Understanding Megatrends: Their Influence on Luxury Travel Business and Consumer Behaviour

UNDERSTANDING MEGATRENDS: THEIR INFLUENCE ON LUXURY TRAVEL BUSINESS AND CONSUMER BEHAVIOUR

TTGLUXURY SEMINAR, OCTOBER 2017

FFLUR ROBERTS – HEAD OF LUXURY GOODS RESEARCH

2

INDUSTRY OVERVIEW

OUR EIGHT FOCUS MEGATRENDS

EXPERIENCE MORE IN TRAVEL

CONCLUSION

3

Personal luxury goods sales in excess of US$388 billionINDUSTRY OVERVIEW

Global CAGR

2016\-21

5 6 6 7 8 9 9 10 10 11 11

Share digital %

3%

10%

Store-based

Digital

-1

0

1

2

3

4

5

6

7

8

-

50

100

150

200

250

300

350

400

450

500

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Gro

wth

%

US

$ b

illio

n

Global Luxury Good Sales and Real Growth 2011-2021 US$ Billion

Real value sales US$ (fixed exchange rate)

Source: Euromonitor International

4

Personal luxury: Swings and roundabouts for regional performancesINDUSTRY OVERVIEW


1%

- 0.1%

2%

5%

3%4%

5%

Asia Pacific

• Appears strong with 5% growth in 2016

• Political instability in Hong Kong and a

further cull on its tourist spend prevails

Europe

• Appears significantly weaker. Russia continues to

stall growth in the East with the Eurozone stalling

growth in the west.

• Concerns over terrorist attacks and Brexit cloud the

horizon

Americas

• Outlook mixed for

North America

• Tourist spend &

consumer

confidence down

on back of political

instability

• Notable rise in

Latin America

expected but

uncertainly now

prevails following

the Trump victory % value growth US$ fixed 2016

5

Travel and tourism continues to defy the oddsINDUSTRY OVERVIEW

Word Travel in 2022

Key Figures

US$1,030

US$1.3 trillion

Online Sales

Source: Euromonitor International from Travel and Tourism

1016

1018

1020

1022

1024

1026

1028

1030

1032

0

200

400

600

800

1000

1200

1400

1600

1800

2017 2018 2019 2020 2021 2022

US

$ p

er

trip

Mill

ion

trip

s/U

S$

bill

ion

World Inbound Arrivals, Spend and Receipts 2012-2022

Receipts US$ Billion Arrivals Million Spend US$

Av. Spend per Trip

US$556 billion

Mobile Sales US$ Bn.

6

Luxury travel benefits as consumers trade upINDUSTRY OVERVIEW

Source: Euromonitor International from Travel and Tourism

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

Low CostCarriers

ScheduledAirlines

Bus LuxuryHotels

Mid-MarketHotels

BudgetHotels

Short-TermRentals

Cruise Campsites

US

D m

illio

n

Forecast vs Historic Incremental Sales by Luxury and Budget Categories USD million

Historic Increment 2012-2017 Forecast Increment 2017-2022

Luxury hotels to see an additional US$27 billion

sales by 2022

Scheduled airlines to see an additional US$71 billion

sales by 2022

7

Luxury hotspots compete for share of wallet from wealthy tourists

Hong Kong 44%

Singapore 34%

UAE 32%

Thailand 24%

Philippines 21%

Indonesia 20%

US 19%

Malaysia 18%

Italy 17%

France 16%

Turkey 6%

Poland 5%

Brazil 4%

Germany 4%

Japan 4%

Ukraine 4%

India 3%

China 3%

South Korea 2%

Mexico 1%

To

p 1

0

Bo

ttom

10

International Luxury Spend by Country as a % of all

Luxury Spending 2017

China US Germany

United Kingdom France Hong Kong

Canada Netherlands Italy

South Korea Rest of World

By 2022 China

will be the

world’s largest

source of

outbound

tourism

INDUSTRY OVERVIEW

International Arrivals by Leading Country of

Origin 2022


8

INDUSTRY OVERVIEW



ETHICAL LIVING IN TRAVEL

CONCLUSION

9

Experience MoreShifting Market

FrontiersHealthy Living Shopping Reinvented

Middle Class Retreat Ethical Living Premiumisation Connected Consumers

Redefined consumer values and priorities: key global mega trends



10

Shifting market frontiers



Shifting market frontiers will shape future strategies for global companies. Businesses will need to adapt to the changes that bring new markets from frontier into the spotlight.

