*Press embargo until July 15, 2020
In a recent study conducted by Northrop & Johnson, ultra high net worth individuals weighed in on their travel and lifestyle plans amid the global COVID-19 pandemic in 2020.
The results of this study can be found below.
As the world reopens from stay-at-home orders around the globe, patronage by UHNWIs who represent a sliver of the population but spend over $230 billion* annually on luxury products and experiences will be an important factor for many businesses.
We asked, “As public spaces reopen, please tell us how your frequency of the following behaviors is likely to change compared to before the COVID-19 outbreak?”
Many UHNWIs either plan to decrease or avoid activities that would increase the risk of exposure, at least until COVID-19 has been mitigated. In every category except Online Shopping, Home Entertaining, Private Aviation, and Yachting, over 50% of our customers said they plan to decrease or completely stop until COVID-19 is mitigated. That includes flying on Commercial Airlines, Dining Out at Restaurants, Shopping at Malls, Department Stores and Small Boutiques, Attending Live Events, and Staying at Hotels/Resorts.
“The feedback is many of our colleagues in the world of luxury products and services need to dramatically rethink how they will engage affluent customers,” said Daniel Ziriakus, President & COO of Northrop & Johnson. “What is clear from what our customers are telling us is that right now they haven’t seen enough that will make the majority of them ready to re-engage.”
ILTM Barton* reports HNWIs contribute $507 billion of the $1.41 trillion spent on global airfares and lodging last year. For airlines, front-of-the-plane passengers may be lower in number, but produce most of the revenues. At the same time, hotels often turn profits based on spending by guests who stay in suites.
Client question: Staying at hotels/resorts
According to feedback from Northrop & Johnson clients, hotels will have an uphill battle winning back their business in the near term, although 38% said there would be no change from pre-COVID-19 levels and 8% will increase stays. Still, 53% will make fewer visits to hotels and resorts with 23% waiting until COVID-19 is mitigated before they return.
Ziriakus noted that while yachting is seeing an uptick in interest, and so are private jets, hotels and resorts will need to re-think their approaches. He suggests luxury hotels should initially reopen with suites and have an opportunity to raise prices if they can provide extraordinary experiences.
“Our average yacht charter is $152,000 for one week, and that doesn’t include food, fuel, or gratuities to the crew. When you add it all up, our customers are spending around $30,000 per day. However, while staying in hotels is run-of-the-mill, yachting continues to be at the top of the travel experiences pyramid. For hotel owners, it shows there is a market of customers willing to pay more if you can give them something they find of value,” said Ziriakus.
James Henderson, CEO of Exclusive Resorts, says they’re seeing high demand for multi-million-dollar, single-family vacation residences as they offer safe sanctuaries, peace of mind, and the ability to travel within your circle of trust. “With heightened levels of security, strict cleanliness protocols, including our new three-part cleanliness strategy, and dedicated on-site staff available just for Exclusive Resorts Members, our Members have peace of mind while traveling, especially if unforeseen challenges arise,” he said.
Hearing that many of their high-end customers were concerned about sending their kids to sleepaway camps, Northrop & Johnson travel advisory partner Embark Beyond created Camp Embark.
The new concept brings together experienced camp directors and a full slate of authentic camp experiences hosted at private and semi-private destinations around the USA, Caribbean and Mexico. Venues include gorgeous luxury ranches out west, to private lodges in the Adirondacks, sprawling California resorts, waterfront homes in the South, and even a selection of private resorts in the Caribbean and Mexico.
Groups are limited to up to three families who know each other and who want to ensure a fun summer without sacrificing safety.
Client question: Do you currently fly privately?
Client question: Flying commercial airlines
Client question: Flying by private jet
Client question: What are your current private aviation solutions?
Private Aviation and flying on Commercial Airlines is a tale of two trend lines. Up for the former and down for the latter. A recent analysis by Northrop & Johnson partner Private Jet Card Comparisons* found that while airline passenger numbers remained at 10% of 2019 levels, private aviation had, in a span of weeks, recovered to nearly 60% of pre-COVID-19 activity.
In a recent article by The New York Times** titled “Wealthy Fliers Worried About Coronavirus Turn To Private Jet Service,” Patrick Gallagher, president of NetJets, reported that May was the company’s best month since 2007 in terms of gaining new customers. Sentient Jet reported more than half of jet card hours it sold since the beginning of April were to new fliers.
Respondents to Northrop & Johnson’s survey echoed that trend. Nearly two-thirds (65%) will completely stop or decrease flying on airlines compared to 25% who will maintain frequency and 10% who said airline flights will likely increase.
At the same time, 80% said private flights will increase or remain the same, with half of those respondents saying private aviation usage will increase. It’s a sea-change from before COVID-19 when only 44% of Northrop & Johnson’s customers said they flew privately.
In terms of opportunity, McKinsey estimates before the pandemic, only 10% of people who could afford to fly privately were doing so, meaning prior to the pandemic, the Northrop & Johnson customer base already indexed 440% higher than all affluents in terms of private aviation usage.
