New kind of luxury

Premium or ‘luxury’ travel is not what it used to be, largely due to a change in expectation and a shift in travellers’ understanding and definition of what constitutes ‘luxury’.

304

If luxury or ‘premium’ travel is not what it used to be, what does that mean for the traveller of today and the traveller of tomorrow?

“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.”

This ‘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 WTM Africa in Cape Town last year, 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 some suppliers tailoring their offerings to meet these millennial demands.

“In the premium product market, it is important to create experiences that will wow our customers,” says Zoleka Skweyiya, Sun International Group Manager for Communications & Customer Insights. “Luxury revolves around experiences, so we offer bespoke and exclusive activities at our premium properties, such as ‘rhino notching’ at Sun City and the ‘foraging experience’ at Table Bay Hotel in Cape Town.”

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.

“Premium travellers want comfort and personalized service, privacy, spacious rooms, amenities in the room, an office away from the office, and fast and reliable internet connectivity,” says Neelma Maru, Director of Sales & Marketing at Mövenpick Hotel & Residences Nairobi in Kenya.

“The premium guest is well-travelled and knows and appreciates exceptional service and product,” says Mark Wernich, General Manager of the Taj Cape Town. “This market expects their hotel to anticipate their needs, thereby eliminating the need for asking for assistance. From larger requirements, such as award-winning restaurants and bars where one can entertain clients and colleagues and spas to unwind during a busy itinerary, to smaller details such as international plug points in all rooms, safes that can accommodate large laptops, and a complimentary shoeshine service.”

Those features may sound a little ‘old school luxury’, but the Taj Cape Town is also mindful of the need to stay current and relevant in an area important to all generations, regardless of whether the guest is a 60-year-old executive or a millennial entrepreneur. That is, connectivity.

To this end, the hotel has recently upgraded its wi-fi. According to Wernich, guests staying at the Taj Cape Town are now able to surf, stream and work on the fastest hotel internet wi-fi connection in the city of Cape Town. The hotel underwent a R2-million ($136,000) upgrade in infrastructure, including an upgrade to the existing 100Mbps line as well. The lightning-fast connection is available throughout the hotel’s rooms, restaurants, conference rooms and public areas, and offers guests uncapped and unshaped access complimentary. The increased connectivity speed at the Taj Cape Town will also facilitate bandwidth-heavy 4K video calls, allowing travelling workers to share information, display merchandise, demonstrate in-room technical models, multimedia presentations, and visual effects in real-life detail.

“Although travellers today are feeling the economic pinch and are looking at ways to cut back on their spending, when it comes to luxury items they are still choosing quality and are prepared to pay more for premium and affordable luxury products,” says Skweyiya. “Regardless of whether someone is visiting us for a meal, to spend a night in our hotels, or to be entertained at the casino or a show, they want to physically connect with other people. A digital platform is unable to offer this social element that people will always need, which is why we believe the hospitality industry will always be relevant.”

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.”

SPEND

According to Tourism Economics data measuring outbound flights, global growth in luxury travel slightly exceeded that for overall travel from 2011-2015, with a compound annual growth rate of 4.5% (4.2% for overall travel). The demand for travel has remained constant despite testing economic times, and the luxury market has remained fairly resilient.

The inference to draw, then, is that despite times being tougher, the premium end of the market continues to thrive. Is it a case of “well, the wealthy will always be wealthy, regardless of the state of the economy?” It’s interesting applying this line of thinking to the corporate space, because there’s no doubt that post the 2008 global economic crisis, there has been a considerable amount of belt-tightening and a much closer look at corporate travel policy, with employees, by and large, no longer able to immediately book business class or check into the closest five-star hotel.

“Customers in the corporate industry are becoming more and more price sensitive, but there is a good percentage of travellers who prefer the premium service and are willing to pay for premium products,” says Maru of the Mövenpick Hotel & Residences Nairobi in Kenya.

“Most certainly, business class travel from corporate companies is no longer a given,” says Chantal Thome, General Manager of AVIAREPS Southern Africa, which represents German airline Condor in the South African market. “This premium segment is very important as most companies do not want to pay for business class any longer. Therefore, Condor’s offering in premium class is geared towards ensuring a lot more comfort for the business traveller who has to go straight to the office.”

According to EyeforTravel, luxury consumers spend over six times as much on travel than the average consumer annually, and the trend is for this disparity to widen. That’s according to its ‘The Global Luxury Travel Consumer’ report. According to the report, the average traveller spends $1,690 a trip and takes around three each year. By contrast, luxury consumers fork out $5,365 on each journey, and take just over 5.6 trips.

