Luxury Travel Trends 2014 white paper

Affluent consumers though they lost income during the recession have largely recovered those losses. They have discretionary income to spend. This high‐income affluent customers are the key to driving sales and delivering profits to your travel experience.

This study examines the affluent traveler market, their preferences in travel experiences as well as trends in their travel purchases and spending. Understanding their mindset is key to designing travel experiences that attract them to your special destination.

4© Unity Marketing, 2014

Travel expenditures fell 1% in the 1Q2014, according to statistics compiled by the Commerce Department. This is the steepest decline since 4Q09 when spending dropped 1.8%. Overall

Americans spent $873.1 billion on travel in 1Q2014 (i.e. all direct tourism expenditures). Government sources report: “Recreation and entertainment” turned down, decreasing 11.2 percent in the

first quarter after increasing 0.9 percent in the fourth quarter. “Food services and drinking places” also turned down in the first quarter, decreasing 3.5 percent after increasing 7.4 percent in the fourth quarter. Partially offsetting these downturns, “all other transportation‐related commodities” turned up.

Dismal 1Q2014 GDP report Real gross domestic product ‐‐ the output of goods and services produced by

labor and property located in the United States – actually fell at a 2.9% rate from first quarter from the fourth quarter of 2013, the worse report since 2009..

Personal consumption rose only 1% in 1Q14, after rising 2.0% in 2013. This downturn goes along with the Bureau of Economic Analysis’ data which shows

significantly less robust personal consumption from 2010‐2013, as compared to 1998‐2000 and 2004‐2006.


5.3%5.9%

5.1%

2.5% 2.5%3.1%

3.8%3.5%

3.0%

2.2%

‐0.4%

‐1.6%

2.0%2.5%

2.2% 2.0%

1.0%

‐2.0%

‐1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

' 9 8 ' 9 9 ; ; 0 0 ' 0 1 ' 0 2 ' 0 3 ' 0 4 ' 0 5 ' 0 6 ' 0 7 ' 0 8 ' 0 9 ' 1 0 ' 1 1 ' 1 2 ' 1 3 1Q14

SOURCE: BEA

PERSONAL CONSUMPTION EXPENDITURES PERCENT CHANGE FROM PRECEDING YEAR

© Unity Marketing, 20146

0% 10% 20% 30% 40% 50%

Do you feel that you are better off, equal to, orless well off now financially compared to three

months ago? (Top Box)

Do you think the country as a whole is betteroff, equal to, or less well off now financiallycompared to three months ago? (Top Box)

To what degree do you feel you will be betteror worse off financially twelve months from

now compared to today? (Top Box)

Compared to twelve months ago are youspending more on luxury now, spending thesame or spending less on luxury now than

twelve months ago? (Top Box)

In the coming twelve months, do you expect tospend more than, the same as, or less on luxurycompared to the previous twelve months? (Top

Box)

30%

22%

40%

18%

16%

35%

29%

48%

25%

22%

28%

16%

40%

22%

20%

31%

32%

48%

27%

25%

34%

29%

47%

23%

23%

33%

29%

44%

25%

23%

Top Box (Much Better & Somewhat Better)

Overview Key Financial Indicators

2Q14 (LCI=49.4)

1Q14 (LCI=65.0)

4Q13 (LCI=56.0)

3Q13 (LCI=67.3)

2Q13 (LCI=64.1)

1Q13 (LCI=65.2)


10097.8

102.7

9695.6100.9

104.7

94.4

104.8

113.2

99.2103.3

98.2100.296.2

87.4

63.6

54.451

40.341.7

55.7

74.375.9

86.9

77.678.3

72.176.1

82.8

66

75.5

54.8

67.3

60.3

84.6

65.2

64.1

67.3

56

65

49.4

0.0

20.0

40.0

60.0

80.0

100.0

120.0

Source: Unity Marketing (www.unitymarketingonline.com)

Unity Marketing's Luxury Consumption Index (LCI)

Dictionary definition of Austerity is “extreme plainness and simplicity of style or appearance.” Its synonyms are “seriousness,” “frugality,” “thrift,” “economy,” “asceticism,” “self‐disciple,” “abstinence,” “restraint.”

Austerity‐empowered affluent travelers will seek out the best value for the money. They will trade down on experiences that are not as important, in favor of indulging on those experiences that mean the most to them.

Affluents still have discretionary money to spend. They just want to make the money they have go as far as possible so that they get the most out of what they spend.

