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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Contrary to popular media hype, wealthy Americans do not spend wildly on luxury cars, opulent hotel rooms, or 4000 thread count sheets.

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 new car.

Over 75% of those surveyed said the most they would spend is $50,000 for a new automobile. Toyota ranked #2 as the most popular brand to buy, ranking just behind Lexus and ahead of BMW and Mercedes Benz.

Surprised that the wealthiest Americans only want to spend less than $50,000 on a new car?  Thought they were driving Ferraris and Maseratis?  Clearly this isn’t Lifestyles of the Rich and Famous.

According to Ron Kurtz, President of the American Affluence Research Center, the people most likely to be living the really good 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, are most likely to spend more than $50,000 for a luxury automobile; the kind of car that you wouldn’t find in the Toyota showroom.

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 spend more than $50,000 on a car, even though they have the funds.  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.”

Luxury brands take note.  There’s market share to win if you can convince the average multi-millionaire that your product, brand, make, or model is worth the splurge.

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, BMW, Ferrari, high net worth, Lexus, Lifestyles of the Rich and Famous, luxury, luxury automobiles, luxury cars, luxury market, luxury motor vehicles, luxury research, Maserati, Mercedes, millionares, multi-millionaire, splurge, Toyota
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Contrary to assertions by some luxury market and retail consultants that the current economic problems are creating longer term changes in their lifestyles and reductions in spending on luxury and conspicuous consumption by America’s luxury consumers, Ron Kurtz, President of The American Affluence Research Center (AARC) believes that “most of the affluent are behaving like their normal, rational, and frugal selves. Their careful spending is not a new trend”.

While the concepts of “stealth wealth” and “luxury shame” are now being advanced by the retail and luxury consultants and futurists through anecdotal research about cut backs in the spending on ostentatious luxury, Kurtz feels “the sale of luxury goods and services, as defined by the majority of America’s affluent, is not subject to much change in 2009, just as it has not shown much change over the past 30 years”.

Kurtz bases his opinions on AARC’s ground breaking research on the definition of luxury among the affluent. The respondents to the AARC survey of the wealthiest 10% of US households were asked to specify the most they could imagine spending for 37 different products and services. They were also asked to name the brand they would most likely purchase for each of the items.

The profile of the 552 affluent men and women in the national survey sample is: $304,000 average household income, $3.1 million average household net worth, and $1.2 million average value of their primary home. The average age is 55 while 86% are married and 60% are males.

Kurtz emphasized that he “doesn’t see any evidence that the majority of the affluent are showing major long term trend changes in their spending patterns and attitudes. They have never been ostentatious or conspicuous consumers. They have always been careful shoppers and savers who look for quality and value in their purchases, the brands they buy, and the stores where they shop”.

The affluent market in the US is cutting back and deferring expenditures, according to AARC research in  2008 and 2009, due to current economic conditions, especially given the reduced values of their homes and stock portfolios. However, these expenditure changes should not materially affect the sales of the high end products and brands normally associated with ostentatious “luxury” because most of the people in this market have not represented a substantial source of the sales of such products. “They will not suddenly be switching from Manolo Blahnik to Stuart Weitzman shoes, from Prada to Coach purses, or from Four Seasons hotels to Marriott,” according to Kurtz, “because they were not supporting those brands previously”.

The sales of the high end “luxury” products appear to be derived primarily from international “new rich” consumers and by the small segment of the wealthiest 1% in the US, as indicated by the AARC research.  A portion of the sales have apparently also been derived from those stretching their resources (especially their credit) to achieve a taste of luxury.

Kurtz believes “a segment of the small niche market of conspicuous American consumers will have to change their spending and saving behavior. The Wall Street investment bankers, attorneys, and others in related activities are experiencing large reductions in income and net worth. Many of the younger people in this group don’t have substantial net worth to fall back on, as they were spending what they were making and perhaps even more”. Kurtz observed that changes in the spending of these people, as well as among the wealthy “new rich” citizens of the BRIC (Brazil, Russia, India, and China) and other countries now experiencing recessions and declines in oil and commodity prices, will contribute to the decline in sales of the ostentatious “luxury” brands.

