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

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Head of Luxury Good Research, Fflur Roberts, presented this session at the TTG Luxury Seminar in October 2017. This session gives an outline of the luxury travel industry and the eight focus megatrends impacting the industry before delving into how the experience more megatrend will shape the future of luxury travel.

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

  1. 1. UNDERSTANDING MEGATRENDS: THEIR INFLUENCE ON LUXURY TRAVEL BUSINESS AND CONSUMER BEHAVIOUR TTGLUXURY SEMINAR, OCTOBER 2017 FFLUR ROBERTS – HEAD OF LUXURY GOODS RESEARCH
  2. 2. 2 INDUSTRY OVERVIEW OUR EIGHT FOCUS MEGATRENDS EXPERIENCE MORE IN TRAVEL CONCLUSION
  3. 3. 3 Personal luxury goods sales in excess of US$388 billion INDUSTRY OVERVIEW Global CAGR 2016-21 5 6 6 7 8 9 9 10 10 11 11 Share digital % 3% 10% Store-based Digital -1 0 1 2 3 4 5 6 7 8 - 50 100 150 200 250 300 350 400 450 500 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Growth% US$billion Global Luxury Good Sales and Real Growth 2011-2021 US$ Billion Real value sales US$ (fixed exchange rate) Source: Euromonitor International
  4. 4. 4 Personal luxury: Swings and roundabouts for regional performances INDUSTRY OVERVIEW Source: Euromonitor International 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. 5. 5 Travel and tourism continues to defy the odds INDUSTRY OVERVIEW Word Travel in 2022 Key Figures US$1,030 US$1.3 trillion Online Sales Source: Euromonitor International from Travel and Tourism 1016 1018 1020 1022 1024 1026 1028 1030 1032 0 200 400 600 800 1000 1200 1400 1600 1800 2017 2018 2019 2020 2021 2022 US$pertrip Milliontrips/US$billion World Inbound Arrivals, Spend and Receipts 2012-2022 Receipts US$ Billion Arrivals Million Spend US$ Av. Spend per Trip US$556 billion Mobile Sales US$ Bn.
  6. 6. 6 Luxury travel benefits as consumers trade up INDUSTRY 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 Cost Carriers Scheduled Airlines Bus Luxury Hotels Mid-Market Hotels Budget Hotels Short-Term Rentals Cruise Campsites USDmillion 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. 7. 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% Top10 Bottom10 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 Source: Euromonitor International
  8. 8. 8 INDUSTRY OVERVIEW OUR EIGHT FOCUS MEGATRENDS EXPERIENCE MORE IN TRAVEL ETHICAL LIVING IN TRAVEL CONCLUSION
  9. 9. 9 Experience More Shifting Market Frontiers Healthy Living Shopping Reinvented Middle Class Retreat Ethical Living Premiumisation Connected Consumers Redefined consumer values and priorities: key global mega trends Source: Euromonitor International OUR EIGHT FOCUS MEGATRENDS
  10. 10. 10 Shifting market frontiers Source: Euromonitor International OUR EIGHT FOCUS MEGATRENDS 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. 11. 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. OUR EIGHT FOCUS MEGATRENDS
  12. 12. 12 Healthy living OUR EIGHT FOCUS MEGATRENDS Source: Euromonitor International 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. 13. 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. OUR EIGHT FOCUS MEGATRENDS
  14. 14. 14 Healthy living in action: Boutique luxury hotel gyms - the new social clubs OUR 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. 15. 15 Shopping reinvented Source: Euromonitor International OUR EIGHT FOCUS MEGATRENDS 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. 16. 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” OUR EIGHT FOCUS MEGATRENDS
  17. 17. 17 Middle class retreat Source: Euromonitor International OUR EIGHT FOCUS MEGATRENDS 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. 18. 18 Middle class retreat in action: Norwegian Air offering low-cost long-haul flights Source: Euromonitor International from Company Reports, Travel and Tourism 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 . OUR EIGHT FOCUS MEGATRENDS
  19. 19. 19 Middle class retreat in action: W Hotel and The Walk Out Wardrobe Service Source: Euromonitor International 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 OUR EIGHT FOCUS MEGATRENDS
