James Shillinglaw | June 01, 2015 11:22 AM ET
Luxury Travel's New Global Reach
How is luxury travel evolving today? That’s the question addressed at the Virtuoso Symposium in Hong Kong this past April, which I attended along with nearly 500 Virtuoso travel agency owners and advisors and top luxury travel suppliers. Much was said during the four days of general sessions, receptions, lunches and dinners, but what was clear is that the luxury market is definitely changing on a global basis.
Indeed, Larry Pimentel, president and CEO of Azamara Club Cruises, widely considered to be an authority on luxury travel, spent part of one general session revealing the results of a new Boston Consulting Group (BCG) study, commissioned by Azamara parent Royal Caribbean Cruises Ltd., on affluent consumer behavior in 14 countries.
Now just why Royal Caribbean wanted such a study is probably a story in itself. The company still does not have a luxury line in its roster of companies, though Pimentel’s Azamara certainly has some of the attributes of a luxury product, as do certain suite products aboard sister lines Royal Caribbean International and Celebrity. The study also included a look at how luxury is changing in Asia, particularly the China market, which clearly is something Royal Caribbean is focused on these days.
But Pimentel’s goal in highlighting the results of the BCG study was not company specific. Instead, he wanted to provide an overall look at what affluent travelers want today and tomorrow. According to Pimentel, the study came to the conclusion that there has been a sea change in culture and demography around the world in the luxury space, though there are different views of luxury in each of the 14 countries surveyed.
The study surveyed 1,200 travelers in these countries with incomes of $250,000 or greater and at least $1 million in liquid assets. The greatest difference is that in western countries, such as the U.S. and Europe, luxury is defined now by what is experienced versus what is purchased. In other words, it’s about the experience, not the dollars spent for western luxury consumers.
These consumers, especially in the big cities, also value exclusivity in the authentic and localized experiences they get to enjoy. According to the study, the average guest also is willing to pay up to 26 percent more for something exclusive that is constructed specifically for them.
In contrast, luxury consumers in Asia, especially China, continue to be focused on more materialistic things and product purchases that can tell others they have “arrived” and are successful. I recently saw this myself when I visited the Costa Atlantica in New York City that was carrying 1,000 Chinese passengers on an 86-day world cruise.
Costa executives told me they actually had to put in more high-end shops for the Chinese market onboard because they value luxury purchases. I could see that for myself as I watched some of the Chinese passengers returning from shopping expeditions in the city carrying bags of high-end goods.
According to Pimentel, the BCG survey also found the number of global luxury consumers is growing exponentially—something that has seemed obvious over the last decade with the rise of wealth throughout Asia and the greater concentration of wealth in western countries.
Best of all, travel continues to be a major focus of these affluent consumers on a global basis. In terms of their purchases, these consumers are focused on buying property (number one), automobiles (number two) and travel (number three), with travel moving up rather radically as a preference over the past few years.
Finally, the survey revealed that luxury consumers mostly learn about luxury travel through digital channels and world of mouth. Fifty-five percent of high spending individuals rely on the Internet for information, 40 percent turn to people they know (word of mouth), 20 percent turn to expert recommendations, 18 percent rely on a specific company or brand website, 14 percent turn to travel agents, and 12 percent get information from ads in magazines in newspapers.
The 14 percent who turn to travel agents might seem low, but it’s in line with previous surveys of travel consumers overall and it represents an opportunity for top travel advisors as the luxury market continues to expand.
What’s been clear over the past decade is that the luxury market is one of the most resilient and consistent segments of travel. Many travel agents focus on it, while others aspire to sell more luxury. The good news is that it appears there will be many more luxury customers in the years to come.
On the other hand, as travel agents increasingly cater to a global customer base, they must remain aware of the differences in how luxury is viewed in different countries—and make sure their recommendations and advice match customer expectations in those markets.
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