Defining luxury

The words ‘premium’ and ‘luxury’ mean different things to different people, specifically in the travel space, where suppliers are currently grappling with these definitions, as they look to deliver a product that ticks all the right boxes.

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What is ‘luxury’ or ‘premium’ travel?

It’s the million-dollar question, isn’t it?

It’s also a question that a lot of travel suppliers are asking themselves, particularly those in the business of serving the top end of the market.

That’s because there’s no use developing a product for the highest spenders without actually understanding them, their needs, and what their definition of ‘premium’ or ‘luxury’ is.

That’s regardless of whether your product is business or leisure travel-focused.

Wrapping this argument nicely is the notion that what we previously understood or defined as ‘luxury’ has changed beyond recognition and is now more subjective than ever before.

“We have entered a new era of luxury travel,” says the executive summary in Amadeus’s ‘Shaping the Future of Luxury Travel – Future Traveller Tribes 2030’ report. “As newly affluent citizens pop up in different regions of the world and the travel industry expands to meet their demands, how can travel brands cater for more luxury customers while somehow maintaining a sense of exclusivity?”

The report goes on to say that “as emergent middle classes seek the material aspect of luxury travel, more mature markets are craving a new, evolved kind of luxury. This is why offering luxury customers a relevant, personal and exclusive experience will become even more crucial than it is today – it will be a differentiating factor between old and new luxury.”

According to research findings released in November of 2018 by Radiant Insights, an American market research and consulting company offering syndicated research studies, customized reports, and consulting services, the luxury travel market is predicted to grow at a compound annual growth rate of 6.83% globally.

According to the Radiant Insights report, this is largely due to “the rising inclination towards unique and exotic holiday experiences, increasing personal disposable income in both developed and developing economies across the globe, and the growing middle and upper middle-class population globally.”

It goes on to say that “factors responsible for robust market growth include the substantial impact of social media on the luxury travel market in the last few years. Additionally, the vast consumer base and emergence of new destinations, along with improved service standards, are expected to drive the growth of luxury travel market in the upcoming years.”

With all of this in mind, it’s probably no surprise to hear from those close to the ground that this growth is reflected in the figures they see.

Legacy Hotels & Resorts is a great example, thumbing its nose at the struggling South African economy and embarking on its most ambitious project yet, the impressive The Leonardo in the heart of Sandton in Johannesburg, which you see on the cover of this issue of the magazine.

It’s officially Africa’s tallest building, with high-end luxury furnishings and services all the way through that are all tailored to the premium market.

“The economic downturn, whether in Africa or globally, does impact on the number of ‘premium travellers’ and some companies have definitely cut their ‘per-diem’ spend,” says Paddy Brearley, Managing Director of Legacy Hotels & Resorts. “However, with the growth in Far Eastern and Indian travellers to our shores, it is anticipated that there will be an increase in premium travellers in the near future.”

It’s not just The Leonardo in the Legacy stable that caters to the premium traveller, with properties such as the Michelangelo Hotel, the Michelangelo Towers, DAVINCI Hotel & Suites, and Raphael Penthouse Suites – all in Sandton, incidentally – all servicing the top end of the market.

If Legacy didn’t believe in the sustainability and robust nature of this market segment, it would be in some trouble.

“In essence, we believe that the top end of the market is here to stay, and by offering personal care and friendly service, our properties stand an excellent chance of growing market share in the very important corporate and conference arena,” says Brearley.

Bullish, indeed!

PREMIUM AIR TRAVEL

But, whilst the world’s premium hotels and groups continue to wrestle with how best to maintain or even grow this market share, they are not alone, if one looks at all the major players in the premium travel value chain.

The airlines, for example, are wrestling with how best to approach their premium offerings, particularly as corporates look at cost-cutting exercises and no longer automatically book their execs into first or business class on a short-haul flight.

“You can see it in the air with the proliferation of premium economy in many airlines,” says BCD Travel South Africa CEO, Marco Cristofoli. “With this class you currently can’t get a seat for love or money. It’s incredibly popular. You can see demand for business class shrinking and you can say the same for the hotel space. You see it in corporate travel policies, as well, and it’s big corporates – not just the small guys. Everybody is cutting back where they can and the airlines are cleverly tailoring their product to demand.”

