The natural assumption in tough economic times is that overall spend is reduced, people travel less, and those who do travel are forced to look at cost-cutting exercises, such as reviewing the class they fly in and the level of comfort they are willing to settle for in a hotel.
Certainly, post-2008 global financial crisis, corporates across the world have had to review their travel policies and change traveller behaviour, with a much closer eye on the bottom line. As a result, many corporate bookers and travellers are no longer grabbing the first business class ticket and looking for the closest five-star hotel. Instead, closer attention is being paid to flight durations and the types of amenities the traveller will actually need at the hotel in question, before a decision is made.
“In 2008 and subsequently, corporate travel policies were updated limiting expenditure on premium travel classes and additional comforts,” says Dr. André Schulz, Lufthansa General Manager for Southern Africa. “Depending on the duration of the flight, corporate policies allowed for economy class travel on short and medium-haul flights, and allowed for premium economy, and to a lesser degree business class, for long-haul flights. It is very seldom that corporate policies will allow for business travellers to travel in first class.”
“Many corporate policies also began to do away with business travellers collecting loyalty programme points as a fringe benefit. Airlines have subsequently placed a greater focus on corporate loyalty programmes, to award the business the loyalty points and allow the business to accumulate these for their use.”
That being said, the African continent presents a different set of challenges, and sometimes, ‘premium’ or ‘luxury’ takes on a different meaning, particularly when it comes to necessity and the basic requirements needed to make a business trip successful.
Corporate Traveller, a division of the Flight Centre Travel Group, conducted a survey in South Africa earlier in the year, where the results yielded some interesting findings.
Firstly, it found that South African business travellers to the continent were staying in luxury hotels and being chauffeur-driven. In fact, the statistics showed that nine out of 10 business travellers to African countries stay in four or five-star hotels, costing at least R3 000 ($225) per night.
Broken down further, close on half of those business travellers – 48% – stay in five-star hotels, while 42% reside in four-star lodging, and around 8% opt for three-star hotels.
Seven out of 10 are also chauffeur-driven during their stay.
At first glance, that may seem an extravagance, but that’s only if you’re someone who has never travelled on the African continent, outside of South Africa. That’s because the general quality of the roads, traffic congestion and security make it imperative to take a local driver, as opposed to attempting to navigate the roads oneself.
“The majority opt for chauffeurs or airport transfers,” Manager Raylene Pienaar. “This is particularly true in Nigeria, Ghana, Tanzania, Kenya, and the DRC, as well as most North and Central African countries where our travel experts actually strongly recommend against car hire, because of the poor road networks and security concerns.”
As it relates to hotels, the preference of South African business travellers is not due to entitlement, but rather out of convenience and security concerns.
“Proximity to work site, office or meeting venue are the primary drivers in what accommodation is selected,” says Pienaar. “Almost 100% of customers surveyed indicated that as a determining factor. This is often due to the traffic conditions in the destination city. In addition, 55% of customers base their hotel choice on the security features of the property, with 33% indicating that the complimentary wi-fi plays a role.”
All of this is no big surprise, if one takes into account the lack of quality, branded hotel accommodation on the African continent. That’s why we see the likes of Hilton and Carlson Rezidor with aggressive African hotel development pipelines, as huge opportunity remains in this space.
“All eyes are currently on emerging markets, where an increase in demand is leading to the launch of more luxury hotel product,” says Mark Wernich, Director of Business Development: Africa for Preferred Hotels & Resorts. “Luxury travellers want to discover and explore new destinations before they become too developed or overexposed. This trend is nowhere more apparent than in Africa. As a result, we are currently working to increase our presence in emerging African markets such as Ghana, Mozambique, Tanzania and Angola, which are seeing exponential growth on inbound corporate and leisure travel.”
Backing up this notion is information gleaned from W Hospitality Group’s annual ‘Hotel Chain Development Pipelines in Africa’ report, which has become an authoritative source on the growth of the hotel industry in Africa.