Companies are facing increasing global competition as well as rising complexity and cost of researching and entering these new frontier markets.

By 2030, developing countries will account for over 60% of global population and GDP. Companies will increasingly see their key revenue streams coming from the underdeveloped and developing regions

We are spending more time on the internet and social media. This allows companies to access young, tech-savvy consumers across the globe in one place and the creative freedom of digital media is unlimited

As the global population grows and Earth’s natural resources diminish, resources outside our planet may need to be found to meet our the ever-growing demand.

11

Shifting market frontiers in action: first tourists to the Moon in 2018

Source: Euromonitor International from Company Reports, Travel and Tourism, Economies and Consumers

There will be 12,000 individuals with over US$10 million annual disposable income on Earth in

2021. SpaceX announced that it will take two private citizens on a trip around the Moon in 2018

As the number of high net worth individuals

increases and experiences are prioritised over

possessions, demand for unique trips such as to

space is set to emerge.

SpaceX announced that it will take two private

citizens on a trip around the Moon in 2018. The

company regularly delivers cargo to the

International Space Station on a NASA contract.

So far, SpaceX is the only private company to

return spacecraft from the low-Earth orbit.


12

Healthy livingOUR EIGHT FOCUS MEGATRENDS


Perceptions of healthy living are shifting beyond just physical health to represent a much more holistic view where broader lifestyle issues are seen as a whole entity

Technology is at the forefront of this behavioural shift, with devices, digital platforms and science supporting the newly-forming self-care model taken by today consumers

Consumers are opting for more conscious nutritional alternatives and showing willingness to adopt and pay for products that support those wellbeing initiatives

Building credibility around fully substantiated ‘healthy’ credentials will remain a challenge. Projecting simplicity and transparency will add further relevance and trust

The community element to wellness is becoming more pronounced, with healthy lifestyles viewed as successful and highly aspirational

13

Healthy living in action: EVEN Hotels - IHG’s answer to travel stress

Source: Euromonitor International from Company Reports, Travel and Tourism

InterContinental Hotels Group is the third largest hotel brand worldwide with value sales of

US$20.0 billion in 2015

InterContinental hotels group opened its first

upscale select-service hotel brand in 2014 and

now has 6 hotels open in the USA. Increasingly,

travellers are looking to balance their health with

the stresses of travel.

The brand focuses on conscientious travellers and

offers exercise equipment in the room and a large

fitness centre and healthy eating options. Future

design concepts of living and hospitality spaces will

increasingly weave in wellbeing as a key attribute.


14

Healthy living in action: Boutique luxury hotel gyms - the new social clubsOUR EIGHT FOCUS MEGATRENDS

Source: Euromonitor International from Company Reports

ESPA Life at The Corinthia, London Workshop Gymnasium, Bvlgari Hotel, London

ESPA Life offers two types of membership, one 'Body'

and the other 'Spirit‘ and adopted the “mindful”

approach in their services

The team is made up of team of naturopaths,

acupuncturists, Chinese Medicine practitioners,

personal trainers and spa professionals

The first Bulgari Workshop Gymnasium opened in

London in 2014. It is now moving to Milan, Bali, Dubai

and Beijing.

Their approach is very personalised, using traditional

exercises such as gymnastic, yoga, boxing, stretching

and swimming

15

Shopping reinvented



Todays shopper expects value at all stages of the shopper-journey The before, during and after experience is now the a new normal in retailing

Todays shopper may even value the shopper-experience more than the price of the goods. There are an increasing number of ways to prove value beyond price

Store based retailers have a major role to play in shopping reinvented. Customer engagement has become paramount and brands need to fit into their current lifestyle

Thanks to digital technology the rate of change in customer-preference has accelerated twofold. This has left the retailing environment in a constant flux

Executing reinvention is extremely challenging. For successful execution brands and retailers should embrace these changes gradually

16

Shopping reinvented in action: Burberrys “phygital” stores

Source: Euromonitor International from Company Reports, Luxury Goods, Digital Consumer

Approximately three-quarters of Internet-connected consumers aged under 30 years own a

smartphone, and 24% of them spend more than three hours a day using their phones

The evolution of e-commerce has created a

demanding consumer that now looks for extra

experiences and services that reinforce the

brand value. ‘Phygital’ is a term referring to the

incorporation of these services into the bricks

and mortar experience

Burberry is one of the leading luxury brands in

terms of digital innovation. They have adopted

digital strategies to expand their brand reach and

have a huge portfolio of success stories. In-store

consumers have access to choices like virtual

mirrors that use 3D technology and can also “shop

the runway”


