A Luxury Alliance report offers a look at the changing market.

To be an at-home agent focusing on luxury travel means keeping up with the trends. That means finding out what it takes to cater to today’s luxury travel client and seeing how the rest of the travel industry is adapting to the ever-changing whims of the upscale traveler.

Each year the Luxury Alliance, a strategic marketing partnership of top luxury travel brands—including The Leading Hotels of the World, Ltd.; Relais & Chateaux; Orient-Express Hotels, Trains & Cruises; Silversea Cruises; and Crystal Cruises—details the changes it sees in the market in an annual White Paper on the direction of luxury. What follows are some of the trends from that White Paper that just might help you identify and sell more to the upscale market.

Generations Affecting the Luxury Travel Market
The Luxury Alliance White Paper points out that three generations are currently at the forefront of the luxury travel marketplace. The Baby Boomers (those born 1946-1964) are already well established buyers of luxury travel and are traveling now more than ever as they approach retirement with far more energy than previous generations. They currently take between 4.2 trips per year (older Boomers) and 4.6 trips per year (younger Boomers). The report says Boomers’ vacation decisions are made after in-depth online research but are influenced also by word of mouth. Their trips tend to be longer, allowing for in-depth exploration at a leisurely pace and are often themed or educational. Boomers also are the organizing force behind multi-generational travel, according to the report, an area that has grown dramatically since 9/11.

While Boomers are seen as a driving force in a number of luxury marketing surveys, the Luxury Alliance says Gen X-ers (born 1965-1979) will likely impact overall sales of luxury goods even faster. According to the U.S. Census Bureau, 20- to 44-year-olds form the single largest age group and will represent 32.3 percent of the population by 2020. Gen X-ers also have been outspending Boomers in the luxury goods category by 18 percent, according to the American Express Platinum Luxury Survey. They take roughly 5.3 trips per year and have an impulsive approach to their buying decisions—a “do-it-now” philosophy that leads to spur-of-the-moment leisure travel.

Raised in a wealthier and more sophisticated environment than Boomers, Gen-X luxury consumers are fearless about spending, have more disposable income at an earlier age, carry substantial debt (on credit cards and with higher mortgages), are not intimidated by luxury and enjoy a high degree of luxury in the home environment (meaning they expect even more from a hotel room).

The third key group poised to have an impact on luxury travel spending are the Millennials (born 1980-2000), also known as Gen Y. As the Luxury Alliance report points out, older members of this group are now entering the work force. A protected childhood watched over by armies of caregivers, educators and chaperones has shaped Millennials to be confident, informed and interested in everything around them. They speak technology like a first language and take roughly five leisure trips per year. The report also suggests that an environmentally-conscious approach by luxury marketers will be important in any outreach to this group.

Young Consumers Focus on a Material Lifestyle
The Luxury Alliance White Paper cites a report by Forrester Research that indicates a greater focus among Gen-Xers and Millennials on preening and impressing people with their lifestyle—a trait which shifts as these generations get older and focus on families and their communities. The same Forrester Research report shows a perception of luxury among those two generational groups as “saving time and reducing hassle, not wider seats or club-level rooms—especially for Gen X.” Brand loyalty also is not a primary driver of travel choices among younger consumers. Forrester reports 28 percent of Millennials and 26 percent of Gen-Xers consider themselves to be brand-loyal to any single travel company, compared with 32 percent of Boomers.

Multi-Generational Groups Drive Luxury All-Inclusives & Cruises
The Luxury Alliance report finds that the focus on multi-generational group travel, driven primarily by Boomers, has been a major factor in the emergence of more all-inclusive resorts in the luxury sector. Until recently, only a select few all-inclusive resorts ranked in the ultra-luxury market. By covering all meals and beverages, as well as sports activities and special amenities, these resorts offer value at the luxury level, facilitate advance planning with a single price, and eliminate surprises in the bill. Luxury cruises also have become a major choice for multi-generational groups, particularly to Europe, where families can arrange customized shore excursions and enjoy a variety of complimentary activities for different age groups. Families are recognizing that the weak dollar in Europe has increased the already strong value of buying a European cruise in U.S. dollars.