Presented by Managing Director and Business Traveller Africa contributor Trevor Ward, this year’s report – the ninth edition – had 36 international and regional contributors, and reported pipeline activity of almost 73,000 rooms in 417 hotels, which was a 13% increase on the 2016 pipeline.
As Africa remains relatively undeveloped, from an infrastructure point of view, and in comparison with the rest of the world, business travellers will gravitate towards brands they are familiar with, and hence the opportunity for the big international brands.
Further to that, as most of these groups’ development strategies consist of first putting up – or taking over – a five-star property in the capital city, the majority of Africa’s business travel hotspots are still waiting for the next wave of new hotels that might sit more in the mid-market range.
Here, Hilton have recognised the opportunity, and are in the process of rolling out their Hilton Garden Inn brand in a host of African locations in the next year or so.
They aren’t the only group to recognise the opportunity in this segment.
“It’s true to say that in Africa, mid-market group properties are currently experiencing the most growth, specifically in emerging markets or secondary and tertiary destinations,” says Wernich. “The infrastructure created with the construction of mid-market properties can in turn, attract independent and upscale brands to enter the market also. Many of the established hotel chains created their independently-styled brand extensions as a reaction to the economic downturn, whereas Preferred Hotels & Resorts has been the champion of the independent hotel industry for almost 50 years.”
For now, though, the African premium hotel market remains strong, due to a lack of alternatives for business travellers who want that brand they know. Hence, why they will check into the first branded hotel in a particular city, regardless of the fact that it is a five-star property and might sit outside the corporate travel policy.
So, that’s the back-drop to the African premium or luxury market.
But what about those at the coalface, the suppliers of premium products. What are they seeing?
“The premium market continue to travel, we have seen growth in the segment in the past year and are focusing on this market segment for future growth in our five-star portfolio,” says Graeme Edmond, Chief Sales & Marketing Officer of aha Hotels & Lodges.
By way of example, aha Hotels & Lodges are currently in the process of implementing product improvements to Shepherd’s Tree Game Lodge in the North-West province of South Africa, “in order to create a much improved guest experience focused on the premium traveller,” says Edmond. These include six pax per game viewer, enhanced sundowner stops, and improved food delivery.
Also upgrading its offering in the premium space is Peermont Hotels, Resorts & Casinos. Specifically, the group is focusing on its five-star D’oreale Grande hotel at Emperors Palace, close to O.R. Tambo International Airport in Johannesburg. There, Peermont have converted one of the floors to cater for the high-end/premium traveller. Located on the quiet, top floor, the Club Floor & Lounge provides restricted access and offers a lovely view over the East Rand area. Club Floor guests are able to conduct business in the private business centre, whilst enjoying complimentary refreshments, work stations, a meeting room, free wi-fi, local and international newspapers, and access to a Club Floor services manager willing to assist with secretarial services such as typing, scanning, photocopying or faxing. Additional Club Floor benefits include early check-in and late check-out options, 24-hour refreshment in rooms, comfortable robes and slippers, selected complimentary food and beverage offerings, shoe polishing services and complimentary pressing/laundry.
“We have not seen a drop in the uptake of our premium rooms,” says Christelle Carstens, Peermont Rooms Operations Manager. “However, it has to be said that the local corporate traveller does not ordinarily book these high-end rooms.”
It seems the airlines are singing a similar tune.
“Virgin Atlantic continues to see a strong demand in our premium cabins,” says Darrin Thomas, Manager, Marketing and Communications South Africa. “Virgin Atlantic has seen a large increase in travel to and from the United Kingdom this year in our Upper cabins, and Virgin Atlantic’s Johannesburg route continues to perform extremely well. A large percentage of our Upper Class cabin is filled with our contracted corporates which continues to drive demand.”
Virgin Atlantic has a chauffeur drive service that allows Upper Class passengers to access its private drive-through facilities in both Johannesburg and at London’s Heathrow.
