Americans love their vacations and that is the one thing that they are going to focus their discretionary income on during tough times.
That was one of the messages passed on from a presentation on Affluence in the US at the recent Annual Tourism Conference at the Westin Casuarina Resort.
The presentation, which focused on the top 10 per cent of the population in terms of disposable income, was very relevant to the tourism industry in the Cayman Islands as over 80 per cent of visitors here are from the US and the target market is the affluent.
Dr. Jim Taylor, VP of Harrison Group and Cara David, SVP of American Express Publishing came together at the conference to present a joint survey that their respective companies had done for 2008 on this group of top earners and their families.
The study is done on an annual basis, explained Mr. Taylor and the Cayman Islands partnered with the most recent study.
‘We interview 1,800 households who have $100,000 in discretionary income and above. We chose the discretionary criteria because we wanted to make sure we talked to families who had sufficient available resources, that they could express those resources in luxury markets,’ he said.
He explained that discretionary income is that from which income tax, mortgage payments, insurance payments and debt services have already been eliminated, the remainder being free discretionary income.
The study concentrated on four groups of people: upper middle class ($100,000 to $149,000 discretionary income); affluent ($150,000 to $249,000 discretionary); super affluent ($250,000 to $500,000 discretionary income); and wealthy ($500,000 and above).
This top 10 per cent covers about 10 million households in the US and accounts for about 70 per cent of Cayman visitors, said Mr. Taylor.
‘Americans love to go on vacations and it’s the one thing that they are going to divert their discretionary income on right now, and things are a little tough for the US, they are not going to get rid of their vacations. They are going to hold onto those, so that’s good news,’ said Ms David.
In fact, one statistic that came from the survey is that 91 per cent of respondents said that vacations are more important to them than ever.
Most wealth in America has been made since 1995, attendees were told.
‘More money has been made in the last 13 years in the US and the Caribbean than in all of history put together,’ said Mr. Taylor.
This means that most affluent Americans did not inherit their wealth. ‘So all these people basically grew up middle class,’ she said.
He outlined their values as being: smart, determined, getting good education, treating others with respect and hard work.
‘None of these people really set out to get rich. They set out to do something. They had a great idea and along the way they just happened to become wealthy but they’re still the same sort of people who grew up in Suburban America,’ Ms David said.
Most of these people believe in ‘stealth wealth’, such as dressing down, indulging privately and living well, attendees heard.
The presenters pointed out that much of America’s wealth is not on Wall Street.
‘There are 250,000 non-finance businesses in America worth more than $100 million,’ said Mr. Taylor. ‘And they were all built in the last 20 years.’
These people have had to learn how to live with abundance.
Mr. Taylor said that for this group, wealth is a journey of learning from when they first get their money to how to handle their money through living well and learning how to find lasting value through it.
‘Your reason for success is probably not because the island is beautiful. I’m going to tell you a little secret – there’s a lot of beautiful islands.
‘I think it’s because people feel welcomed into a place where they find the values of the community resonate with the core values they have as family members and it’s an incredibly important point of compatibility,’ he said.
The survey showed that 87 per cent of those surveyed were married or living together and 50 per cent had kids younger than 18 living in the house.
Within the household, the wife acted as CEO, including the planning of vacations in 34 per cent of cases.
Children’s preferences are extremely important and are taken into account for planning vacations in 62 per cent of cases.
And 53 per cent like brands preferred by their children.
Top destinations outside the US were Hawaii followed by the Caribbean.
The Cayman Islands No. 1 competitor, according to this survey, is Jamaica, while No. 2 is the Bahamas.
The Cayman Islands was fifth in the Caribbean for attracting this group.
‘There is always room for some luxury,’ said Ms David. ‘These folks, no matter how stressed they are about the economic conditions in the US, they want to still feel like they’ve accomplished something so they love stores that are elegant; they want to be in hotels and destinations that are just beautiful great places to be. Design is really important to this segment of the population.’
In June 2008 a re-contact study was done on the group to see how it felt about the economic situation in the US. This showed that 75 per cent already feel the US is in recession while 55 per cent think that it will last longer than a year.
In this environment it goes from what consumers want to what they actually need, said Mr. Taylor.
Statistics thrown out included 61 per cent saying they still need luxuries in tough times while 86 per cent say they need a clean conscience by doing their part to help the environment, with 45 per cent seeking out hotels that care about the environment.
But ultimately, the Cayman Islands is attracting the best travellers in the world.
Mr. Taylor said that he can see that the opening up of Cuba would attract party going travellers, but he said he believes the real impact would be on resort destination homes. ‘I think it’s going to absolutely terrorise the real estate business,’ he said.