In terms of solutions, like cars in the driveway, most private aviation users had more than one, and in fact, the average was 1.3 solutions per Northrop & Johnson customer. On top was On-Demand Charter (43%), followed by Friend’s Private Jets (32%), Full Ownership (25%), Fractional Ownership and Leases (15%), and Jet Cards and Memberships (13%).
Ziriakus points to how private aviation has successfully addressed the desire of travelers to reduce exposure to the virus without a cure. He noted how European very light jet operator GlobeAir took the initiative and conducted primary research that revealed that it’s 30 times*** less likely to be exposed to the coronavirus when flying privately compared to airlines, which require transits through busy terminals and onto now often crowded airplanes.
“I have been impressed to see how widely so many players in private aviation have implemented and communicated to customers the actions they are taking to increase hygiene and decrease risk. While superyachts have a reputation for extreme cleanliness, the private aviation industry is really doing smart things to capture increased interest and turn it into new customers.”
He again points to NetJets. “In addition to providing detailed updates about hygiene and cleaning, they also eliminated the 60-minute minimums for specific aircraft types. There are a lot of journeys which might take four or five hours by car but are 20 minutes if you fly, for example from Westchester County to the Hamptons. By changing their pricing policy, they cut the cost of these flights in half. It’s something their customers will remember, making it easier to stay safe via private aviation.”
This survey also reaffirmed both the tailwinds for private aviation and the power of linking industry-leading brands together. Respondents were asked if they would like to speak to a representative of NetJets, with 37% responding affirmatively.
Client question: Dining out
The good news for fine dining and other high-end restaurants is 32% of respondents say they will continue dining out with no change and 12% said they plan to increase eating out. The bad news is 35% say their patronage at restaurants will decrease with more than 1 in 5 (21%) saying they plan the avoid dining out at restaurants until the COVID-19 has been mitigated.
“This suggests restaurants need to do something more than they have so far to provide assurances,” said Ziriakus. “In looking at the websites of restaurants from some of the world’s best-known chefs, there is little messaging about specific hygiene-related and social distancing measures being taken.”
By contrast, he points to NetJets, a Northrop & Johnson partner. Since the start of the pandemic, NetJets has sent at least three updates to customers and partners outlining specific measures such as special treatments to cabins, increased cleaning protocols, and specifics on how they are protecting both staff and customers, including deadheading pilots aboard private jets instead of via the airlines, which had been the normal procedure.
Ziriakus also cites The Deck at Island Gardens, located next to Miami’s megayacht marina in Biscayne Bay. In addition to paper menus, it is providing a QR code guests can scan to view that evening’s menu on their smartphones. Its communications highlight it has respaced tables at least six feet apart.
“The clear message is unless I am comfortable you are safeguarding my health, I probably won’t come,” said Ziriakus.
Client question: Shopping
With high interest in fashion, watches, jewelry and other hard luxury, the UHNW segment is a critical target for brands. However, how they buy is set to change, according to the customers of Northrop & Johnson.
Client question: Online shopping
In 2019, retail e-commerce sales worldwide reached $3.53 trillion. Before COVID-19, Statista* estimated that this number would grow to $6.5 trillion by 2022, calling online shopping “one of the most popular online activities worldwide.”
UHNWIs will help power that increase. A full 55% of survey respondents said they plan to increase online shopping compared to just 10% who said they will reduce online purchases. More than a third (36%) said there will be no change.
While the yachting industry requires a high level of personal consultation and experiences are customized to the individual, Northrop & Johnson has developed online tools to help clients explore the possibilities if they want that self-guided exploration.
Client question: Shopping at department stores/shopping malls
By contrast, 58% said they will decrease visits to Department Stores and Shopping Malls, including 27% who will stop completely until COVID-19 is mitigated. By contrast, only 8% will increase visits and 34% said there will be no change.
Lack of UHNW shoppers could dramatically impact these segments. Boenning & Scattergood reports the 20 most valuable malls in America that are owned by real estate investment trusts generated $21 billion in retail sales annually. Examples include Ala Moana Shopping Center in Honolulu, Hawaii with over $6 billion in sales, Oakbrook Center in Oakbrook, Illinois at $3.5 billion, Fashion Show in Las Vegas, Nevada with $3 billion, and Tysons Corner Center in Virginia at $2.9 billion.*
Ziriakus recommends mall operators should be seeking to ramp up shop-at-home options that are provided by COVID-19-tested concierges who can bring items from the stores of favorite shops. He also says they should use empty spaces to create private VIP salons where top customers can come in privately and arrange appointments with their favorite salespeople.
“Shopping centers provide the efficiency of being able to visit multiple stores in a convenient way, so the question now becomes how do you adapt that in a way that your highest spending customers will keep buying,” Ziriakus asks.