“With our chauffeur car service, your Upper Class experience starts the moment you leave your home, office, or wherever you prefer,” says Thomas. “We take the stress out of travelling to the airport so that you can relax or catch up with work before your flight. In London, we also offer other complimentary transfer options: Heathrow Express, Gatwick Express, and Limo bikes – whatever works for you.”
The Lufthansa Group are also positive about what they’ve seen in premium class travel. According to Schulz, the group has not experienced a significant drop in premium travel demand on the airlines servicing the market.
“In fact, the Lufthansa Group has increased flight frequencies to the region significantly over the last year, and the group has announced that additional airline brands within the Lufthansa Group will commence with routes to South Africa within the remainder of 2017 and into 2018,” he says.
“Our premium classes, particularly business class, remain popular on both the inbound and outbound and are often the first to be booked out. Given the opportunity, economy class passengers are prepared to spend more for additional services and comfort on long-haul flights. Since its inception four years ago, Lufthansa’s premium economy class has proven to be exceptionally popular.” In 2016, Lufthansa launched the airline’s new first class service on all long-haul flights, and also recently implemented the Lufthansa ‘Business Class Signature Service’ across most of its long-haul footprint.
“The signature service offers a more personal touch in the service provided and a greater flexibility in terms of processes as a whole, which makes passengers feel even more pampered,” says Schulz. “The aim is to provide a service that reminds passengers of being in a top restaurant – complete with a dedicated flight attendant for personal service.”
Lufthansa’s business and first class lounges at the Munich and Frankfurt airport hubs, as well as the SWISS Zurich hub, have been substantially upgraded to offer the premium traveller an easier and faster check-in service, and a luxurious and relaxing space to enjoy before their flights. At the Lufthansa Frankfurt terminal, premium travellers are also able to access the airline’s welcome lounge, where they are able to refresh and unwind after a long flight.
SWISS also offers a ‘privacy seat’ reservation on long-haul flights. This is a business class seat on long-haul aircraft on intercontinental routes, offering additional privacy, discretion and more stowage space than other business class seats. Subject to availability, these single seats can be reserved in advance for an additional fee. HON Circle Members and Senators can reserve these seats free of charge if they are available at the time of booking.
British Airways, meanwhile, are investing £400 million ($540m) in Club World, their long-haul business class product. In more good news for African customers flying into Gatwick, all operations have now been moved into the South Terminal, where a new premium check-in area has been created. The new first class and Club lounges, with sweeping views of the runways, have 40% more floor space. Other features include power sockets with USB ports in most seating areas and upgraded wi-fi; a study with project tables, PCs and a printer; modern shower suites with Elemis amenities; a hot and cold self-serve buffet; full bars and tea and coffee stations and; centrally managed lighting set by time of day in different zones.
At Heathrow’s Terminal 5, BA has launched a new ‘First Wing’ check-in area. It includes a dedicated two-lane security channel and direct access to the Galleries First Lounge and Concorde Room for the first time.
“We know that our First customers are used to the very best in life and have very exacting standards,” says Alex Cruz, British Airways’ Chairman & CEO. “They rightly expect every part of their journey with us to cater to their needs, so we’ve focused on areas that we know matter to them. First Wing enables them to maximise their time, whisking them from kerb to lounge through the fast track security channel. And we’ve paid attention to the details that make a difference on board too, through elements such as the updated Liberty washbags and the ability to pre-order a preferred meal.”
The programme of BA lounge investment will see revamps of the Terminal 5 lounges as well as the Johannesburg lounge at O.R. Tambo International. A new lounge is also being built at Jomo Kenyatta International in Nairobi (Kenya), which will be shared with American Airlines.
Catering has been a focus for BA across Africa and improvements have already been made across a number of routes, most recently Accra. Johannesburg will be the next route to benefit. In addition to improvements to the on-board menu, a new service style has been introduced across Club World, with display trolleys allowing customers to select dishes from a choice of freshly prepared starters and desserts, providing an experience similar to that of a premium restaurant.
