Luxury Travel Market

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Luxury Travel Marketing Expenses

Luxury brands spend 33% of their marketing budget on digital while overall brands spend 42% of their marketing budget on digital. In 2016, Gucci spent 11% of their revenue on advertising which is about the same as the 2018 average. LVMH spent 12% of revenues on advertising in 2018, which was only exceeded by Chanel (13%). According to the Ultra High Net Worth Luxury Report, at a 2018 population of 255,810 individuals, UHNW individuals are considered to be a very small market. The budgets for ultra luxury category marketing therefore vary vastly depending on whether this is the company's main target audience, such as with ultra luxury travel companies, or only a small fraction of the spend, which is consistent with luxury clothing brands and car companies. In 2018, non-luxury brands spent 11.2% of revenue on marketing.

LUXURY CATEGORY MARKETING SPEND

  • Luxury brands spend 33% of their marketing budget on digital while overall brands spend 42% of their marketing budget on digital. The areas where luxury brands are spending digitally include social media promotions, internet ads, influencer ads, and branded content.
  • In 2016, Gucci spent 11% of their revenue on advertising which is about the same as the 2018 average. LVMH spent 12% of revenues on advertising in 2018, which was only exceeded by Chanel (13%).
  • Statista broke down the marketing spend of luxury brands for 2017 and found that 31.6% of the budget was spent on TV, and 22.9% was spent on print media. The next three largest categories were display, search, and outdoor. In case the data is not accessible on the website, a screenshot is included here.
  • The Luxury Daily survey of marketers in luxury reported that 58% of firms have boosted their spend in 2018, which is a 5% rise from 2017.
  •  The largest number of luxury brands will use some of their advertising budget on social media advertising and promotion; and about half as many brands plan on allocating advertising resources to print media as compared to social media.
  • Although luxury brands were expected to increase advertising spend by 2.4% in 2018 and 2.8% in 2019, this is below the 4.2% and 3.6% increases expected across all categories.
  • Although high luxury brands are shifting some of their marketing budgets to digital, they still spend more than 50% of their advertising dollars on magazine ads. Meanwhile, broad luxury categories spent more on TV advertising.
  • According to Bain, luxury experiences remain "very attractive to consumers, as illustrated by sales growth of luxury hospitality (up 5% from last year), gourmet food and fine dining (up 6%) and luxury cruises (up 7%)" which is followed by higher marketing spend in those categories.

ULTRA LUXURY CATEGORY MARKETING SPEND

  • According to the Ultra High Net Worth Luxury Report, at a 2018 population of 255,810 individuals, UHNW individuals are considered to be a very small market.
  • Many luxury companies are now treating UHNW individuals as a separate marketing demographic. According to the UHNW-focused strategy team at Porsche, "they are spending a lot, buying very, very expensive models and spending even more on personalization. We need to treat them differently."
  • No specific marketing spends are allocated to this category. Instead, companies are establishing new departments that will cater specifically to these individuals with their own separate budgets. However, marketing is turned into building relationships instead of advertising and investing in digital channels.
  • Individuals in this category are considered to be "highly demanding and, being able to make additional resources available, they expect more from luxury brands. For them, the garden variety of luxury product or service may not be sufficient, or even desirable, and it can be a constant battle to attract and keep them."
  • Therefore, firms are building teams to engage and stay relevant to UHNW individuals who are looking for personalization and sophisticated yet authentic offerings.
  • The budgets for ultra luxury category marketing therefore vary vastly depending on whether this is the company's main target audience, such as with ultra luxury travel companies, or only a small fraction of the spend, which is consistent with luxury clothing brands and car companies.

NON-LUXURY CATEGORY MARKETING SPEND

  • In 2018, non-luxury brands spent 11.2% of revenue on marketing.
  • When it comes to marketing spend by sector in the non-luxury category, the retail sector spends 21.9% on marketing, the automotive sector spends 12.6%, and financial services 12.2%. 
  • On the other hand, health and pharma only spend 2.6%, entertainment 5.2%, and media 6.1%. 

RESEARCH METHODOLOGY

The information regarding marketing spend in luxury travel agencies was not readily available. The reason for this is the fact that luxury travel agencies exist in the form of boutique travel agencies which are privately owned and do not publish their annual reports or talk about their expenditures publicly. Examples of such companies globally are Scott Dunn, Black Tomato, Inspiring Travel, Audley Travel, etc. Therefore, we opted to report on the alternative suggestion according to research criteria, which included comparing the marketing spend of the luxury category, the ultra luxury category, and the non-luxury category. Note that the data for Gucci is from 2016, although the source itself is from 2017. This data is the most recent available and has likely not changed much in the intervening years since the industry average has remained stable.
Sources
Sources