Some 40% of wealthy Americans surveyed by the Luxury Institute say that declines in their wealth would lead to decreases in their luxury spending, while only 30% of individuals earning at least US$500,000, and 33% of those with a net worth of US$5 million or more, agree that decreases in wealth of any magnitude would prompt cutbacks in luxury purchases.
In fact, the highest end of luxury goods and services providers and retailers is set to outperform down-market rivals if economic conditions worsen, according to The Wealth Report from The Luxury Institute.
Luxury lacks elasticity
According to Milton Pedraza, CEO for The Luxury Institute, demand from the wealthiest consumers is relatively inelastic, while the gyrations of the economic cycle can wreak havoc on the income and spending power of those who are not as wealthy.
Ultra-wealthy investors have a number of firms to choose from when selecting a wealth manager and they are not bashful about sharing their thoughts on which brands they think are best in the business. The Luxury Institute asked individuals with US$200,000 minimum annual income and net worth of at least US$5 million for their opinions on the wealth management brands of seven commercial banks, 10 regional banks and 21 private banks. These ultra-wealthy investors considered each wealth management brand on the 'four pillars' of luxury brand status: consistently superior quality; uniqueness and exclusivity; use by people who are admired and respected; and self-enhancement, or making the customer feel special across the entire customer experience. (Survey respondents had an average income of US$775,000 and an average net worth of US$14.4 million.)
Holidays and entertainment
Despite its substantial size, Celebrity Cruises earned top marks from wealthy cruise passengers for the best overall customer experience. In a crowded field, Celebrity (a division of Royal Caribbean Cruises) earned the highest Luxury Consumer Experience Index (LCEI) score in the cruise line category with what customers called "excellent" food and "lots of little perks" - such as champagne upon boarding, and cool towels when returning from ports. Holland America and Princess ranked second and third respectively.
Wealthy travellers who gamble prefer tasteful Italian-themed luxury on the Las Vegas Strip, the report noted. The Venetian and its across-the-strip neighbour, the Bellagio, ranked first and second respectively for overall scores in the casino category, while Mandalay Bay ranked third. Wealthy consumers cited the "beautiful and elegant atmosphere" with "top-notch dining and shopping" and some even called the service "stellar". But outdated decor and large crowds were the biggest turn-offs for wealthy gamblers who commented on 27 other casino brands included in the survey.
The Luxury Institute conducts and publishes a variety of research that aims to inform high net-worth individuals and the companies that cater to them, and the institute also operates the Luxury Board (a membership-based online community for luxury goods and services executives, professionals and entrepreneurs).