Travel marketers can thrive in this ‘season of austerity’ if they keep the needs and desires of their luxury travelers firmly in mind – To get the most bang for their travel ‘bucks.’

© Unity Marketing, 2014

8


8,656

7,395

11,511

10,409

9,186

8,47335%

31%

34%

31%

32%

31%

28%

30%

32%

34%

36%

38%

40%

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

2008 Total 2009 Total 2010 Total(n=5,175)

2011 Total(n=5,266)

2012 Total(n=5,221)

2013 Total(n=5,001)

Luxury Travel Demand & Quarterly Spending Trends

Travel avg. 3 month period Travel Demand

Luxury travelers surveyed every three months about their travel experiences, spending, attitudes and brand preferences. Every three months Unity Marketing conducts an in‐depth

survey among affluent luxury consumers, defined by high‐income (top 20% based upon income starting at about $100,000) and purchases of any 21 different categories of high‐end/luxury good or services, including Luxury Travel. This report includes the results of six continuous years of quarterly survey results, from 2008‐2013.

The overall results include 2013 surveys of n=5,001 affluent luxury consumers, of which n=1,374 were luxury travelers in 2014.

The survey over samples ultra‐affluents ($250,000+), so they weigh more heavily in the final analysis. In a natural distribution ultra‐affluents would represent

10‐12% of total; in our sample 33% of total sample are ultra‐affluents. These ultra‐affluents make up the large majority of HNW consumers included in the survey, as well – typically making up 30% of so of the survey sample

This report includes deep dive into luxury travel trends, covering planned travel experiences, as well as past experiences, conducted in early 2013. Further with every quarterly survey, one aspect of the

affluent consumers’ lifestyle is the subject of a special investigation. In the luxury travel investigation we went deeper into not just travel experiences during 2012, but planned experiences for 2013 and 2014, as well as attitudes and motivation. A total of n=1,309 affluents were surveyed in January 2013 about their travel plans in the coming year and travel experiences in the past year.

Another special investigation into the luxury travel market is scheduled for October 2014. Subscribers to this report will be the first to receive the results of that new luxury travel trend study.


Successful marketing of your hospitality brand or travel experience is especially critical now as affluents enter a period where austerity, not indulgence, is top of mind. Marketers need to be out in front of the consumer, inviting them and enticing them with travel experiences that will grab their attention and their dollars.

Travel and hospitality marketers need to be at the top of their game to make an impression on their affluent target market, as the consumers look to find those experiences that will deliver the most value for their money. While they may want to spend less by booking at discounts, they still have plenty of money to spend. But they will only spend more if – and that is a big ‘IF” – they are assured that they will get the right experiences for the money invested. Marketers need to position their travel experiences as the ones that will deliver the most excellent and rewarding experiences for the money invested. They are thinking like investors, not consumers, so marketers need to position their experiences as an investment.


Brand. The most important asset a travel marketer owns is not its location, facilities, or its staff to guest ratios ‐‐ it is its brand. The brand captures the promises, dreams and ideals of the customer. That is what travelers are buying. So while disruptive brands like Expedia, Travelocity or Trivago have grown fast by promising cheap travel experiences, they don’t offer the features or experiences that mean most to the luxury travelers – that something special and meaningful. For example, Royal Caribbean positions its brand around low‐cost

excursions and makes news headlines with its Oasis of the Seas offering as the “Caribbean’s biggest ship” with “its groundbreaking design introduced seven distinct neighborhoods built for ultimate enjoyment.” In other words, Royal Caribbean has something for EVERYONE, as compared to luxury brand Seabourn which offers cruises to the same Caribbean destinations but takes a completely different branding approach. Seabourn’s claim to fame is as a “small‐ship cruise line,” with “intimate ships with no more than 229 suites.” Seabourn is decidedly not for everyone, but for the discerning traveler who wants – demands – something very special and distinctive for its guests. This illustrates the key differences between mass marketing – Royal Caribbean – and luxury marketing – Seabourn.

Unique Experiences. While luxury travelers don’t want to stay in a facility that is sub‐par, they are more than willing to make tradeoffs in aspects that are less important to them when they are delivered the kinds of services that mean the most – personal attention and care. For example, the popular travel destinations for skiers, like

Aspen and Vail, provide first‐class ski experiences with a wide range of offerings at different price points, including the most exclusive like Four Seasons. By contrast, a small, independently owned ski provider, Bella Coola Heli Sports, offers the ultimate luxury ski experience to serious skiers – deep powder skiing which Beat Steiner the owner describes as the ‘Holy Grail’ of skiing. Steiner says,

“People, especially the Baby Boomers, have done the Four Seasons. They’ve been pampered, they’ve done the spa, fine dining. What they are looking for is a memory, a unique experience that impacts them personally.”

