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$388 billion
INDUSTRY OVERVIEW
Global CAGR
2016-21
5 6 6 7 8 9 9 10 10 11 11
Share digital %
3%
10%
Store-based
Digital
-1
0
1
2
3
4
5
6
7
8
-
50
100
150
200
250
300
350
400
450
500
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Growth%
US$billion
Global Luxury Good Sales and Real Growth 2011-2021 US$ Billion
Real value sales US$ (fixed exchange rate)
Source: Euromonitor International

4
Personal luxury: Swings and roundabouts for regional performances
INDUSTRY 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 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
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
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

8
INDUSTRY OVERVIEW
ETHICAL LIVING IN TRAVEL
CONCLUSION

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

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 living
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 clubs
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 experiences
 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
INDUSTRY OVERVIEW
CONCLUSION

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

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
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 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
CONCLUSION

39
Fflur Roberts
Head of Luxury Goods Research
Fflur.Roberts@euromonitor.com
EMI twitter: @Euromonitor
Blog: http://blog.euromonitor.com/
And my twitter: @Fflur
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