The Lufthansa Group is a good example, launching a premium economy product on Lufthansa as far back as in 2015 and following suit with Austrian Airlines last year. The near future will see a premium economy product on SWISS International Air Lines’ long-haul aircrafts as well.

Cristofoli makes a fair point, with just about all of the world’s major airlines now offering a premium economy product and meeting that demand.

That being said, right at the front of the plane is the where the big money is made and still remains a focus area for many airlines, with some reporting that it’s not all doom and gloom in this space.

“The premium market has been very robust in recent years, having strongly bounced back from the global economic downturn,” says Bob Schumacher, United Airlines’ Regional Managing Director Sales.

December will see United launch a direct service between New York Newark and Cape Town in South Africa, whilst earlier this year saw the airline unveil its Premium Plus product and join the flood of operators now offering a premium economy service.

“Our customers have a range of travel needs and requirements, with a significant percentage seeking to travel with the highest levels of comfort and service,” says Schumacher. “This has always been the case and this continues to grow as a segment. As growth has returned to economies, and business volumes with it, United has witnessed a strong demand in the premium cabins. This is undoubtedly true also for many of our competitors and especially in the longer flight segment markets.”

That may be the case, but airlines remain under pressure to keep innovating and showing ‘value’ for every rand, dollar, euro etc spent by a corporate or individual luxury traveller. The end result is not only the unbundling of a lot of airline products, but also new products that speak directly to the premium traveller.

For example, the Lufthansa Group offers a complimentary luxury BMW chauffeur drive service to its first class, HON Circle and business class guests. This service transports them directly from their home or office to the airport and can also be booked for the return journey. It’s exclusive to passengers flying on Lufthansa, SWISS and Austrian Airlines-operated flights departing from South Africa.

“Premium passengers certainly do have a high expectation from the product and service of the airlines they choose to travel with,” says Dr. Andre Schulz, General Manager of the Lufthansa Group Southern Africa. “One of the key factors for those travelling in business class and first class is to arrive at their destination hassle-free, relaxed and ready to start their business day.”

The Lufthansa Group is also investing heavily in its lounge facilities throughout its various hubs. That includes in Frankfurt, where its Welcome Lounge and First Class Terminal offers guests the opportunity to refresh and have a meal or relax before embarking on the next leg of their journey. From the First Class Terminal, guests are chauffeured directly to their departing aircraft.

“This market is very important to us,” says Schulz. “Germany, Switzerland and Austria are some of South Africa’s key trading partners and this means that the premium traveller segment is significantly utilised by corporate passengers f lying between South Africa and the Lufthansa Group hubs in Frankfurt, Munich, Zurich and Vienna.

United launched its Polaris business service on all long-haul international flights in December of 2016. It features fine dining and a reimagined, sleep-enhancing experience for intercontinental travellers, including elevated inflight food and beverages, custom bedding from Saks Fifth Avenue, comfortable pyjamas and exclusive amenity kits with products from Sunday Riley.

At the United Polaris lounges, customers can enjoy high-end shower suites, rest pods with day beds, and pre-flight dining.

On average, United says it plans to add one aircraft with both the new United Polaris business seat and the new United Premium Plus seat every 10 days from now through to 2020.

DIFFERENT TAKE ON ‘LUXURY’

Let’s return to the debate around what constitutes ‘luxury’ or ‘premium’.

Sure, in the corporate travel space it’s little easier to define, largely due to star grading (hotels) and airline travel classes, although within those segments the finer details are changing, as suppliers take a greater interest in the needs of their customers.

Adding to that complexity is the changing profile of travellers and suppliers are having to do a lot of work to better understand their customers, particularly those emerging out of the ‘millennial’ segment.

No surprise, then, to see some of the big players dedicating a lot of time and research to this better understanding, as they look to tailor their premium offerings using a more intuitive approach.

