Travel: The Luxury Product
By Don Holecek & Joe Fridgen, MTB’s Editors

Understanding what one’s customers value in a product or service and enhancing it is a formula for success in any business venture.  People travel primarily for business, to visit friends and relatives and for pleasure purposes.  Our focus here is on pleasure travel and an important attribute sought by pleasure travelers- luxury.  Defining what is or isn’t a luxury is no simple matter, and there is surely no one definition which fits all people under all circumstances.  In principle, one might define luxuries as anything that one doesn’t view as a necessity.  This is helpful but ultimately leaves what a luxury is or isn’t to the eyes of the beholder.  While this doesn’t resolve the problem of defining luxury, pleasure travel is more often than not considered to be a luxury which is sufficient reason to consider what this means to travel service providers.

Let’s begin by reviewing some statistics borrowed from the November 2002 issue of American Demographics magazine and the Diversity in America supplement, which was mailed with the November issue.

Since 1975, a survey of American conducted by Roper ASW has asked: “What are you doing or plan to do to cope with high prices?  In 1975, 62% of respondents said that they would cut back on purchasing luxuries.  This percentage fell to 44% in 1991, and only 33% of respondents indicated cutting back of purchases of luxuries would be a high price coping strategy in 2001.  While it may sound like an oxymoron, it does appear that more and more consumers over time are beginning to perceive luxuries as necessities.  This trend thus leads us to conclude that the traveling public increasingly sees travel as a “necessary” luxury.

Unity Marketing conducted a survey of a sample of upper income households in August 2002 for House & Garden magazine, which explored respondents’ luxury product purchase behavior during the last 12 months.  Selected results are provided below.

During the last 12 months have you:	Household Income
	$100K+	$150K+	$200K+
Purchase any luxury product	89%	92%	97%
Purchased any luxury service	85%	87%	93%
Purchased travel	57%	64%	68%
Purchased electronics	56%	59%	66%
Purchased fragrance/beauty products	43%	46%	45%
Purchase maid service	37%	45%	63%

These results confirm that travel is considered to be a superior good as defined by economists, because its consumption increases as income increases.  More importantly, the results indicate that travel is deemed more valuable than all other luxuries considered in this particular survey, which is additional good news for the travel industry.

American Demographics also provides some clues that can be used to begin to target upper income travelers, which we extracted the Diversity in American supplement and present in the table below.

Ethnic Group	% of US Population (1)	States in Michigan’s Prime Market With > Average Ethnic Group Population  (2)	% of Population With Income >$100K	Median Income	Projected Population Growth  (2002-07)
Black	12.3%	MI, IL	5.6%	$29,470	11.6%
Hispanic	12.5%	None	7.0%	$33,565	8.9%
White	75.1%	MI, OH, IN, WSC	14.8%	$44,517	1.9%
Asian	3.6%	None	21.9%	$53,635	26.8%
Native American	0.9%	None	5.4%	$30,599	11.2%