a perfect mango she found in Paris. She and her husband have also been shopping a lot at Brunello Cucinelli, an Italian brand known for making J. Crew-style clothes such as cargo pants and comfy sweaters out of deluxe materials such as cashmere. Luxury may be back, but bling isn’t.

The affluent are less trusting of brands than a few years ago. That makes sense: When Saks and other stores slashed prices on luxury goods in winter 2008-2009, shoppers got an inkling of the outsized markups on $10,000 handbags.

Consumers are also less influenced by brands’ marketing. Harrison Group annually asks wealthy people if they agree with the statement: “I am willing to spend more for designer brands because they are the most stylish and fashionable.” In the first quarter of 2008, 51% of respondents agreed. Three years later, 32% agree.

Yet 82% say they are happy with the way they look. “They don’t need your brand to feel like they look good,” Mr. Taylor told a group of luxury executives last month.

Nor do they want salespeople hammering away at them. Only 2% said they trust salespeople—down from nearly 50% four years ago.

Part of this may be a reaction to the corporate push of commodity luxury. Ikram Goldman, the owner of the Ikram store in Chicago, says clients these days covet things that aren’t mass-produced. She cites Rodarte, which makes artful designs in tiny quantities, as a label that has benefited from new tastes. “They don’t feel like they’re a dime a dozen,” she says. “Our customers are desperate for that.”

Christophe Georges, chief operating officer of Bentley Motors Inc., says his clients are increasingly distrustful of corporate marketing. He types his own emails to them, rather than using automated customer-outreach programs. “We are a little amateurish,” he says, “and that’s a good thing.”

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In contrast to the March general Consumer Confidence Index of The Conference Board, which fell over 10% to the low levels last seen in Fall 2010, the affluent, who account for about half of all consumer spending, report a better outlook for the economy and their personal spending plans in a new Spring 2011 survey by the American Affluence Research Center.

Spending plans for all 17 products and services tracked by these twice-yearly surveys of the wealthiest 10% of US households are much stronger than in the Fall 2010 survey. There is also improvement in the plans to make major expenditures such as for a new auto, a cruise, and a vacation home. These results are consistent with reported sales during the first quarter of 2011.

Given the 11.4 million households represented by this survey, it can be estimated that the market segment represents potential purchases during the next 12 months of 2.4 million autos, 1.5 million home remodeling projects, 1.7 million cruise buyers (total of 3.4 million cruisers), 422,000 vacation homes, and 536,000 primary residences.

Men, those with a $6M+ net worth, and those under age 50 are the most likely to plan the acquisition of one or more of the 8 major expenditures listed. Most of the items have relatively large variations within age, income, and net worth segments. Reflecting a substantial amount of possible additional purchases, the “undecideds” or “don’t know” respondents are relatively numerous for autos (10%), cruises (8%), remodeling (5%), acquisition of a primary residence (4.1%), and acquisition of a vacation home (5.4%).

With the exception of the dining in casual/family restaurants index, which was unchanged, the index for all of the categories rose from the Fall 2010 survey, typically by 7 to 9 points.

The improvement has come primarily from increases in the “same” category and declines in the “less” category rather than increases in the “more” category.

In 16 of the 17 categories, two-thirds or more plan to spend the same or more during the next 12 months. There were 12 such categories in the Fall 2010 survey.

Domestic vacation travel continues to be the strongest category. Most of the categories are now higher than the Spring 2010 survey, when evidence of “frugal fatigue” first appeared in the surveys, and back to the levels of Spring and Fall 2008. The overall average is the highest it has been since 2008.

In 16 of the 17 categories, the segment with the strongest spending indexes is the under age 50 group. The differences within the gender, income, and net worth groups are generally minimal.

In general, the categories of services (vacation and leisure activities) appear to have somewhat better prospects than the other categories of tangible products. All three group spending indexes (home durables, leisure, and vacation travel) increased from the Fall 2010 levels, with the vacation travel category showing the most improvement and the other two groups up slightly less. All three groups are essentially back to 2008 levels.

Participants in the American Affluence Research Center survey have an average annual household income of $333,000, an average primary residence value of $1.2 million, an average net worth of $3.1 million, and average investable assets of $1.8 million.

A description of the Spring 2011 survey methodology and other detailed highlights of the survey can be viewed at:
http://affluenceresearch.org/most-recent-tracking-study/highlights-of-most-recent-survey/

Posted in Cruises, Entertainment & Recreation, Fine Jewelry & Watches, Home Entertainment Equipment, Home Furniture & Furnishings, Home Purchases & Remodeling, Luxury Market & Goods, Restaurants & Dining, Travel, Vacation Homes, Vacations | No Comments »

March 2011

This is a post from The Cruise Industry News

Defining Luxury

While rating ships on an intricate point system, luxury is ultimately in the eye of the beholder, according to Douglas Ward, author of Berlitz Complete Guide to Cruises and Cruise Ships 2011. Not so fast, according to Ron Kurtz, president of the American Affluence Research Center, who defines true luxury products by per diems, which should be $500 and higher.     Only a few brands command per diems of $500 or more, Kurtz said, with some of the proclaimed luxury brands merely aspiring to that price level. In addition, exclusive accommodations on some of the premium lines also command very high per diems, he noted.

