Are inhibitions about free spending falling away? It could be good news for the top-end travel market, says David Stevenson
City Insider: The return of conspicuous consumption
Are inhibitions about free spending falling away? It could be good news for the top-end travel market, says David Stevenson
If you want a gauge for measuring underlying business confidence I’d suggest a focus on the FT’s glorious weekend magazine How to Spend it.
To say that this publication divides opinion is something of an understatement. Some champion its eclectic range of articles, others deplore what they see as its garish celebration of conspicuous consumption.
I’m rather more interested in whether my friends leave it out on display at the weekend or attempt to hide it. Hiding it usually implies pessimism, proud display bullish optimism.
Over the last few years our wealthy friends (lucky buggers) have tended to hide How To Spend It, preferring to talk about the articles in the main, less glossy magazine on corruption in Russia or fly fishing in Scotland.
But in the last few weeks the magazine has found its was to the coffee table, in open view.
I take this as a small vote of confidence in the economic recovery – it’s okay to admit that you’re making money again, even though there’s still a legion of unemployed filling up the local job centre.
Conspicuous consumption is almost back in business, and that’s good news for the luxury end of the travel business. And that’s certainly the story I’ve been hearing from high end operators such as Abercrombie and Kent.
Its CEO Geoffrey Kent was in fine form at the recent WTTC summit in Beijing, noting that “business is surprisingly vibrant” with revenues up 20% over the last few months.
Obviously some lines of business are doing better than others. According to Mr Kent his European Villa business is up a staggering 50% as wealthier clients look to book what he describes as a proper inter-generational holiday.
This chimes with my own experience – travellers want a quality place to visit where they can bring the kids and the grandparents and still get some good service without being stuck in a hotel.
The underlying story here is, I would suggest, a redefinition of the accommodation and hospitality model away from the standardised experience to something much more bespoke.
Business also seems to be booming in three other fascinating segments – occupancy on Abercrombie and Kent’s brand new Antarctic cruises is close to 95%-98% at the moment, reminding us that wealthy travellers will pay for a unique experience that reconnects with wilderness and nature in a non-intrusive way.
Business also remains strong in luxury safaris and camps where travellers get “out and about” and have personal experiences that range from a one-on-one guided tour through to micro-lighting over the Victoria Falls.
Crucially, Abercrombie and Kent is experiencing rapid growth in demand from wealthy travellers in the BRIC countries. Kent suggested that even planning for 20% capacity from countries such as Brazil and China is not going to be enough.
Demand for his companies new Yangtze cruises is booming, even with locals, and the Indian market is apparently lapping up luxury European villas.
Business is also brisk in new markets such as Syria and Lebanon as well as slightly more established destinations such as the Galapagos Islands. In fact all the places you’d expect to see featured in the FT Weekend How to Spend It magazine.
Yet it was one last throwaway comment from Kent that I think gave the biggest insight into future luxury travel trends. Discussing the brand’s new Destination Club, he suggested that the most exciting aspect of the service is the Global Experiences Manager.
The role is akin to the holistic financial planner or private wealth banker. The advisor works with the client over the long term to figure out a range of experiences.
It may be European villas while the kids are young but then Antarctic Cruises once the kids have flown the nest – holiday choices change over time and with personal experiences.
The key insight here is that many consumers are confused by the world of choice and want experts to help them navigate their complex life journey.
What they need is an expert who can sit down with them and give them great advice and offer exclusive access to products.
This is of course exactly what our trusty local travel agent should be doing (and in some cases has been doing, with great success).
But I’d suggest that too many travel agents, like investment based IFA’s or wealth advisers, have been captured by channel and product push. Too much time is spent funnelling product down the line whilst appearing to cater for the consumers’ special needs.
Channel has trumped personal attention in the value relationship. What Abercrombie and Kent’s model is suggesting is that high end customers will pay for proper, holistic planning where the consumers’ interests are paramount.
The big question is whether the rest of the market will pay for that advice – in my humble experience I’d suggest that most customers stick with what they know but secretly wish they’d paid for some good advice.
The clever business model is to work out how to get this group to pay for that expert advice – a bad pension based on poor advice can be hushed up over the next few decades and hopefully corrected but a bad or even just mediocre holiday will have an immediate effect and result in much acrimony.
Why not admit that your hard work gives you the right to spend your earnings wisely, and buy quality? Hey, you might even be tempted to read the FT at the weekend.