Luxury Travelers Are Brand-Loyal But Seek Value
Citing another Forester study of mass-market travelers and travelers with a net worth of $1 million or more, the Luxury Alliance report finds that more affluent travelers may be brand-loyal, but they are also equally price-focused. For example, 59 percent of affluent travelers agreed with the statement that “travel is an area in which I’m willing to indulge myself,” compared to 34 percent of mass-market travelers who agreed with the same statement. Fifty-one percent of affluent travelers agreed with the statement “I would pay more for products that same me time and hassle,” compared with 39 percent of mass-market travelers. Fifty percent of affluent travelers agreed with the statement “I am willing to pay above average price for noticeably better quality travel products or services,” compared with 35 percent of mass-market travelers. Finally, 41 percent of affluent travelers agreed with the statement “When buying leisure/personal travel, I consider myself to be brand-loyal,” compared to just 28 percent of mass-market travelers.

Where Luxury Travelers Want to Go in 2007
The Luxury Alliance forecasts that destinations of enhanced interest for luxury travelers this year are Argentina, Baltic States, Botswana, Brazil, Indian Ocean, Peru, South Africa and Vietnam. The Mediterranean and the Baltic remain hot for summer cruising, while sailings to Brazil, China, India and Russia are gaining in popularity. Multi-component vacations also are in the rise—for example, passengers cruising from Cape Town to Dubai may leave the ship to take a safari in between and then return to the cruise.
 
The Acquisition of Wealth Proceeds at an Unprecedented Pace
The Luxury Alliance report finds that the acquisition of wealth is proceeding at an unprecedented pace. In the U.S. alone, the number of people with over $1 million in liquid assets (excluding their home and retirement funds) is approaching nine million, or roughly 3 percent of the population. The report also repeats a Forrester finding that affluent travelers spend 2.7 times more on leisure travel than mass-market travelers. Amounts spent annually per consumer for affluent travelers are $6,223 versus $2,341 for mass-market travelers. The quest for the very best is also re-shaping the character of the luxury market, creating a climate where price is not an issue and ultra-luxury is out-performing all other areas.

Luxury Marketers Are Identifying New Markets
The report finds that luxury marketers are identifying new and expanded opportunities in the luxury marketplace. They also are learning the enhanced impact of targeted niche marketing initiatives to grow their market share. For example, topics of high interest among luxury travelers currently include art and architecture, food and wine, cooking, music and literature. According to the report, the gay, lesbian and transgender community is clearly a growing luxury market segment.

Luxury Marketers Are Revisiting the Web
Travel marketers are revisiting the marketing mix and diverting funds from traditional marketing to Internet advertising and search engine marketing. With the 202.4 percent growth in Internet use since 2000, according to Internetworldstats.com, the impact on the luxury sector has skyrocketed, according to the report. Younger luxury consumers depend progressively more on the Internet as their primary source of information and communication.

Agents Find Opportunity in the Growth of the Web
With continuous change in the online landscape, many travel agents are now identifying opportunities in the growth of the web and are stepping in to fill the vacuum between technology and human contact, according to the report. In the luxury sector, the role of a travel advisor is more important than ever in creating a unique, custom-designed travel experience. Despite increased Internet usage, the affluent consumer is still a less engaged online buyer. Research in 2006 by Forrester indicates that while the average mass-market consumer researches 71 percent of his or her leisure travel online and buys 62 percent online, the affluent consumer researches just 68 percent and buys 54 percent online. For the affluent traveler, a higher degree of control over specifics of the booking process is important and underscores the necessity of voice contact.
 
In emerging markets the ongoing need for agents is especially important, and their role is of significantly greater impact than in more mature ones. Consolidation in the travel agent market has led to increased strategic partnering, with top U.S. producers now working in partnership with luxury travel suppliers. The Luxury Alliance anticipates global growth for this marketing trend.