17

Middle class retreat



Middle class households in developed economies have not experienced any improvement in their standard of living and struggle to maintain their economic status

The need to optimise on their limited recourses means they are focusing more on obtaining the most value for money

Value is not only about price with areas such as quality, experience, authenticity and convenience playing an increasingly important role

The accumulation of “stuff” has become less important with simplicity, frugality and the rise of second-hand and refurbished goods making headway

Whilst this trend has the potential to be disruptive to a number of industries it also opens up a number of new opportunities

18

Middle class retreat in action: Norwegian Air offering low-cost long-haul flights


The global sales value of low-cost airlines is set to rise by an average 5.4% per year over 2017-

2020, compared to 3.9% for the whole airlines sector

Budget carrier Norwegian Air Shuttle offers long-

haul flights to such destinations as the USA and

Thailand, with tickets starting from £149 one

way. It also plans to enter a partnership with

Ryanair in the form of joint feeder flights to boost

its passenger flows to the USA and Southeast

Asia

Offering lost-cost long-haul flights is all about

tapping into the trend of ‘Trading Up, Trading

Down’. It allows middle-class consumers to cut

flight costs but upgrade their holiday experience

(e.g. five-star luxury hotel stay at more exotic

destinations), and thereby obtain the most out of

their limited budget

.


19

Middle class retreat in action: W Hotel and The Walk Out Wardrobe Service


The UK is the world’s fifth largest consumer market for clothing and footwear at US$70 billion in

2016 ahead of markets like France and Italy

W Hotel has teamed up with

Girlmeetsdress.com to offer a designer

wardrobe room services. Similarly The Berkeley

Hotel has launched a new Trunk service,

offering a treasure of vintage accessories that

hotel guests have complimentary

Fashionistas can earn back some of the money

spent on their luxury hotel or expensive clothing,

bags and accessories by renting them out, while

aspiring consumers can access a fancy and bigger

wardrobe at more affordable prices


20

Ethical living



Ethical living is gaining strength with sustainability no longer being driven solely by NGOs but also closely linked to wider commercial activity

Long-term charity affiliations have become an important caveat of many companies’ corporate social responsibility and marketing strategies, proving that an ethical agenda and profit do not have to be mutually exclusive.

The huge plethora of certification and award schemes means that obtaining certification does not necessarily indicate that a company makes true efforts towards sustainability

Efforts from major companies are often high-profile but small-scale. Those that priorities ethical business practices early will appear more genuine - crucial gaining favor with millennial consumers

Consumers generally only see the end-product of the supply chain - but it’s only a matter of time before the whole production process moves into focus forcing companies to be completely transparent

21

The ?! Careyes Foundation, Mexico: sustainable luxury travel


International arrivals into Mexico are expected to reach 43 million in the next 5 years

Founded in 1968, Costa Careyes is a private

community and luxury resort located on Mexico’s

Jalisco Coast. The founder believes in creating an

experience of the areas beauty without intruding

upon it. He also believes that the community is as

important as the resort itself and works hard to

protect it

In in 2013 the Careyes Foundation was founded.

As well as the Sea Turtle Protection and

Conservation Centre that started in1983, they

also have programs in the fields of education,

sports and recreation and the arts, reaching a

population of around 7,000 people


22

Ethical living in action: Soneva Kiri Resort follows the SLOW LIFE philosophy


The Tourism Authority of Thailand hopes to increase the number of “high-spending” tourists by

discouraging zero-dollar tourism and launching marketing campaigns with EVA air in the US and

Taiwan . It also plans to reduce the Visa-on-arrival fee

Far off the beaten track Soneva Kiri Resort houses

24 villas and 11 private residences that sit either

on the beach or up on the slopes of the rainforest

overlooking the sea, Every hut is built with

sustainable materials, including local timbers

The resort follows SLOW LIFE philosophy:

Sustainable, Local, Organic, Wellness, Learning,

Inspiring, Fun, Experiences.