Hilton Hotels & Resorts is a good example, with the group recently embarking on a research study that found that “73% of young professionals have a better travel experience when they spend free time on their own.”

Now, that sort of insight is of immense value to a hotel group such as Hilton, particularly if you’re in the busy of deciding what to put in your premium suite, hotel restaurant or lobby area.

The Hilton study was all about trying to understand the next generation of business travellers, so it set out to “uncover the travel highs and lows for young professionals, ages 23-35, who attend meetings while on the road.”

The survey revealed that, while young business travellers prefer a buzzing social environment and in-person interactions during regular work hours, they would rather spend their evenings on their own.

The research identified that 84% of young business travellers say that they cherish their alone time during business trips, and nearly three-quarters (73%) report that they have a better experience when they spend downtime on their own. When asked how this group prefers to spend their free time, results included:

– Eating at local restaurants (69%)

– Exploring the city and/or neighbourhood (59%)

– Sleeping or relaxing (56%)

– Working out (35%)

– Attending a Happy Hour (38%) or unwinding at the lobby/hotel bar (32%)

“We’ve all had over-scheduled business trips – with meetings from 09h00 to 17h00 and social obligations the rest of the evening – and the result is pure exhaustion. We applaud this next generation of travellers for highlighting a tension point many of us have dealt with for years,” said Vera Manoukian, Senior Vice- President & Global Head, Hilton Hotels & Resorts.

Manoukian makes a fair point and it’s something picked up by Legacy’s Brearley, when talking about his premium customers.

“Every guest has different whims about services,” he says. “Sometimes they require to be left alone and on other occasions they wish to be acknowledged and ‘fat faced’. The key is for staff to know when to or not to, and our training programmes cover this in depth.”

It’s probably fair to say, then, that those activities listed above constitute a version of luxury for those young travellers, particularly if it’s juxtaposed with intensive work days crammed full of meetings and demanding deadlines.

Delving a little deeper, ‘old and new luxury’ taps into the generational differences between the travellers of today and the travellers of the past. It’s something picked up on by Anthony Berklich, founder of Inspired Citizen. He was speaking at the trade show WTM Africa in Cape Town in 2017, looking specifically at the millennial traveller.

“Parents of millennials perceive luxury in a somewhat old-school way. Butlers in tuxedos, stuffy hotel furnishings, being greeted by ‘sir’ and ‘madam’,” said Berklich.

But, according to Berklich, millennial travellers go in search of a more ‘authentic’ experience – something that offers them a bit more meaning.

“The narrative, the story behind it, is what they are buying into,” he said.

According to Berklich, millennials “seek unique and special, exclusive experiences and items that make them different and create a separation between them and the masses and, most importantly, allow them to express themselves. They are a little narcissistic and will spend money to feel special.”

No surprise, then, to see many suppliers tailoring their offerings to meet these millennial demands.

Berklich’s points regarding the millennial generation is not a suggestion that suppliers in the premium travel space need to remain focused on this generation. Sure, this generation will have a big role to play in the global travel space going forward, but there are other players in this market and other trends that remain constant, regardless of generation.

The bottom line is that what constitutes ‘luxury’ is a very personal thing, with no one rule applying to each and every traveller across the board.

“Luxury travel is subjective,” says the Amadeus report. “For one traveller, it could be a private multimillion-dollar cruise around the Arctic on a famous yacht. For another, it could be the reassurance of having their dietary requirements automatically catered for throughout their entire holiday and a bespoke designer wardrobe waiting for them in their hotel room – without them having to ask. For some, it could be having their favourite Michelin-starred chef flown in to prepare a meal in a Bedouin tent in the middle of the Sahara. Curating something that appeals to them on a specific, personal level that goes above a traveller’s ‘norms’ is key to the next chapter of luxury travel.”

‘BLUXURY’

Unlike ‘bleisure’ travellers (those combining business travel with leisure travel), ‘bluxury’ travellers (combining business travel with luxury leisure travel) in senior positions will likely have greater autonomy over their decision to extend their travel for some leisure time.

That’s according to Amadeus.