Concepts such as “discreet luxury”, in Kurtz’s view, are creations of some retail and luxury consultants who invent terms such as “mass affluent”, which he considers to be an oxymoron, to promote new consulting work. In his opinion, “some of these consultants are prone to invent such terms to describe changes in behavior among a small group of people as major trends. These trend projections are often based only on anecdotal or “managed” research”.

For a more detailed summary of the findings of this research and its implications, visit our blog post at AffluenceResearch.org entitled “Popular View of Luxury Spending Debunked in Survey of the Wealthy.”

Tags: Affluence Research, affluent market, conspicuous consumption, consumption habits, discreet luxury, high net worth, luxury, luxury consumers, luxury market, luxury research, luxury shame, millionares, stealth wealth
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“Luxury is a very ambiguous word that is used very loosely”, according to Ron Kurtz, President of The American Affluence Research Center (AARC), which has conducted a survey that provides a new view of the luxury market and how luxury consumers define luxury. In this survey, the affluent defined luxury by price point and brand for 37 products and services.

Affluent Report the Most They Could Imagine Spending for 37 Products

In AARC’s ground breaking research on the definition of luxury among the affluent, the respondents to the survey of the wealthiest 10% of US households were asked to specify the most they could imagine spending for 37 different products and services. They were also asked to name the brand they would most likely purchase for each of the items.

The profile of the 552 affluent men and women in the national survey sample is: $304,000 average household income, $3.1 million average household net worth, and $1.2 million average value of their primary home. The average age is 55 while 86% are married and 60% are males.

Conspicuous Consumers Only 10% of Affluent Market; Most Affluent Not Familiar with Luxury Brands

“The research results support two important observations about the affluent market and their spending on luxury items”, according to Kurtz.

First, the affluent market is composed primarily of people with middle class backgrounds who continue to pursue a somewhat middle class lifestyle with middle class values. Kurtz emphasized that “about 90% of the affluent, or 10 million households, are not conspicuous or ostentatious consumers. They spend conservatively and save carefully. America’s current credit and economic problems might have been avoided if these affluent people, with their conservative spending and saving habits, had been recognized as role models. They have demonstrated the importance and value of living within your means.”

Second, only about 10% of the wealthy, or the 1 million households that account for less than 1% of US households, might be considered conspicuous consumers. With the exception of this relatively small niche segment, the affluent market does not appear to be very knowledgeable about the pricing and brands of products that are generally recognized by marketers as being in the higher price points associated with the luxury category. This seems to create an opportunity to substantially increase the market for high end luxury products if the affluent market can be educated about why they should consider buying them and the brands that offer them.

The popular perception of the luxury market and luxury consumers has resulted from anecdotal “research” “provided to the media by retail and luxury consultants that used examples such as a young Wall Street attorney spending $50,000 of a year end bonus for a new watch or a secretary spending $1,000 for a new hand bag”, according to  Kurtz.

Kurtz observed that “other examples of conspicuous consumption among the wealthiest 1% of US households have created the impression that there were many hundreds of thousands of people making a million dollars a year or more among the ranks of the entertainers, professional athletes, Wall Street bankers and attorneys, Fortune 500 executives, real estate developers, and entrepreneurs who have taken their company public. In fact the latest Internal Revenue Service data shows less than 400,000 US households in this income bracket”,

The results of this survey, together with earlier research by Dr. Thomas Stanley, challenge the conventional wisdom that the US has witnessed increasingly conspicuous and ostentatious consumption by an increasingly affluent market for a period of about 30 years, which has been interrupted by brief interludes of retrenchment during the occasional recession and the 9-11 tragedy.

With only about 10% of the US affluent engaged in conspicuous consumption, together with the purchases of luxury goods by international visitors leveraging the weak value of the dollar, Kurtz believes “a distorted view of the size and nature of the true luxury market in the US has been created”.

The actual size and spending patterns of the affluent market are well documented by the data from the Internal Revenue Service and The Federal Reserve Board and the research of the affluent by former Georgia State University Professor Thomas J. Stanley that began in the 1970s and led to “The Millionaire Next Door” and a series of related books beginning in 1996. Dr. Stanley’s research produced similar conclusions regarding the lifestyle, values, spending, and savings profile of the affluent as that suggested by the AARC research. In fact, since AARC’s inception in 2002, the results of its research have been consistent with Dr. Stanley’s research.