In 2014 they were awarded The Butterfly Mark for

their environmental conservation practices especially

in renewable energy and efficiency


23

Ethical living in action: Song Saa - business as a positive-and-profitable agent


With its relatively low level of arrivals the Cambodian government is able preserve its nature and

cultural heritage. Inbound arrivals are expected to increase to reach eight million trips in 2022

The award-winning Song Saa Private Island is a

conservation-based luxury resort in Cambodia’s

Koh Rong Archipelago. Song Saa Collective has

created a 21st-century business model that

employs business as a positive-and-profitable

agent

They work closely with the government, local

villages, investors and donors to improve local

livelihoods and preserve the marine life and

rainforests. Song Saa was awarded the Butterfly

Mark from Positive Luxury in 2013


24

Premiumistaion



Consumers are spending more on the things that matter to them, while cutting back —often significantly — on those that do not

Premiumisation is less about what we own and more about who we are. This is driving demand for products and services which helps us to demonstrate and achieve this

Technology is a key accelerator. Whilst it gives consumers more options than ever, it also creates more pressure to optimise those choicesr

Consumers are paying more for time, security, and health. Demonstrating success will still matter but with consumers feeling increasingly stressed, products that offer clear benefits for their health are winning

Explosive growth of new players means today’s premium is tomorrow’s commodity. The mid-tier is losing share to both low and as high-end products, this is also evident in the luxury sector

25

Premiumistaion in action: Singapore Airlines - premium meets low cost


Singapore Airlines has a fleet of 102 aircrafts and a firm order of an additional 101 wide-body fuel

efficient airplanes as of 31 March 2016

Singapore Airlines is one of the most prestigious

brands for luxury travellers and has a stellar

reputation for premium service. In 2016, it

launched the premium economy class.

The introduction of this new class matches the

company’s premium positioning, where it aims to

deliver higher value to all travellers. The new

premium economy class offers a “book the cook”

service, as well as a personalised entertainment

system, and a selection of wines and champagnes


26

Premiumistaion in action: LVMH cafés as the new entry-level luxury

Source: Euromonitor International from Company Reports, Hot Drinks, Luxury Goods

Global spending on specialist coffee shops is projected to reach US$71.0 billion by 2021,

compared with US$106 billion spent on packaged coffee bough through retail, a far larger

segment in terms of volumes of coffee sold

In 2013, luxury-goods conglomerate LVMH

purchased Milan-based café Cova, marking the

group’s continued expansion into brands

combining both food and experience. Since

then, the company has steadily expanded the

brand internationally

The entry of luxury players, such as LVMH, Prada

Group, Burberry and Gucci, suggests further

Premiumisation of coffee and service is possible,

while also highlighting luxury goods players’

willingness to engage at lower price points


27

Connected consumer



With 45% of the global population using the internet connectivity is now the new normal. Euromonitor projects that 76% will have access by 2030 making it the most transformative innovations of the modern era

Digital access has altered all aspects of life with consumers leveraging connectivity for purposes such as entertainment, education, knowledge, social sharing and shopping

Digital connectivity has been the great societal equaliser, enabling companies to reach new geographies and consumers. But the meaning of a Connected Consumer varies greatly with income and infrastructure

Consumer data is now a commodity. Companies can forge one-on-one relationships with end-consumers, by offering tailored experiences and recommendations.

Digital is contributing to the death of brand loyalty and staying competitive has never been harder

28

Connected consumer in action: Renaissance casts light on digital living


Marriott is the largest hotel company worldwide with room sales of US$30.0 billion in 2015. With

the acquisition of Starwood, market share jumped from 6.0% to 9.1% over 2015-2016.

Marriott’s Renaissance Mid Town New York is

pioneering the “living hotel” concept. The

premise lies in a “living building” that provides a

multi-sensory digital experience. Using motion

detectors and 3D cameras, the hotel offers art

that changes in real time and a virtual concierge

Marriott uses technological innovations to enhance

the experience in the hotel, providing more

seamless interactions between guest, the hotel and

its locale

With 575,000 global hotel outlets forecast by 2020,

there is a huge amount of work to be done to meet

consumers’ expectations


29

Experience more



There is a fundamental shift in consumer values towards experiences over things that bring happiness and well-being

Brands are going authentic, local, immersive, stimulating and social, they are embracing their imperfections to help counteract over-choice and commoditisation

Harnessing the power of the senses can transform even the most mundane product into a truly amazing moment through creating affordable, natural and inclusive brand experiences

Experience is a lifestyle choice that defines how consumers play and work, as exemplified by the gig economy

With a global population of 8.5 billion by 2030, all with greater expectations for unique experiences, brand survival depends on putting the consumer first

30

Experience more in action: Onefinestay - unique, local, authentic experiencesOUR EIGHT FOCUS MEGATRENDS


