As the owner or general manager of a small luxury hotel you know the success of your property depends in large part on your ability to attract today’s affluent American traveler. But who are these people, what do they think about themselves and how do they plan to spend their money on big ticket items?
A recent research study by YouGov sheds a very interesting light on these much sought after consumers. While the research highlights the linkages between wealth and golf it is easy to see the connection between all three – wealth, golf and luxury travel.
In a report published by Chandler Mount, Director, YouGov Affluent Perspective* he identifies six trends in the purchase behavior among the very wealthy. Below is a list of the six trends and insights he sees among affluent consumers. Below each are the insights we see as they apply to luxury hotels and their ability to both attract and retain them.
TREND 1: Slowdown in purchase decision making. This trend is particularly evident in the summer of 2016. Affluent consumers are deeply concerned over the outcome of the Presidential election, which appears to be contributing to a slowdown in spending and purchase decision-making.
The affluent consumer mindset for many big-ticket purchases is to “wait and see” what happens. While they don’t panic much anymore, they are more mindful than ever of their personal economies. They have built a moat of protection from outside influences in the form of cash (YouGov estimates around $7.5 trillion, a per-household average of more than $500,000 in cash), so they wait.
Insight for luxury properties: If your summer business this year is off compared to last year this “wait and see” attitude among affluent travelers could very well be one of the key contributors.
TREND 2: Golf is not immune to consumer cutbacks. When there is a need to pull in the reins in spending, club memberships, sports, and recreation are among the first items to be curtailed in the affluent household budget. They are seen as areas that can be scaled back or cut out completely if a significant adverse financial event were to strike their household.
In response to this risk, shore up relationships with your best customers and have a “Plan B” ready should consumer spending sentiment turn sour. There is no direct evidence of an impending recession, however affluent and wealthy consumers are cautious, and are showing signs of buttoning the wallets.
Insight for luxury properties: Remember for many Americans vacations are still considered a birthright so segment your database and launch highly targeted and personalized direct marketing programs to encourage past guests to return again soon. Remind them of the cherished memories created during their last visit, the warm and friendly staff awaiting for their return and perhaps offer a unique gift to help encourage them to book. Do not “blast” emails with unusually high discounts which research shows only erodes profitability.
TREND 3: The desire to be victorious. Throughout history, luxury has been reserved for the social, political and economic elite. As aspects of an affluent lifestyle become increasingly available to non-affluent people, so too does the pursuit of luxury living. Luxury purchases represent, among other things, the owner’s victory over the challenges they have faced. The increasingly victorious golfer is one who can afford to focus on the answer to the question “what do I need to win?” For golfers, being “victorious” can mean having the latest and best equipment, playing trophy courses, or joining the most prestigious private clubs.
Insights for luxury properties: This is an interesting trend which, perhaps, points to a return although in a more subtle way to a period of conspicuous consumption. Then again, perhaps with the truly affluent traveler it never really went away, only to be modified slightly. Time will tell.
TREND 4: The ability to discern. Luxury is a part of a lifelong journey, and as successful people often do, they learn from their experiences. As luxury participation increases, so too does the ability to tell the difference between very good and excellent. Details begin to stand out as hallmarks of artistic metric and high quality materials. The ability to discern is based on interest in the category and is the product of knowledge, experience, and taste. The new motivation for the prospective affluent customer is based on the perception of worth. Worth is the culmination of a brand: the details of distinction that set it apart, the value of the product, quality materials, craftsmanship in construction and empathetic service.
Insights for luxury properties: This is a very important point for hotels wishing to attract and retain an affluent clientele. Your product needs to be impeccable down to the smallest detail. Every staff/guest interaction needs to be friendly, sincere and helpful and be looked upon as an opportunity exceed each guest’s expectations. The quality of the hotel needs to shine through down to the minutest detail. You know the drill.
TREND 5: Luxury is increasingly independent. More and more, affluent consumers prefer brands that work independently from the mainstream. The trend is popular because of a commonly held belief that independent companies rely on their ability to provide better service, better training for staff, and deeper connections to the product that big-brand companies don’t always provide. The increasing popularity of these independent providers is proof that consumers prefer companies that take the time to organize choices, to maximize the number of desirable choices, and minimize the time invested choosing between them. Think “everything for someone” instead of “something for everyone.”
Insights for luxury properties: This should be music to the ears of small, independently owned luxury hotels and resorts. Affluent travelers are looking for you and what you have to offer. Not every hotel can be #1 on TripAdvisor in their particular destination, but every hotel does have the potential to carry a 5-Star TripAdvisor rating. Doesn’t this sound exactly like what affluent travelers are looking for?
TREND 6: Informed purchases with a personal experience. We are in a time of informed consumer purchasing and with it increasing pressure on retail channels. Affluent consumers learned during the recession that if they were diligent in their purchasing (i.e., researching products, prices, and brands online) that they could find what they wanted was available at a substantial savings.
The internet is the perfect research tool, but it is not the perfect purchasing method. In fact, “in-person” browsing and purchasing remains the preferred channel by the majority of affluent consumers. This affinity to in-store purchase presents its own challenges: they expect salespeople who are happy to be there and passionate about the category (read: knowledgeable about products), a fun shopping environment, and they prioritize retailers who make it easy to do business.
Insights for luxury properties: It is generally impossible for an individual to physically in-store shop for a vacation at a luxury property that may be a plane ride away. But they can be mentally transported there by your highly experiential website and your reservations staff if they are truly professional in what they do. Talking to reservations is often times the very first time an affluent traveler comes in personal contact with your hotel and you know what they say about a first impression. It’s true.
Can the people who answer your phones actually make the reservations process “a fun shopping” experience? Do they really understand the mindset of the clientele you are looking to attract? Do they listen to the customer and fashion appropriate responses custom-tailored to their specific wants and desires. Today they have to.
Affluent travelers remain bullish on their personal economy, feeling good about the purchase decisions that they make after lots of research, and are willing to spend significantly. However, to some, another recession is a possibility, and the resulting impact on the industry could be widespread.
Consumers approach shopping with a defensive mindset. They will conduct the necessary due diligence to mitigate risks in purchasing products, engaging with service providers before making substantial investments. For a brand to win with affluent consumers they must satisfy both rational and emotional needs. Products must stand out as arguably superior to its competition and the brand must “take the high ground” in the category to have a place in the hearts of consumers.
What do you think?
* This year’s YouGov Affluent Perspective study included 2,515 financially successful individuals in the United States who have a minimum household income of $150,000, a group reflective of the top 11% of all U.S. households. YouGov estimates that this group will drive $2 trillion in discretionary spending in 2016.