Five Stars

Ward said that to be considered luxury, ships have to earn a five-star rating in his book – but even so, there is a range. Not all five-star ships are the same, he said, and not all the ships thought of as luxury ships are rated five stars.  Ward’s top rated ship continues to be Hapag-Lloyd’s Europa, which he attributed largely to a superior service level, including the smaller details, such as making tea from loose tea leafs and not bags. “If you are a coffee drinker, you do not expect your coffee from a bag (instant coffee),” he added. “When they serve butter, they ask if you want salted or unsalted butter. And the first time you sit down for dinner, they ask if you are right- or left-handed.” Such attention to details is the difference that distinguishes the top rated ship, Ward said. In all fairness, some of the cruise lines that did not earn top grades from Ward also disagreed strongly with his ratings.  Ward commented that in some cases the service level was friendly and enthusiastic, but it was not refined enough to compare to the top brands, which he attributed to “sloppy middle management.”Some of the older ships are also starting to look a bit date and “tired,” according to Ward, and do not compare well to new ships.Bigger ships are also straddling into the luxury segment, and Ward noted MSC Cruises’ Yacht Club, where “you find good examples of fine European service.”This year’s Berlitz guide is the 26th edition, going back to 1985. Distributed worldwide, the 720-page book rates all cruise ships and has its biggest markets in the U.S., the UK and Australia.

Bi-Annual Surveys

Kurtz said that since nobody has a quantifiable definition of luxury as a concept, per diem is the only reasonable definition. The American Affluence Research Center does affluent tracking surveys twice a year – in spring and fall, and will do its 19th bi-annual survey shortly. In a 2008 survey, respondents put the price points for cruises in this market segment much lower than they actually were, Kurtz said, and few expressed any brand knowledge, except for the top 1 percent of the market.  The surveys target the top 10 percent of the wealthiest U.S. households, and only the top 1 percent expressed much knowledge about luxury products, according to Kurtz. He said that experienced travelers and cruisers have good awareness of the different brands, but demonstrate less understanding of why they should pay so much for a luxury cruise.  “The problem the luxury lines have is to convey the value of their products to the market,” said Kurtz. “To get the value message across, they need better presentation, personal presentation and better websites. They need to justify their rates and that is hard to do in advertising only.”  Another issue is that some of the brands are limited in their market appeal as some guests today want to travel with children, especially during the holiday periods, and many of these ships are not geared to children. It would be wise to dedicate a few sailings to family cruises, he said. In the recent 2010 fall survey, 12 percent said they would like to take a cruise in the next 12 months, compared to 15 percent in the previous spring survey, and 22 percent in the fall of 2007.  Most likely to take a cruise are the oldest and wealthiest.  Eighteen percent of those over 60 said they would like to take a cruise in the next 12 months; 10 percent of those between 50 and 60; and only 7 percent of those under 50.  Twenty-five percent in the highest income group said they would like to take a cruise; 15 percent in the middle income range; and only 8 percent in the bottom half.  The top 10 percent includes 11.4 million households with an average net worth of $3.1 million and an average annual household income of $290,000.

Struggles?

When Carnival Corporation announced that the Yachts of Seabourn will merge its operations with Holland America Line and move to Seattle, it was clear that the luxury brand was not meeting its financial objectives.  The move from Miami to Seattle will take place over several months, according to Carnival, and once the transition has been completed and the synergies are fully realized, the company said it expects annual savings starting in 2012 in the $20 to $25 million range.  Rick Meadows has been named president of Seabourn, taking over from Pam Conover, who assumed the job after Larry Pimentel. Conover has chosen not to move to Seattle at this time, according to Carnival. Meadows has been executive vice president of marketing, sales and guest programs for Holland America.  In addition, at press time, John Delaney has been named senior vice president of marketing and sales; he has been vice president of revenue management for Holland America.  But Seabourn may not be the only luxury brand facing challenges. Silversea Cruises also introduced a new and bigger ship, adding another 20,000 berths to the passenger capacity in the luxury segment, in addition to its luxury expedition ship.  Also, Silversea has had more executive changes at the top any of the other luxury brands.  At Crystal, Greg Michel, who joined as financial officer at the very beginning, has been at the helm since Art Rodney left to help launch Disney Cruise Line, and Mark Conroy has been at the helm of Regent Seven Seas virtually since the start of that line – since 1993.