Onefinestay business model is inherently

intertwined with the search for the real and

authentic luxury. It is the archetypal high-end

“sharing economy” brand, putting the social and

“human” factor up front and centre of its service

offer

As well as their in-house magazine “Guestbook”,

which captures the novel concept and lifestyle

choice represented by the brand, they also have

“Sherlock”, their patented keyless entry technology

system and each guest in given a branded iPhone

Founded in 2009, Onefinestay has seen astronomical growth to register a company valuation of

US$170 million in 2016. The company was acquired by AccorHotes in 2016

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INDUSTRY OVERVIEW



CONCLUSION

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Luxury travel rides the “Experience More” mega trendEXPERIENCE MORE

Note: Experiences includes consumer expenditure on leisure, recreation, hotels and foodservice

0

2,000

4,000

6,000

8,000

10,000

12,000

2016 Forecast Spend2030

Optimum Spend2030

US

$ b

illio

n,

fixe

d e

xch

an

ge

rate

s

World Consumer Expenditure on Experiences 2016/2030

USD2.3 trillion

increment

USD2 trillion

additional

20172007

+104%

+ 20%

+ 15%

US$144 billion US$173 billion

US$52billion US$60 billion

+ US$240 billion + US$489 billion

World Consumer Expenditure, Luxury Cars,

Luxury Hotels, Spas 2007/2017


33

Exclusive yet inclusive: more room for affordable luxury travel

Source: Euromonitor International’s Economies and Consumers

Households with Disposable Income

over US$300,000 as % of Total

2017 2030

Households with Disposable Income

over US$100,000 as % of Total

2017 2030

EXPERIENCE MORE

Top Five Airlines Globally for Reward

Availability 2017

Rank% Total

availabilityAirline

Loyalty

programme

1 100.0% SouthwestRapid

Rewards

2 94.3% Jetblue TrueBlue

3 90.7% airberlin topbonus

4 90.7%Lufthansa/

Swiss/ AustrianMiles & More

5 90.0% Air Canada Aeroplan

34

ICEHOTEL: experiencing the extreme


Adventure travellers have a more positive impact on local destinations than their mass

counterparts, spending more per trip (US$3,000) and longer in destination, eight days.

The ICEHOTEL in Sweden is one of extreme

experiences. Guests are supplied with sleeping

bags, and sleep on beds made of ice covered

with reindeer pelts in a room kept at -5°C.

Activities include husky sledging, cross-country

skiing, and Arctic survival courses.

Far beyond a place to spend the night, the hotel is

a destination in itself. With a heavy focus on art,

each room provides a different design and feel.

The hotel forces guests to test their endurance and

resilience, allowing for an enhanced experience of

the senses.

EXPERIENCE MORE

35

Roja Dove for the Connaught Hotel: the importance of sensory experiences

Source: Euromonitor International from Roja Dove

The Connaught, partnered with British Master Perfumer Roja Dove in late 2015 to create a

bespoke perfumed candle which encapsulates the creative essence of the hotel

The sense of smell allows us to detect

information from our environment and all that

inhabits it. It is the oldest of all the senses and

happens on two levels — the conscious effect,

and the subconscious effect, which can sneak

up on you when you least expect it

When we encounter a smell where a previous

positive association has been formed (i.e. a stay in

a luxury hotel) it will stimulate the most primitive

parts of our subconscious, triggering an association

which we generally refer to as a memory – thus

bringing back some of those “feel-good” factors

EXPERIENCE MORE

36 Source: Euromonitor International from Psycle London

37

INDUSTRY OVERVIEW



ETHICAL LIVING IN TRAVEL

CONCLUSION

38

Experience More

Shifting Market Frontiers

Healthy LivingShopping

ReinventedMiddle Class

Retreat

Ethical Living PremiumisationConnected Consumers

Smart Cities and Smart

Homes

Circular Economy

Changing Family

DynamicsMulticultural-ism

Striving for Authenticity

Generation Gaps

New Ways of Working

Searching for Simplicity

Buying TimeReinvention of Gender Roles

PersonalisationSharing

Economy

Our 20 megatrends shaping consumer markets


CONCLUSION

39

Fflur Roberts

Head of Luxury Goods Research

[email protected]

EMI twitter: @Euromonitor

Blog: http://blog.euromonitor.com/

And my twitter: @Fflur

THANK YOU FOR LISTENING

mailto:[email protected]

https://twitter.com/Euromonitor

http://blog.euromonitor.com/

https://twitter.com/Fflur

Understanding Megatrends: Their Influence on Luxury Travel Business and Consumer Behaviour

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Transcript of Understanding Megatrends: Their Influence on Luxury Travel Business and Consumer Behaviour