Luxury brands fail to gain traction with a huge swath of affluent consumers because they overlook a key fact: Most of the top 10% of the wealthy are self-made millionaires with little in common with the rich and famous seen on TV.
Significant percentages of affluent consumers are either ignorant of or scornful of luxury brands – including hotel brands, according to new research from Ron Kurtz. As head of the American Affluence Research Center, Kurtz studies the attitudes and behavior of the wealthy
That gap creates an opening for travel agents, said Kurtz, whose latest research analyzed 17 brands including Louis Vuitton, Prada and BMW.
To capitalize on the opportunity, agents need to educate their clients, including the rich who are living quietly next door, about the value of luxury brands and convince them to travel in the style they can afford, he said.
“The perception of the affluent created by the media is different from the reality. The affluent are not all celebrities, athletes and Wall Street investors. Those groups are not typical of the top 10% of the wealthy, which is who we study,” Kurtz said.
Travel Market Report asked Kurtz, a former cruise line executive, about what his research means for agents.
What are the highlights of this survey?
Kurtz: This research showed that surprisingly few [of the top 10%] have experience with or are familiar with many luxury brands – including Four Seasons Hotels and Ritz-Carlton Hotels, the best known of the luxury hotel brands. Only when you get to the top 1% of wealth do people really know these brands intimately.
Your research shows that many of the affluent consider luxury brands overrated. How can that be overcome?
Kurtz: The less people are familiar with these brands, the more likely they are to believe they are overrated – and meant for elite status seekers.
People who own or experience these brands are least likely to believe they are overrated because they have been able to experience the value they bring firsthand. Experience clearly makes a difference in how you view a brand or product.
What are luxury brands doing wrong?
Kurtz: They do not understand the starting point for the affluent. Over 80% of millionaires are self-made and were raised with little or no exposure to luxury.
The question is: how do you educate them? Imagery-type ads won’t work, nor will references from their peer groups.
Even among those saying they have owned or experienced a brand, few say the brand is targeting or appealing to someone ‘like me.’ A surprising number, 20% to 25% for most brands, said the brand was targeting someone ‘wealthier than me.’
Then what is the answer?
Kurtz: The affluent have to be educated to the fact that there are differences in quality that make spending on luxury worthwhile.
The two hotel brands you researched were more familiar to the affluent and less likely to be perceived as overrated. Why is that?
Kurtz: The two hotel brands did do well. Some of that is the fact that many are exposed to hotels because of business travel or attending a conference when somebody else is paying for it – or simply living in proximity to these brands.
Once these travelers experience those brands they might realize that they are not overrated and that they deliver value.
Does that extend to other luxury travel products like tours or cruises?
Kurtz: Not necessarily. Travelers are more likely to sample hotels than tours or cruises.
What does all this mean for agents who want to sell luxury travel to affluent clients?
Kurtz: Historically, agents have viewed their role as enabling clients to save money. However, those clients like value and sometimes need to be told about the value of quality. Agents can sell up if they’re knowledgeable about these products.
How can they address issues such as the perception that products are overrated or only for status seekers?
Kurtz: Clients need to be told not to feel uncomfortable with these brands because the other customers are just like them.
Agents should educate clients on what they will actually be receiving – the substance of the experience – even before they get into discussing price.
Agents can size up clients to determine whether they can afford these products. While most of these affluent are not conspicuous consumers, they do enjoy quality once they have experienced it.