For a more detailed summary of the findings of this research and its implications, visit our blog post at AffluenceResearch.org entitled “Popular View of Luxury Spending Debunked in Survey of the Wealthy.”

Tags: Affluence Research, affluent market, conspicuous consumption, consumption habits, discreet luxury, high net worth, luxury, luxury consumers, luxury market, luxury research, luxury shame, millionares, stealth wealth
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For several years, luxury retail and marketing consultants have fed the media with anecdotal research about the luxury market as though the purchases of $700 Manolo Blahnik shoes, $1,000 Prada hand bags, and $250 True Religion jeans are common place among luxury consumers.

But the affluent women in a survey of the wealthiest 10% of US households by The American Affluence Research Center (AARC) report they are more likely to spend less than $120 for nice shoes, less than $100 for a purse for every day, and less than $75 for a pair of women’s jeans.

“Luxury is a very ambiguous word that is used very loosely”, according to Ron Kurtz, President of AARC, who observed that “the definition of luxury varies considerably by individual and by product, as clearly demonstrated by our survey. In this survey, the affluent defined luxury by price point and brand for 37 products and services”.

Affluent Report the Most They Could Imagine Spending for 37 Products

In AARC’s ground breaking research on the definition of luxury among the wealthy, the survey respondents were asked to specify the most they could imagine spending for 37 different products and services. They were also asked to name the brand they would most likely purchase for each of the items.

The profile of the 552 affluent men and women in the national survey sample is: $304,000 average household income, $3.1 million average household net worth, and $1.2 million average value of their primary home. The average age is 55 while 86% are married and 60% are males.

Both men and women  were asked to provide a price (the median value of the price reported by men/women is shown in parenthesis)  and a brand for a new auto ($40,000/$35,000) for personal use, a room in the winter in a Caribbean resort ($300/$250 per night), a European cruise ($300/$300 per person per night), a hotel room in New York City ($300/$300 per night) for a vacation, a refrigerator ($1,500/$1,500), an original painting $3,000/$3,000), a washer/dryer set ($1,500/$1,500), a king size mattress ($1,000/$1,500), a set of linens for a king size bed ($200/$150), wall to wall carpet ($20/$20 per square foot), a watch for dressy occasions ($1,000/$500), a watch for every day ($130/$150), a bottle of wine ($40/$30) for a special dinner at home, frames for sun glasses ($125/$150), and a large 24” wheeled garment bag ($200/$150).

Women were asked to provide a price (median value shown in parenthesis) and a brand for a dressy suit ($250), shoes ($120) to go with the dressy suit, a cocktail dress ($200), shoes ($100) to go with the cocktail dress, a pair of jeans ($75), a pair of diamond stud earrings ($1,000), a purse ($100) for every day, skin rejuvenation cream ($50 for 1.7 ounces), liquid make-up/foundation ($25 for one ounce), a bottle of perfume ($60 for 1.7 ounces), and lipstick or gloss ($15).

Men were asked to provide a price (median value shown in parenthesis) and a brand for a business suit ($500), shoes ($200)  to go with the business suit, dress shirt ($75) to go with the business suit, a tie ($50) to go with the suit, a tuxedo ($500), shoes ($125) to go with the tuxedo, shirt ($75) to go with the tuxedo, a sport coat ($250), slacks ($100) to go with the sport coat, a dressy long sleeve sport shirt ($75), and dressy short sleeve sport shirt ($50).

For a more detailed summary of the findings of this research and its implications, visit our blog post at AffluenceResearch.org entitled “Popular View of Luxury Spending Debunked in Survey of the Wealthy.”

Tags: Affluence Research, affluent market, conspicuous consumption, consumption habits, discreet luxury, high net worth, luxury, luxury consumers, luxury market, luxury research, luxury shame, millionares, stealth wealth
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The potential market for vacation homes, including full ownership and private residence and destination clubs, has declined substantially from 2007 levels, reflecting losses in net worth and a negative 12-month outlook for the economy and personal income among the wealthiest 10% of US households surveyed in March 2009 by The American Affluence Research Center.