He says the idea of the pop-up VIP salons comes from Northrop & Johnson’s international expertise. Ultra wealthy Middle Eastern clients often travel in family groups when a member is coming to the U.S. for medical treatments. As part of the entertainment during what can be month-long stays, the families will reserve suites in the hotels they are staying in. Their favorite vendors make appointments to visit on a one-on-one basis.
“In this case, it’s both privacy and security, but now there is an application for health security, and it’s an opportunity for those companies who are willing to innovate,” said Ziriakus.
Client question: Shopping at small boutiques
Small boutiques will also need to adapt if they want to continue getting sales from UHNWIs, according to respondents. Over half (54%) will decrease shopping at small boutiques with 22% not returning until we are in a post-COVID-19 world.
Ziriakus is very optimistic these companies will quickly re-orient their businesses. “Many watch and jewelry retailers are owner-operated, with the ownership and salespeople having strong and trusting relationships with customers.”
He expects more house calls. As an example of forward-thinking retailers, Ziriakus points to Provident Jewelers, with multiple locations across South Florida.
“Even before this, instead of just a store floor with cases, they had a separate lounge area with a private bar, large screen televisions and even a filtered cigar room, allowing clients to keep their personal supplies,” Ziriakus said. “This type of creativity will serve them well, enabling social distancing in a pleasant and high-end environment.”
Client question: Sporting events/concerts
In stadiums with up to 100,000 seats, premium seating, including luxury boxes, can account for up to 50% of revenue in a building, according to Sports Venue Business*. ILTM Barton says of the $292 million that Wimbledon brings in, $62 million come from international visitors.
However, 7 in 10 of our survey’s UHNW respondents said they will decrease attendance at live sporting events and concerts, with 37% stopping entirely until mitigation of the pandemic virus. Only 25% say there will be no change, and 5% said they will increase.
In this case, Ziriakus predicts there could be unique opportunities that would attract even higher premiums and satisfy health concerns. “I can see teams offering once-in-a-lifetime opportunities for a family to reserve the entire area behind home plate or other large seating areas entirely for their party, including private arrival at specific times.”
“It seems that some leagues may play in specific locations, so most of their fanbases couldn’t attend, even if they wanted. Community-oriented owners and leagues can perhaps donate money paid for these experiences to charitable causes.”
Client question: Trade shows
The $1.03 trillion global tradeshow industry* is also likely to take a big hit, according to the responses from Northrop & Johnson’s affluent customers who represent business owners and top executives of both private and publicly traded companies.
Over half of respondents (58%) say they will cut back on attendance at business conventions and trade shows, with 24% saying they will avoid them until the COVID-19 threat has been mitigated.
“Our customers are frequent keynote speakers, leaders in their industries, and their companies often represent large buyers and sellers in the industries where they earn their money,” said Ziriakus. “While everyone knows that people need to interact, what’s apparent is companies in the events and conference business need to come up with new models that will attract both attendees and sponsors.”
Ziriakus highlighted Corporate Jet Investor, a trade media company servicing private aviation. With their live events canceled, in July, Corporate Jet Investor Global 2020 will be an entirely online event. They plan for 12 hours of live events and 24 hours of additional content that will be on-demand. So far, they have 80 speakers and panelists, over 500 attendees and have attracted a slew of sponsors. They have also been holding weekly town hall meetings drawing over 500 C-Level executives each time.
In the luxury travel space, several journalists and PR agencies have banded together to launch The New Travel**, a weeklong online conference expected to attract several thousand luxury travel advisors to hear expert panels covering timely topics such as, “What’s High-Touch Service in a No-Touch Era?”, “How Will Group, Business, and Event Travel Change?”, and “How Can We Get There Safely?”. Paid exhibitor presentations will be interspersed.
“This is a great idea, but the troubling point is that it should have come from exhibition companies, not their constituents,” Ziriakus said. “I am from Germany and as a European who loves watches, it’s still hard to believe that Baselworld, the world’s biggest watch and jewelry trade fair, has ceased forever.”
After several years of disputes with major exhibitors, the show was pushed over the edge when it declined to provide refunds after COVID-19 forced the cancelation of this year’s show, according to press reports.
“If you don’t adapt your business, somebody else will adapt it for you,” Ziriakus said.
Client question: In-home parties & events
Homes of UHNWIs are often used for both family and business parties, as well as to host charity fundraisers. These events support countless jobs in the local community from security to florists, bartenders, waiters, busboys, caterers, technicians, designers, and entertainers.
While 20% of respondents said there would be no change to their behavior and 22% said they would increase, making up for missed time, 58% will cut back, with 23% avoiding doing so, perhaps totally.
“Event organizers have the opportunity to win trust if they can demonstrate that they will protect the health and safety of their clients,” Ziriakus said. He points to how Northrop & Johnson quickly educated clients on the high level of cleaning aboard yachts that keep them pristine but are often unseen.
“Clients who initially considered canceling were telling us they trusted us. Many told us that by flying by private jet to their yacht, they believed they would be as safe as if they stayed at home,” he noted.