“Nonetheless, they may still be somewhat restricted until companies begin to build ‘bleisure’ or ‘bluxury’ practices into their corporate travel policies. It isn’t happening widely yet, but is something the industry will need to address in the future.”

“Companies need to implement processes and procedures to ensure travellers adding leisure days to a business trip are transparent and have the adequate insurances in place,” says Jo Lloyd, Partner at business travel consultancy firm Nina & Pinta. “Whether a company permits bluxury travel is not really the issue – it is more to do with risk, responsibility and insurance.”

Luxury travel brands can benefit by accommodating travellers’ increasingly blurred lifestyles. Understanding the bluxury mindset is key. In some cases, these travellers will have the option to fly home on a Friday night at the end of a work trip, but will instead take the opportunity to spend another 24 or 48 hours in a destination and fly back over the weekend instead, for the same or similar price. They may come to a travel provider hoping for advice for 24-hour guides to a city, or to get them last-minute tickets to a concert or sports event they have found out about since they made the decision to extend their trip. These travellers have travelled to fulfil a business obligation, worked hard, and are now seeking a reward and some well-deserved downtime. Their expectations transfer from needing to get their job done as easily as possible to wanting to indulge in a destination now that the work is over.

“If we have guests staying for a week – professionals coming out of London – for the first few days, I can feel that they’re not relaxed yet,” says Joachim Hartl, General Manager of the Conrad Algarve in Portugal. “I deliberately say to them ‘let us pamper you’. By the fourth or fifth day, they’re seeking other experiences – their expectations are changing.”

“Although they will seek assistance from a trusted brand or party to make their decisions more easily, a ‘bluxury package’ is unlikely to entice bluxury travellers – they won’t want to feel that they are following the herd,” says the Amadeus report. “Brands that serve a business travel demographic will need to identify and fulfil travellers’ personal leisure needs and create a bespoke itinerary that can be adapted to how they are feeling at the end of a business trip, if they are to convert them into bluxury customers”.

Again, there’s that point about personalisation and authenticity.

THE FUTURE?

According to Amadeus, over the next 10 years, the growth rate in outbound luxury trips is projected at 6.2%, almost a third greater than overall travel (4.8%).

“This could be a symptom of how polarised travel is becoming to reflect the wealth patterns of the world’s citizens,” says the ‘Shaping the Future of Luxury Travel – Future Traveller Tribes 2030’ report. “Luxury and budget markets will become increasingly extreme to cater for tomorrow’s ‘ultra’ market. Luxury long-haul travel will grow faster than any other form of travel and will overtake border travel (travel between countries that share a border) shortly after 2025. This is shown through Tourism Economics data that forecasts the distance of the next decade’s luxury outbound trips, based on current trends and growth rates.”

That’s probably encouraging for the suppliers in the premium space, although what’s obvious is that these suppliers will have to better understand their premium customers, if they are to win a sizeable slice of the action.

The new era of luxury travel is geared towards achieving an end-to-end luxury experience from the moment a passenger gets in their taxi to the airport until they arrive back at their front door from their journey home. The industry is aware that greater collaboration between parties is needed, but what does that mean on a practical level?

A major stepping stone would be overarching technology that is able to collect passenger data from the point of booking and pass it through the luxury travel supply chain as the traveller moves through phases of their journey. Real-time updates that will impair the luxury element of their trip could be a call to action for whichever party is responsible for the traveller at that time – the baggage handler, the chauffeur, the staff at hotel check-in.

“Imagine you’re on your way to the airport, your taxi’s stuck in traffic. Imagine the airline was able to locate you via their app, calculate your new arrival time at the airport and automatically book you on to the next flight. Not only that, but what if all your further travel arrangements were synced… your hotel knew your new check-in time? Imagine if you had the ability to locate your luggage at any time and find out where it is…,” said Sadiq Gillani, Senior Vice-President, Lufthansa Group, from his speech ‘The Next Step for Airlines’ at the 2014 TEDx Conference in Berlin.

Hmmm…intuitive and personalised. I like the sound of that.

Is this the future of luxury travel?