EyeforTravel’s research found that this gap is more likely to widen than diminish. According to the ‘Knight Frank Wealth Report 2017’, the number of high net worth individuals globally is expected to grow by double digits each year and well into the 2020s, adding millions of luxury consumers into the market. For the travel industry, more good news is that luxury consumers are expected to prioritise experiential (as per points raised earlier in this piece) spending and put less emphasis on personal goods.

It is clear that consumers are switching more of their discretionary spend into leisure travel. While developed economies are leading this trend, as wealth becomes more widespread, emerging markets are playing catch-up.

To this point, Travel Futurologist, Ian Yeoman makes an interesting observation, related to emerging markets and, arguably, directly translatable to the African continent.

“Middle class tourists from emerging markets want materialism,” he says. “However, with the rise of middle classes in developing economies, luxury becomes less exclusive as more people are accessing it. As consumers become older, luxury becomes more about enrichment than materialism”.

“Our research suggests that despite the challenges, it pays to focus on the luxury traveller and not just because they are big spenders,” says Alex Hadwick, Head of Research at EyeforTravel. Indeed, luxury travellers are trendsetters and are an indication of where the market might head in the future.

“The luxury traveller is at the forefront of a number of trends, including rising disposable income, a focus on the experience, and growing smartphone usage in the travel research and booking process.”

NEW PRODUCT

Taking all of the above into account, it’s no surprise, then, to see the likes of the world’s big airlines spending heavily in the premium travel space.

British Airways is investing £600 million ($788m) in its Club World class, including a significant upgrade of its catering and the roll-out of luxurious bedding via its partnership with White Company.

From 2019, there will also be a new seat with direct aisle access in Club World.

BA is also celebrating the first anniversary of The First Wing. This is the airline’s exclusive check-in area for its First, Gold Executive Club and oneworld Emerald customers, which welcomes travellers through a dedicated security channel leading directly into the First lounge at Heathrow.

“Customers really value the smooth and swift experience from check-in through security and into the lounge,” says Carolina Martinoli, British Airways’ Director of Brand & Customer Experience.

The introduction of the airline’s exclusive First Wing has also reduced the number of customers travelling through the normal security search areas, delivering a benefit to all fliers.

BA is investing £4.5 billion ($5.9b) for customers over the next five years, including the installation of wi-fi and power in every seat, fitting 128 long-haul aircraft with new interiors, and taking delivery of 72 new aircraft. Lounges are also benefitting from the investment and the airline has already unveiled new lounges in Rome and Aberdeen, with another new lounge due to open in New York later this year, followed by Geneva, San Francisco, Johannesburg, Chicago and Heathrow.

Delta’s roll-out of its new ‘Delta One’ business class ‘suites’ and international-style premium economy seats is also picking up steam. The airline said in August that its updated premium cabin will be added to five more trans- Pacific routes in the near future.

The Delta One suites are Delta’s latest update to its business class cabin. The seats convert into lie-flat beds and have sliding privacy doors.

The cabin first debuted last year on Delta’s new Airbus A350 widebody jet, a plane the company has billed as its new ‘flagship’ aircraft. Those planes also were the first to feature Delta’s new ‘Delta Select’ international-style premium economy seats.

Earlier this year, Delta started refurbishing its Boeing 777 aircraft so that they would also include both of the new premium cabin seats.

The roll-out of Delta’s updated cabin to additional routes comes as it takes delivery of more Airbus A350s and presses ahead with the refurbishment of its existing Boeing 777s. Delta says all eight of its 777-200ERs and all 10 of its 777-200LRs should be updated by the end of 2019. Delta adds that it expects to have taken delivery of 13 A350s by the end of 2019. Overall, Delta has 25 Airbus A350s on order, though the company has deferred the delivery of 10 of those.

Also in the airline space, Condor ‘leisure’ airline, but it has recognised the opportunity premium class presents. As a result, it offers a three-class configuration on the B767-300. Extra amenities in its premium class on long-haul flights include: footrests and individually-adjustable headrests; extra-wide pillows; increased baggage allowance; free seat reservation; separate check-in at all German and many international airports; free late night and online check-in options; and priority check-in, priority security check, priority boarding, and priority baggage.

“In-flight entertainment has also become essential, as passengers do not want shared screens,” says Thome. “Thomas Cook/Condor offer modern touch-screen IFE.”

‘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. “At the other end of the spectrum, we are seeing the introduction of ultra-budget products, such as the launch of from Delta, United and American Airlines. 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?