The American Affluence Research Center has studied this market every 2 years since 2005. The  Spring 2009 Affluent Market Tracking Study #15 includes relevant comparisons to the 2007 survey results.

Only 4.1% of the respondents indicated serious consideration of the acquisition of a wholly-owned second home during the next 12 months versus 9.8% in 2007. Intent to consider a time share or a private residence or destination club totals less than 1% and is essentially unchanged from 2007.

About 6 in 10 of the affluent market indicate no familiarity with either the private residence or destination club concepts, despite the growth in the numbers, the marketing expenditures, and the media exposure of companies offering these concepts. This represents little or no change in the level of concept familiarity over the past two years. Just over one- third indicated familiarity with the private residence club concept, with 3 in 10 indicating familiarity with the destination club concept. This represents some modest improvement from the 2007 study for both.

Concept familiarity is highest among the higher income and net worth groups. For the private residence club concept, familiarity is about 45% among both the $200K+ income and $1.5M+ net worth segments. For the destination club concept, familiarity is about 40% among the same 2 segments.

Among those indicating familiarity with the private residence club concept, 72% did not name a brand or company with which they are familiar. The other quarter named a hotel-affiliated brand most frequently. Some brands/companies not participating in the business were incorrectly named, thus indicating some confusion about the concept.

Among those indicating familiarity with the destination club concept, 82% did not name a brand with which they are familiar. As some brands/companies were named incorrectly, this indicates some confusion about the concept. Exclusive Resorts was the most frequently and correctly named brand, but by fewer than one in five of those naming a brand.

Among those indicating familiarity with the private residence club concept in the current survey, 12% did not check any of the listed brands (compared to one in five in 2007) as ones they had heard of. Those checking one or more brands averaged 2.9 brands, with 4 of the hotel-affiliated brands checked most frequently.

Among those indicating familiarity with the destination club concept, over half did check at least one of the listed brands as one they had heard of. This was a slight improvement over the 2007 survey. Those checking one or more brands averaged 1.6 brands, with Exclusive Resorts checked by almost two-thirds of the respondents. This is relatively consistent with Spring 2007 results. Ultimate Escapes did not have the recognition of its predecessor Private Escapes.

Over 28% of the sample reported full ownership of a second home with just over half (56%) of the homes used throughout the year and just under half (44%) used primarily on a seasonal basis. An additional total of 15% reported partial access to a vacation home, primarily through a time share, but also through private residence and destination clubs.

As might be expected, the ownership for wholly-owned second homes was most prevalent among the $6M+ net worth group (64%) and the $1.5M to $6M segment (34%). Vacation home ownership was also higher among age 60+ and those with an income of $200K+. Time share ownership was most prevalent among those with an income of $200K+ and those with a net worth of $1M to $1.5M.

The value of the second home generally increased with increases in income, net worth, and the value of the primary residence. The second home at an average value of $781,000 is typically valued at about two-thirds that of the primary residence ($1.2 million).

Second homes used year-round apparently fell by “only”11% in average value, compared to the values reported in the 2007 survey, while those used seasonally declined by 35% in average value.

The survey respondents indicated a negative 12 month outlook for business conditions and personal household income. They also reported declines in their net worth, as a result of substantial declines in the value of their primary home and their investments/savings during the past two years. Together, these factors have contributed to a general attitude toward reducing or deferring expenditures in all areas.

The intentions to acquire a new vacation home are consistent with the overall mood of the affluent market. Over 80% of the survey respondents reported that they had made a general effort to reduce or defer expenditures during the past 12 months, would make a conscious effort to do so during the next 12 months, or had both done so in the past and would continue to do so in the future.

The survey is representative of the population of the most affluent 11.2 million households in the U.S. that account for almost 40% of total personal income and two-thirds of the personal wealth of all Americans.

The 640 men and women included in the national survey have an average annual household income of $290,000, an average primary residence value of $1.2 million, an average net worth of $3.1 million, and average investable assets of $1.4 million. This survey of the affluent market has a maximum margin of error of five percentage points at the 95% confidence level.

Tags: Affluence Research, affluent market, destination clubs, high net worth, luxury, luxury market, luxury research, millionares, second home market, second homes, vacation home market, Vacation Homes
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