New Ship

While the North American luxury market is reorganizing, Hapag-Lloyd will add a ship in 2013 “to complement its Europa.”
The German brand operates the 1999-built, 28,600-ton, 408-passenger Europa in the luxury segment, and the expedition ships, the 188-passenger Hanseatic, the 164-passenger Bremen and 420-passenger Columbus in the premium segment.  The new ship, to be named Europa 2, will be 39,500 tons and have a passenger capacity of 516.  Hapag-Lloyd said the ship will be built by a “third party owner” at STX in France, and it will operate the ship on a 12-year charter agreement.  In addition, the line is chartering the 684-passenger Insignia from Oceania Cruises for two years, starting April 2012. Crystal and Regent have not appeared to move any further on their new ship plans. Meanwhile, marketing and sales for the luxury brands continue to be very price-driven, offering discounts up to 60 percent off brochure prices and added values, including free or subsidized air fare, to attract customers, plus bonus commissions to travel agents.

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Contrary to popular perception, affluent Americans do not spend lavishly on luxury hotel suites on Park Avenue.

In ground breaking research on the definition of luxury and the spending habits of the wealthiest 10% of US households, respondents to a survey by the American Affluence Research Center were asked to specify the most they could imagine spending for 37 various products, including a hotel room for one vacation night in New York City.

For both men and women across various high net worth levels, the overall median amount survey respondents could imagine spending for one night of leisure in a NYC hotel is $300. Marriott and Hilton were the top two brands named by those responding with a brand preference.

Surprised that the wealthiest Americans aren’t staying at the Peninsula or the Four Seasons when vacationing in the Big Apple?  Ron Kurtz, President of the American Affluence Research Center, is not.

According to Kurtz, the people most likely to be savoring the finer things in life are the ones with a net worth of $6 million or more and an income of $500,000 or more.  These are the “conspicuous consumers” who, according to Kurtz’s study, indicated a median of $400 when imagining the most they would pay for a night in The City that Never Sleeps.

So what does all of this mean?  According to Kurtz,” about 90% of the affluent are not conspicuous or ostentatious consumers. They spend conservatively and save carefully.”  They choose not to stay at The Plaza or The Pierre, even though they have the funds for suites in these luxury destinations.  Kurtz believes it is these affluent consumers that represent “an opportunity to substantially increase the market for high end luxury products if the affluent can be educated about why they should consider buying them and the brands that offer them.”

Someone please tell The Donald he needs to sell his friends on the value of style, service and exclusivity if he wants to fill those suites at The Trump International.

The national survey included 552 affluent men and women with an average of $304,000 household income, $3.1 million average household net worth, and $1.2 million average value of their primary home.

Tags: Affluence Research, affluent market, Big Apple, Fifth Avenue, high net worth, Hilton, luxury, Luxury hotels, luxury market, luxury research, luxury suites, Main Street, Marriott, millionaires, multi-millionaire, New York City, Peninsula Hotel, Serenity Bed, splurge, The Donald, The Pierre, The Plaza, Trump
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In the latest of the twice yearly surveys of the most affluent 10% of US households by The American Affluence Research Center, the respondents were asked to specify the most they could imagine spending for 37 different products and services if they were to purchase the item during the next 12 months. They were also asked to name the brand they would most likely purchase. The goal was to identify how the affluent define luxury, in terms of price points and brands, for each of the products.

The minimum and maximum price points reported in this new survey, though realistic for many of the products, should probably be dismissed as being rather “extreme”. The median value, which is the mid point (not the average) of all the values/prices reported, seems to be very realistic for all 37 products and services, if not a bit low, given the affluence of the respondents. It is important to note the relative degree of consistency between women and men in the median values for most of the 15 products where they both gave opinions.

For a room in the winter in a Caribbean resort, the median value was $300 for men and $250 for women. The lowest price suggested was $50 (men) and $60 (women). The highest price was $3,000 (men) and $1,500 (women).

Only a third of the respondents named the brand they would most likely purchase. Marriott (20%) and Ritz Carlton (9%) were the two mentioned most frequently.

For a hotel room for a New York City vacation, the median value was $300 for both men and women. The lowest price was $50 for men and $100 for women. The highest price was $1,000 for both men and women.

Only a third of the respondents named the hotel brand they would most likely buy. Marriott (27%) and Hilton (16%) were the two brands mentioned most frequently.

For a European cruise, the median value was $300 per night per person. This was true for the responses of both males and females. The lowest price suggested was $60 (men) and $100 (women). The highest price was $10,000 (men) and $20,000 (women).

Less than a quarter of the respondents named the cruise brand they would most likely purchase. Among those that did, the most frequently mentioned brands were Royal Caribbean (18%) and Princess (17%).

The AARC research has consistently shown over the years that the affluent represent over 3 million cruisers per year and that most of their cruises are with companies that would be considered premium or contemporary brands. The price points and brands reported in this new survey are consistent with prior survey findings.

The Affluent Market Tracking Study #14 is a national survey representative of the wealthiest 11.2 million households (as defined by net worth in the most recent Federal Reserve Board research). The 552 survey participants have an average income of $304,000 and an average net worth of $3.1 million.

The results of this research demonstrate that 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”.

Survey highlights are posted at www.affluenceresearch.org

AARC provides marketing research, mailing lists, and consulting services to businesses that focus on the affluent. For more information: Ron Kurtz at KurtzGroup@comcast.net or 770-740-2200.

Tags: Affluence Research, luxury travel
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