“Lies, Damned Lies and Statistics”

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When I ran the numbers for The Top 0.1 Percent Spent $214 Billion on Lifestyle and Luxury in 2013 in leisure hotel and resort stays from our previous research it showed that these Ultra High Net Worth consumers spend over $12 billion annually sleeping in nice beds not their own. The research was from interviews with 661 private jet and fractional jet owners published in “The Sky’s the Limit” and projected against a universe of 117,000 households to represent the Top 0.1 Percent,


Responding from Singapore, The Leading Hotels of the World CEO Ted Teng noted that Smith Travel Research pegs total room revenue for the 5,000 properties they classify as luxury at around $60 billion.  Luxury hotels often get quite a bit of additional revenue, depending on size and location from dining, banquets, meetings, spas and activities.  Smith doesn’t track this extra revenue but Teng estimates its is an additional $25 billion making total annual sales around $85 billion.

Now to the details:

–       65.4% stayed of the audience we surveyed stayed in a hotel or resort for leisure in the previous 12 months
–       Those that stayed spent an average $157,000 for the year
–       We didn’t ask them to break out room versus overall folio, so we can make an assumption respondents were estimating their total spend over multiple stays
–       To make the projection I took the population of 117,000 households, then multiplied it times .654 usage, and then multiplied it again by $157,000 and I got a result slightly over $12 billion.

But as Mark Twain among others said, “there are lies, damn lies and statistics.”  So with Teng’s prodding I delved a bit deeper.

We are really talking about the spending of 76,518 households (117,000 x 65.4%) that perhaps spend $12 billion. 

So how about this scenario:  Five three-night stays and four one-week stays?  That would be 43 nights per year in a hotel or resort for leisure.  Multiply 76,518 x 43 = 3,290,274 nights at a hotel.  If we then take $12 billion and divide it by the nights spent, we get $3,647 spent per night per household. 

In other research we’ve done with private jet travelers – the same income demographic as the Top 0.1 Percent we found they take an average of 4.1 suites and rooms per stay making our assumptions seem quite realistic, particularly if we believe respondents also included dining, concierge services, mini bar charges and the like.

Teng also pointed out it could be some of their stays take place at hotels not classified as luxury by Smith, for example Westin, Hilton and Sheraton. 

The more I took a look at how these numbers project out I think they are probably in the ballpark. To get a broader read on the impact of the Super Rich on high end hotels we would also have to look at business and meetings travel. Either way, it means a very small segment of the luxury consumer population is responsible for a large chunk of spending in luxury properties.

What do you think?

About Doug Gollan

Media Executive focused on marketing and sales to Ultra High Net Worth (UHNW) consumers, luxury travel and private aviation, particularly jet cards
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