The BA on-board improvements extend to the latest-generation wi-fi, which will be rolled out across the long-haul network from April. Customers will be able to use their own devices to browse the internet, access email and check social media. In addition, they will be able to stream video content from sites such as Netflix and YouTube.
BA has also introduced a new service called ‘Premium Transfer Drive’ at Heathrow to ensure that customers who are at risk of missing their connection are able to catch their onward flight. The new scheme applies to customers travelling on a UK domestic flight, who are connecting on to either a short-haul flight in Club Europe, a long-haul service in Club World (long-haul business class) or first, or who are Silver or Gold Executive Club members. BA’s team at Heathrow will track these customers, and where there’s a risk they will miss their connection, will provide an ‘airside’ car transfer between one flight and the next. They will also send a message to the inbound aircraft, so the cabin crew can inform the customer that a car will be waiting to transfer them, thereby alleviating any stress or worry.
“It’s simple really – we need to deliver what our customers value most, where they value it most,” says Cruz. “We need to focus on enhancing premium – offering contemporary service, improved catering and lounges and a consistent experience.”
Another bullish international airline with a presence on the African continent is Delta.
“Our non-stop network between Africa and the United States, combined with our operational reliability has ensured that business travel demand has remained constant, despite various global economic challenges,” says Jimmy Eichelgruen, Delta’s Sales Director – Africa, the Middle East and India.
Delta has made significant investment in its Delta One cabin, enhanced by the latest technology and innovation.
“All our Africa routes feature fully flat-bed seats in Delta One, with Westin Heavenly bedding created exclusively for Delta by Westin Hotels and Resorts,” says Eichelgruen. “We’ve just launched the industry’s first customizable amenity kit, too. Customers can take their TUMI amenity kit to a TUMI store for a complimentary monogram service. In the air, customers have the option to connect to wi-fi and stay connected to the office at 30,000 feet. Or if they’d rather relax, we offer over 1,000 hours of free, on-demand entertainment, including movies, TV, music and games on Delta Studio. This year we added Nollywood blockbusters to our movie repertoire and these are available on hundreds of aircraft across our fleet.”
“Meanwhile, we’ve developed menus to be reflective of local tastes and preferences. Meals are created by restaurant chefs and feature dishes such as chicken stew with egusi soup and pounded yam on our Lagos flights. This year we introduced new service ware in Delta One, which has been created by the internationally renowned design house, Alessi.”
Singapore Airlines is another international player with a close eye on the importance of its premium cabins, and if you read between the lines, it seems they may be on the brink of an exciting announcement in this space.
“Even during downturns, we maintain our investment in products and services,” says Sally George, Market Development Manager in Johannesburg. “Revenue from premium classes remains a significant contributor to our overall revenues. In 2013 we launched the next generation of cabin products and now we are again launching all-new cabin products (watch this space!). We regularly review demand for travel throughout our network and remain flexible in adjusting capacity, growing it in markets which continue to perform well and reducing it where demand is not as strong. At the same time, we continue to introduce promotions and competitive fares to help stimulate demand.”
And what about Africa’s airlines?
“There’s definitely been a decline since the 2008 financial crisis, however there’s also been significant growth over the past few years,” says Thembela Dladla, RwandAir’s Country Manager in South Africa. “In South Africa, however, we have seen businesses leveraging backwards and travel costs including business class sales being under pressure due to ongoing tough economic conditions. This has therefore allowed for opportunities to try alternative products such as premium economy, as it provides an alternative for our business travellers.”
RwandAir does not offer a first class, but is in the process of rejuvenating its business class product, as well as introducing a premium economy class on the new Airbus A330. It has also re-named its business class ‘Dream Class’ and completely overhauled its product offering by providing a full business class product on all its sectors (domestic, regional and long-haul). This includes introducing a full lie-flat bed in a semi-pod for maximum privacy on some long-haul and regional routes.
