Super Rich Will Super Spend This Summer

As the rest of us whine over gas prices, the super rich spend on the good life.

“Summertime, and the living is easy…” for the ultra-affluent. Households with a net worth topping $10 million will enjoy spending even more on luxury and travel goods this summer than they did in 2005, according the 2007 Elite Traveler/Prince & Associates Summer Spending Survey.

Many business owners harbor low expectations for summer profits due to rising gas prices and its negative effect on discretionary spending. Studies have shown that scores of Americans will be cutting back on everything from dining out to household purchases in the coming months (see “Record-High Gas Prices Alarm Retailers, Auto Industry,” May 18, 2007, demodirt.com).

Luxury retailers will survive this disappointing consumer spending trend unscathed due to their target consumer base of the “Ultra Elite” demographic, who plan on increasing their summer spending by 55 percent this year over summer 2005. Luckiest retailers include those connected with luxury cruise lines and resorts, high-end watchmakers and manufacturers of designer apparel, accessories and electronics.

"This survey underscores the spending power of the Super Rich and also reflects that this segment is not impacted by the ups and downs of the overall economy. In fact they are enjoying a very robust period," says Douglas Gollan, president and editor-in-chief of Elite Traveler.

He adds, "Unlike Mass Affluent consumers who may splurge and charge up credit cards to buy jewelry or watches for the holidays, it is interesting to see that the Super Rich spend money on virtually every type of luxury good and service on an continuous basis."

“Designer” and “digital” are the buzzwords attracting the richest of the rich this summer. The elite affluent will spend more on audio-visual products (an increase of 121 percent), most likely in order to get high quality footage of themselves in their designer apparel (a 112 percent increase), while on their luxury resort vacations (an over 78 percent increase).  Average projected spending in these categories for the elite affluent customer includes $31,000 on electronics, $34,000 apparel and accessories, and $41,000 on luxury resort stays.

The super rich plan on hosting lavish parties this summer, as more than 93 percent of those surveyed plan on spending an average of $56,000 on entertaining.  Wine and spirit sales will also increase, both for personal consumption ($17,000) and social entertaining ($24,000).

Watches and jewelry will sparkle this summer, as nearly three quarters (73 percent) of the ultra elite plan on purchasing fine jewelry and luxury watches. The projected average in this category is $94,000, reflecting an increase of nearly 50 percent over summer 2005.

In fact, a recent article describes the sustained success of the luxury jewelry market as the ultra affluent continue to spend (“Luxury Jeweler Grows and Rich Keep Spending,” by Marilyn Much, May 22, 2007, Yahoo News). The article states, “High-end consumers have been the pillar of strength in retail over the past three years, giving a nice lift to sellers of luxury goods…Luxury jewelry retailer Tiffany is one player that's cashing in. From 2003 to 2007, sales have grown at an 11% average annual clip. Earnings have risen at an 8% rate.”

It is clear that the super rich will keep luxury retailers thriving this summer with unabashed spending. But businesses won’t be the only beneficiaries of the ultra elite’s dollars. Here’s a feel-good footnote: nearly 100 percent of the ultra elite surveyed for the 2007 Elite Traveler/Prince & Associates Summer Spending Survey stated that they planned to give to charitable causes this summer, averaging $82,000 in contributions, a $30,000 increase over summer 2005.