Posted on: Saturday, July 2, 2005

Luxury travel is booming

By Jeannine DeFoe
Bloomberg News Service

Abercrombie & Kent, a luxury tour operator, is reviving its $39,100 per person, 21-day private jet tour of South American islands and jungles after canceling it following the September 2001 terrorist attacks.

The tour, which will circumnavigate South America, is one sign of the growing interest in luxury vacations that has enabled Marriott International Inc. and Starwood Hotels & Resorts Worldwide Inc. to raise prices. Demand for everything from $17,000 luxury-liner voyages to $60,000 African safaris is soaring along with incomes for the wealthy.

"The baby boomers are raking it in," Bill Marriott, chief executive of Marriott International, said in an interview. "People have a lot of money. They're selling their houses. They've got money to spend."

At high-end hotels owned by Starwood, such as the St. Regis and W chains, revenue per available room will rise 11.3 percent this year, faster than in any other segment of the hotel industry and the highest since 1996, according to PricewaterhouseCoopers LLP. Starwood's first-quarter net income jumped 132 percent, the biggest year-over-year increase since 2000, the most profitable year for the industry.

"All travel is going to be very strong this summer, but if there's one segment that we'll call the outstanding performer, it's deluxe, which is high-end luxury," said Bjorn Hanson, director of the hospitality division for New York-based PricewaterhouseCoopers.

The shares of the largest lodging companies have risen with demand for travel. Marriott has surged 37 percent in the past year, compared with 30 percent in the prior 12 months in New York Stock Exchange composite trading. Beverly Hills, California-based Hilton Hotels Corp. has climbed 28 percent in the same period, and Starwood shares have increased 31 percent in the past year.

Bookings at SeaDream Yacht Club climbed more than 30 percent this year for voyages that can cost as much as $17,250 per person. During trips to ports including Nice, France, guests enjoy an open bar, a 30-hole golf simulator, flat-screen televisions, and champagne and caviar at the beach.

Luxury travel has returned "with a vengeance," said chief executive Larry Pimentel, who founded the Coconut Grove, Florida-based company in September 2001. "If you are doing poorly this year, you should either sell or get out of the business."

Luxury Hotels

The growing demand is spurring an expansion of luxury hotels. Marriott, the No. 1 U.S. hotel company, has 30 Ritz-Carlton hotels under development or in the pipeline, up from 15 a year ago, the Bethesda, Md.-based company said.

Hilton, the No. 3 U.S. hotel company, will open 50 of its Conrad luxury hotels in partnership with Hilton Group Plc by 2010, up from 17 currently.

Abercrombie & Kent's travelers starting in October will ride the Orient Express train to Peru's Machu Picchu, scuba dive off Easter Island with a diver who worked with the late Jacques Cousteau, sail around Cape Horn, where the Pacific and Atlantic oceans meet, and sleep at the Four Seasons.

"We've had a very, very, very thin three years, after 9/11; everything went wrong," said Geoffrey Kent, president of London-based Abercrombie & Kent, whose revenue has jumped 40 percent this year. "Now demand is very, very high."

Spending on luxury travel began to slow with the U.S. economy in the first half of 2001, a decline exacerbated by the Sept. 11 attacks and Iraq war, which left consumers reluctant to splurge on vacations.

'Trip of a Lifetime'

Revenue per available room for luxury hotels fell at about double the rate in the rest of the industry in 2001 and 2002, according to Pricewaterhouse-Coopers.

"To spend $3,000, $5,000, $10,000 on travel per day seemed inappropriate to many people," PricewaterhouseCooper's Hanson said.

Lynne Goldstein and her husband Paul, a dentist, spent $60,000 on the "trip of a lifetime" with their two adult children in late May, she said.

The family went to the Mombo camp in Botswana and Singita camp in South Africa to see the "big five" of game: lions, leopards, elephants, cape buffalos and rhinos.

"This was a major, major splurge," said Goldstein, a 54- year-old homemaker from Fairfax Station, Va.