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C. Paul Luongo's Published Columns

Friday, September 08, 2006

Wealth In America: The 6th Star


Ah Luxury! How sweet it is. Nowadays, there’s been an inflation of stars given to luxury hotels. 6 Stars! 5 Stars is not enough. The reason? During the first half of 2004, gross operating profits at high-end hotels rose nearly 9% compared with only 5% for mid-scale hotels. As a result, some hoteliers are attempting to create a new top tier for travelers with an appetite for more coddling. The idea is to focus on highly individualized services such as personal butlers, chefs, drivers and concierges, as well as unique architectural designs and experiences. Some even offer dog massages and butlers-on-call to handle difficult tasks like filling the bathtub!

Interestingly, much of the spending is coming from people in their 30’s and even 20’s as Americans continue to accumulate more wealth at a younger age. Younger people are more willing to blow a few thousand dollars on a posh weekend than their parents were at the same age.

There are now 2.3 million millionaires in the U.S. (7.7 worldwide) and their wealth is expected to grow at 7% a year through 2008. Villas now renting for $5500 and $6600 per night come with their own butler and chef and even a preferred room temperature!

Paul Allen, Microsoft billionaire (at just 52 years old) has a new 400 ft. pleasure boat, “The Octopus”, complete with basketball court, music studio and personal submarine! Also, a 72 ft. sailboat, 59 ft. speedboat, music studio, costing more than $250 million and $10 million a year to run.

Today’s biggest yachts are loaded with new technology and toys which anticipate the rocking movements of a boat and offset them with underwater fins or gyroscopes, making mega yachts perfectly still even when anchored. High-tech security systems, stereos, theaters and swimming pools have become standard. Most come even with garages to house jet skis, motorcycles, small motorboats and other vehicles.

The rich are now finding it harder to set themselves apart. Mega yachts have grown in size from a typical length of 110 ft. in the mid-1990’s to well over 150 ft. today, and the market for luxury yachts has more than tripled since 1997. Some boats cost well over $100 million! The most expensive Mercedes used to be the CL600 about $100,000 in the 1990’s. Last year, the Mercedes group introduced the Maybach 62 for $350,000 and this year started selling the SLR for over $450,000 with a long waiting list!

Volkswagen AG’s Bugatti is about to introduce a sports car priced at more than $1 million.

Patek Philippe, Rolex and Breguet are now selling watches priced at more than $200,000.

The inflation rate for luxury goods reached 7% last year, more than twice the overall U.S. inflation rate. The wealth held by millionaires world-wide rose to $28.8 trillion at the end of 2003, up 11% from $26 trillion in 2001. That’s more than the annual gross domestic products of the U.S., Japan, German, France and England! The wealth controlled by individuals in North America with more than $30 million in financial assets jumped 45% to $3.04 trillion from $2.1 trillion in 2002.

Today’s instant multimillionaires tend to be younger than the rich of the past and more likely to splurge on lifestyle goods to differentiate themselves from hoi polloi affluent people.

As Oscar Wilde said “Living well is the best revenge!”

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