“Each business class seat has individual on demand full screen TV as well as full on-board connectivity, which includes full wi-fi and roaming services supported by On Air wireless,” says Dladla. “For regional routes, mostly operated by our state of the art Boeing 737- 800 Next Generation, we only have two cabins – Dream Class and economy class. The Dream Class seat on this aircraft is a complete recliner seat with full connectivity on some of the 737- 800 Next Generation planes.”
THE PREMIUM TRAVELLER
A big part of servicing the premium traveller is understanding just who this traveller is, what makes them tick, and, quite simply, what they are looking for, whether it’s a flight or hotel experience.
So, just who is this premium traveller?
“This type of traveller expects superior service, coupled with state-of-the-art room features, comfort and technology at their fingertips,” says Carstens. “These travellers expect a comfortable stay where they will enjoy luxury rooms, world-class service, convenience and access to technology.”
Wernich of Preferred Hotels & Resorts picks up on the point regarding technology.
“Luxury travellers expect to enjoy spacious guestrooms and be able to use multiple devices and enjoy uninterrupted connectivity, so it is key for luxury hotels to be able to accommodate this requirement,” he says. “We are also seeing more of our hotel members around the world offering paperless check-in, check-out and keyless entry to guest accommodations. Forward-thinking hotels are also seizing the opportunity to act as a travel guide to their guests. One example is the emergence of mobile apps that offer local travel ideas, the latest hotel programming, and other useful tips to visitors.”
In Dladla’s opinion, “it’s all about exclusivity and attention to detail.”
But, there’s more to it than that, says Schulz.
“Premium class travellers are exceptionally discerning, and have far greater expectations from a travel experience perspective,” he says. “While economy class travellers are accepting of the processes of mass commuter travel, premium class travellers have an expectation that they are not exposed to the relative inconvenience and discomfort of mass commuter processes, and further that their travel experience will be more personalised. It is a common trend across all airlines, all forms of travel, and generally all forms of service, that this increase in expectation is directly proportional to the class of traveller – the higher the class of travel, the higher the expectation of a personalised travel experience.”
“Airlines globally have recognised the importance and profitability of premium travellers,” Schulz goes on to say. “Airlines are now in a highly competitive game, and have to consistently upgrade the premium class products, as well as the benefits associated with higher tiers in travel loyalty programmes, in order to capture greater loyalty from this market.”
Lufthansa has clearly spent a lot of time researching and trying to understand this type of traveller.
“For the Lufthansa Group, the premium traveller represents a loyal travel segment that utilises their preferred airlines for business and personal use,” says Schulz. “This market generally consists of more frequent long and medium-haul (intercontinental) travellers. While the segment represents a far smaller group of travellers, the premium class travel market embodies a significant revenue stream for the premium airlines in the Lufthansa Group, as well as the associated ancillary services utilised by premium travellers.”
Edmond of aha Hotels & Lodges takes this further by touching on one of the many buzz words in modern day travel parlance – that of the ‘experience’ – something more authentic than your standard business or leisure trip.
“The segment represents a growing market of discerning traveller that are more concerned with the type of experience that they are receiving than the costs,” says Edmond. “These can be very loyal clients if you are able to continuously supply the level of guest experienced required. If this market is given what they want and have been promised, they are in fact an easy customer to work with.”
“Most of all, service, both personalised and comprehensive, is crucial to attaining loyalty and repeat business from luxury travellers,” says Wernich. “Through Integrated Quality Assurance – a tool that combines the traditional site inspection with a customised social media element to provide real-time quality assessment scores – Preferred Hotels & Resorts can measure what’s happening at each of our member properties and provide hoteliers with instant feedback or solutions.”
And what if we broke this dissection of premium travellers down into actual market demographics?
Are they predominantly ‘baby boomers’, ‘Generation X’, or ‘millennials’?