  20. 20. 20 Ethical living Source: Euromonitor International OUR EIGHT FOCUS MEGATRENDS 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. 21. 21 The ?! Careyes Foundation, Mexico: sustainable luxury travel Source: Euromonitor International from Company Reports, Travel and Tourism 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 OUR EIGHT FOCUS MEGATRENDS
  22. 22. 22 Ethical living in action: Soneva Kiri Resort follows the SLOW LIFE philosophy Source: Euromonitor International from Company Reports, Travel and Tourism 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 OUR EIGHT FOCUS MEGATRENDS
  23. 23. 23 Ethical living in action: Song Saa - business as a positive-and-profitable agent Source: Euromonitor International from Company Reports, Travel and Tourism 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 OUR EIGHT FOCUS MEGATRENDS
  24. 24. 24 Premiumistaion Source: Euromonitor International OUR EIGHT FOCUS MEGATRENDS 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. 25. 25 Premiumistaion in action: Singapore Airlines - premium meets low cost Source: Euromonitor International from Company Reports, Travel and Tourism 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 OUR EIGHT FOCUS MEGATRENDS
  26. 26. 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 OUR EIGHT FOCUS MEGATRENDS
  27. 27. 27 Connected consumer Source: Euromonitor International OUR EIGHT FOCUS MEGATRENDS 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. 28. 28 Connected consumer in action: Renaissance casts light on digital living Source: Euromonitor International from Company Reports, Travel and Tourism 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 OUR EIGHT FOCUS MEGATRENDS
  29. 29. 29 Experience more Source: Euromonitor International OUR EIGHT FOCUS MEGATRENDS 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. 30. 30 Experience more in action: Onefinestay - unique, local, authentic experiences OUR EIGHT FOCUS MEGATRENDS Source: Euromonitor International from Company Reports, Travel and Tourism  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$170 million in 2016. The company was acquired by AccorHotes in 2016
  31. 31. 31 INDUSTRY OVERVIEW OUR EIGHT FOCUS MEGATRENDS EXPERIENCE MORE IN TRAVEL CONCLUSION
  32. 32. 32 Luxury travel rides the “Experience More” mega trend EXPERIENCE MORE Note: Experiences includes consumer expenditure on leisure, recreation, hotels and foodservice 0 2,000 4,000 6,000 8,000 10,000 12,000 2016 Forecast Spend 2030 Optimum Spend 2030 US$billion,fixedexchangerates 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 Source: Euromonitor International
  33. 33. 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 availability Airline Loyalty programme 1 100.0% Southwest Rapid Rewards 2 94.3% Jetblue TrueBlue 3 90.7% airberlin topbonus 4 90.7% Lufthansa/ Swiss/ Austrian Miles & More 5 90.0% Air Canada Aeroplan
  34. 34. 34 ICEHOTEL: experiencing the extreme Source: Euromonitor International from Company Reports, Travel and Tourism 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. 35. 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. 36. 36 Source: Euromonitor International from Psycle London
  37. 37. 37 INDUSTRY OVERVIEW OUR EIGHT FOCUS MEGATRENDS EXPERIENCE MORE IN TRAVEL ETHICAL LIVING IN TRAVEL CONCLUSION
  38. 38. 38 Experience More Shifting Market Frontiers Healthy Living Shopping Reinvented Middle Class Retreat Ethical Living Premiumisation Connected Consumers Smart Cities and Smart Homes Circular Economy Changing Family Dynamics Multicultural-ism Striving for Authenticity Generation Gaps New Ways of Working Searching for Simplicity Buying Time Reinvention of Gender Roles Personalisation Sharing Economy Our 20 megatrends shaping consumer markets Source: Euromonitor International CONCLUSION
  39. 39. 39 Fflur Roberts Head of Luxury Goods Research Fflur.Roberts@euromonitor.com EMI twitter: @Euromonitor Blog: http://blog.euromonitor.com/ And my twitter: @Fflur THANK YOU FOR LISTENING

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