Your brand must encompass special, memorable experiences that will connect with affluents.


Introduction p.4 Overview Luxury Travel Market 10

Get Inspired>> Royal Caribbean vs. Seabourn; Four Seasons Vail vs. Bella Coola Heli Sports 12

Affluent Traveler Demographics 13 HENRYs & Ultra‐Affluents 15 Education 18

Get Inspired>> TripAdvisor & Power of Stories 19 Marital Status 20

Get Inspired>>Travel Intermediaries (Viruoso & Specialty Tour Operators) 22 Age of Affluence 23 Next Luxury Boom? 2026‐2029 Millennials Reach Affluence 24

Get Inspired>>Social Media for Millennials 27

Affluent Traveler Purchases & Spending (2008‐2013) 29 ACTS Survey & Methodology 30 Luxury Travel Demand & Spending Trends 32 Spending by Demographic Segments 33 Foreign Luxury Travel Details (Travel Means, Accommodations, Special Experiences, i.e. cruises) 35

Get Inspired>>Dark Rome/City Wonders Tours 39 Domestic Luxury Travel Details (Travel Means, Accommodations, Special Experiences, i.e. cruises) 41

Get Inspired>>Staycations & Local Partnerships 42 Get Inspired>>Luxury Link 44

Domestic & Foreign Luxury Travel Comparisons 46 Top Luxury Hotel Brands (2010‐2013) 47

Get Inspired>> Starwood’s Luxury Collection 48 Most popular Cruise Brands (2011‐2013) 50

Get Inspired>>Cruises & Cruising 52 Millennials & Travel 53

Get Inspired>> Urban Adventures 54 Get Inspired>> One Fine Stay 55 Get Inspired>>Four Seasons Beverly Hills’ new Culina Restaurant & Windows Lounge 56

Luxury Travel Special Investigation 57 Special Investigation Survey Methodology & Methodology 58 Last‐Minute Travel 60

Get Inspired>> Expedia’s ASAP, Luxury Link auctions, Leading Hotels of World 62 Who Travel With 63 Foreign Destinations Planned 64 Domestic Destinations Planned 65 Luxury Travel Budget 67 Luxury Travel Spending Trends 68 Rewards for Luxury Travel 69


Travel Plans (Travel Means & Accommodations) 72 Details Luxury Travel 2012 77 Get Inspired>>AKA Hotel Residences 81

Luxury Travel Experiences Desired 84 Demographic Distinctives in Travel Experiences Desired 86 Get Inspired>>What HNW & Ultra‐Affluents Want 87

Trends in Travel Experiences Desired (2011 & 2013) 88 Get Inspired >> Experience America (USA Today & Choice Hotels) 90

Trends in Use of Travel Professionals 92 Why Affluents Use Travel Professionals 93 Get Inspired>>Specialize in Niche Experiences 95

Most Motivating Experiences 97 Less Motivating Experiences 98 Power of Reviews, Discounts 99 Word‐of‐Mouth Highly Motivating 101 Get Inspired>>Drive User‐Generated Content (UGC) 102 Get Inspired>>How Four Seasons NYC Used Social Media to Increase Bookings 103

Word‐of‐Mouth Resources 104

What Luxury Travelers Do at the Airport 107 Airport Lounge Details 108 Get Inspired>>Airport Shopping & Luxe Brands 110

Travel Insurance 113

Understanding Psychology of Luxury Travelers 114 Luxury Travelers’ Affluents Attitudes Toward Travel 115 Get Inspired>>Help Clients/Guest Create Memory Books 117

Five Key Take Aways 119 Use “L” Word Sparingly & When You Do, Prove It 120 Position Around Smart Travelers 123 Create Buzz Around Set Brand Values 124 Time Is Ultimate Luxury, But Different Generations Value Time Differently 126 Success in Travel Is in the Details 131


Special Offer: Order this report by September 15, 2014

and get input into the next survey of the luxury travel market. You'll get a chance to ask your questions and probe your special interests in a new survey and receive the results absolutely FREE.

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