According to Skift’s Laura Powell, this is a question often posed by luxury travel marketers. But, apparently, it’s not simply an either/or question, according to aging expert Ken Dychtwald and his millennial son Zak.
During a Virtuoso conference earlier in the year, the Dychtwalds presented ‘The New Language of Leisure: A Boomer Millennial Smackdown’. For more than 35 years, Ken Dychtwald has focused on lifestyle issues among the baby boom generation. In 1986, he founded Age Wave, a firm that guides companies in product and service development for ‘boomers and mature adults’. Meanwhile, 27-year-old Zak earlier in the year returned to the United States after a four-year stint in China.
Powell spoke with both Dychtwalds to get their views on the generation gap in luxury travel. While the conversation, based on their presentation, focused on ‘boomer versus millennial’, it is, as the elder Dychtwald noted, “a profound mistake” to forget about Generation X.
Powell’s piece goes on to say that Ken Dychtwald was “fascinated by how many in the luxury travel area are gearing an overwhelming amount of attention on millennials.” He believes this strategy is “misguided” and urges luxury marketers to re-set their focus back to the 50-plus set. He cites statistics to back up his argument. “People who are 50-plus have 70% of the disposable income and own 76% of the total net worth.” The combination of this concentration of wealth, plus a surfeit of time affluence makes boomers “the ideal candidates for luxury travel.”
That’s not to say that there aren’t affluent millennials who like to travel.
According to Powell, wealth does exist among the younger set. And even when it doesn’t, according to Zak Dychtwald, the desire to travel is so keen that millennials are willing to forego other creature comforts in order to travel.
“Our mindset,” says Zak Dychtwald, “is that we prioritize experiential affluence. Our generation is no longer craving houses in the suburbs with white picket fences. Instead, we want white sand beaches.”
That said, there are plenty of baby boomers seeking peak experiences, too, says Powell.
The bottom line – according to both Dychtwalds –is that luxury marketers need to avoid stereotypes and to rethink ways to market travel in order to appeal to dreams that resonate across generations.
Premium travel under pressure? I think not.
LUXURY TRAVEL TRENDS
According to National Geographic’s Annie Fitzsimmons, here are seven luxury travel trends, which she penned in January. How on point was she? Your call.
Backlash Against Luxury
‘Luxury’ is one of travel’s most overused declarations. But 2017 is not about solid marble suites or gold-leaf interiors. Many have talked about returning luxury to its roots – something precious, rare, and most important, invested in emotional value.
Experience Over Ownership
Luxurians no longer want souvenirs. The elite traveller now thirsts for access over acquisition, and experiences over owning stuff. Owning specific, expensive products like the Hermès Kelly bag doesn’t mean as much anymore. Travel experiences – and posting about them – matter more.
The Next Travel Buzz Word: Simplicity
Words like ‘curated’, ‘artisanal’, and ‘authentic’ fill press releases, but true luxury is slowing down – that moment of decompression when you see a phenomenal view – and feeling completely unburdened.
There’s An App for That
I consider most apps to be like vitamins – they’re nice to have, but not life-changing. The technology is easier, but it doesn’t replace personal service. Many travel and hotel apps still need work – and I expect by year’s end we’ll have many new ones to love.
Small Has Never Been Bigger
Small Luxury Hotels of the World coined this phrase, perhaps fighting back at large chain hotels and resorts. Guests staying in small hotels tend to want ultra-immersive experiences.
Family-owned properties, capitalizing on the travellers’ desire to make deep, local connections, will become an even bigger draw.
Destinations to Watch
Yes, Cuba still sizzles, and Rwanda might just be Africa’s next hot destination, but look out for these destinations, too. InterContinental Hotels announced 2017 openings in Sofia, Bulgaria; Ljubljana, Slovenia; and Tbilisi, Georgia. Eastern Europe, with under-rated cities and good value for the money, will continue to grow in popularity.