The Way That the Rich Travel is Changing
August 29, 2015 (Print Edition)
At the Burj Al Arab hotel in Dubai, one of the world’s most luxurious (pictured), guests can avail themselves of 24-carat gold iPads and caviar facials. The cheapest rooms cost $1,000 a night; those interested in the royal suite can expect to pay nearer $25,000. Such ostentation is not to everyone’s taste. But it illustrates a trend: the way that the rich spend their money is changing.
Once, the well-heeled bought fancy stuff. Nowadays they spend more on things to do and see. A report last year by the Boston Consulting Group (BCG) found that of the $1.8 trillion spent on luxury goods and services worldwide in 2012, nearly $1 trillion went on “luxury experiences”. Travel and hotels accounted for around half that figure.
This partly reflects the growing weight of rich folk from developing countries. Wealthy Chinese spend 20 days a year travelling for leisure, according to ILMT, a travel agency. The most popular destination was Australia, and nearly half made it as far as Europe. On average, affluent Americans went on holiday 3.9 times in 2014, says Resonance, a consultancy, up from 3 times in 2012. Around half travelled more than 1,000 miles (1,600km) for their most recent trip. They favoured Europe, especially Italy, Britain and France.
Antonio Achille of BCG says luxury consumers have distinct spending styles, depending on how old they are and whether they were born rich or became so later. The young and the recently affluent tend to buy visibly costly items that will impress their peers. Soft Living Places, an Italian luxury hotelier, recently filmed an advert to educate newly rich Russian tourists. It offered such advice as “don’t show off by ordering the most expensive bottle of wine on the list.” By contrast, the longer someone has been rich, the more likely he is to value quality over ostentation.
When they travel, rich 20-somethings are drawn toward gregarious pleasures that can be shared on social media to make their friends jealous. But plenty also view holidays as a time to learn something and broaden their cultural horizons, says Chris Fair of Resonance. Though older travellers to India still frequent the Taj or Oberoi hotels, younger ones are more likely to plump for a homeshare—albeit a posh one. The established wealthy spend relatively more on travelling to five-star hotels.
Tapping into this more traditional market is not easy: in some respects, the luxury-hotel business has become commoditised. As the standard at the best establishments has risen, high-paying guests have come to expect a level of service that is ever harder to exceed. “There is only so much caviar and champagne you can throw at them,” says Milton Pedraza of the Luxury Institute, a consultancy. Opulent bathrooms, world-renowned chefs and state-of-the-art technology are now the norm at the poshest hotels.
So differentiation must come from more personalised service. Value is added by “being generous in small ways”, says Frank Marrenbach, the chief executive of the Oetker Collection, a luxury-hotel group. Attentive service means remembering customers’ every preference, either because they have visited before or because the hotel has gathered data from previous trips elsewhere. Equally important is knowing when to step back, says Mr Marrenbach, because for rich guests downtime is also a luxury. At Villa Stephanie, a spa the group runs in Germany, guests can flick a switch in their rooms that blocks all wireless signals to their phones and computers. (Fortunately for paupers who stay in cheaper joints, many of these devices already come with a handy off-switch.)
The established rich, because they own so much stuff, place a high value on doing or feeling something new. According to BCG, they claim to gain three times the emotional reward from an experience, compared with owning something with the same price tag. For luxury-travel retailers, this means that selling fancy add-ons to trips is one of the most lucrative parts of the trade.
Abercrombie & Kent, an upmarket travel agency, for example, arranged for its guests in Egypt to view Queen Nefertari’s tomb, even though its doors had been sealed to the public for decades. In Moscow its clients can attend a private opening of the Kremlin grounds and have lunch with an ex-KGB agent who worked as a spy in London during the cold war. Even when shopping, the experience can matter as much as the acquisition. For some it is important not just to own a Burberry raincoat but also to have bought it from the brand’s flagship London store.
The biggest concern of rich travellers, according to Resonance, is safety. As crime levels have fallen in cities such as London and New York, they have become more appealing to affluent visitors. Metropolitan travel is now as popular as traditional “drop-and-flop” resorts with well-off Americans, says Resonance. Hotels and tour operators catering to the rich must be able to prove their security credentials. Abercrombie & Kent owns its own “destination management companies” in many African and Asian countries, which can respond quickly to problems, including by evacuating guests caught up in Nepal’s recent earthquake.
For the very richest travellers, there is another consideration. Many will go to extraordinary lengths to make far-flung destinations feel like home. Kevin Johnson has worked as a chief-of-staff and palace manager for several billionaires. Some of his employers would even take their favourite bed on their travels, he says. When arranging a holiday on a remote island, his bosses also insisted on their own IT infrastructure, often sending someone ahead to install it. This was partly to ensure security, he says, but also to be sure they could watch their favourite television channels. For the traveller who has everything, the familiar can be the biggest luxury of all.