National consumer trends play a key role in recognizing and responding to changing club member needs. By understanding how the habits, preferences and lifestyles of the current and next generation of members—as well as shifting economic and demographic landscapes—affect membership marketing, club leaders will be able to adapt, tailor and market their offerings to today’s value-oriented member.
EFFECTS OF THE RECESSION
The Great Recession took a tremendous toll on Americans. Census data shows median household income down eight percent since 2007, just prior to the recession. The average income for those in the top five percent is up nearly five percent since bottoming-out in 2010, though this figure is currently more than six points lower than pre-recession levels. From just before the recession in 2007 to the beginning of the recovery in 2011, the population of those earning $75,000 or less grew 24 percent while the population of those earning above $75,000 shrunk 9 percent.
Consumer confidence understandably fell during the recession, hitting a low of -59 in 2009 according to Gallup’s metrics. To put this in perspective, Gallup’s data consistently shows consumer confidence above -10 in the years prior to the recession when the economic climate was much more favorable. Since hitting these lows, confidence has grown significantly—at -14 at time of publication—but this number has plateaued in the last 10 months, leaving many to believe that although the economy is improving with many recouping what they had lost, consumers remain cautious about its future health.
CONSUMER CAUTIOUSNESS
Although affluent Americans are making more and spending more post-recession than during, they still remain cautious with their expenses. According to the American Affluence Research Center (AARC), 45 percent of wealthy Americans (those making $800,000 or more) were still trepid toward making large purchases during the first part of 2014. When they did spend money, they avoided taking financial risks and instead opted to make purchases based on past experiences, says the Luxury Institute, a research and consulting firm for luxury brands.
Research by Convergent Wealth Advisors shows how wealthy Americans’ priorities have changed regarding their expenditures. More affluent Americans want to stretch the value of their dollar to go beyond the usual high price tag item. “Wealthy families want an experience tailored to their individual needs and goals—and one that allows them to enjoy more of the benefits and avoid many of the burdens of wealth,” says Douglas Wolford, President and COO of Convergent.
Ipsos, an international market research firm, highlights similar findings from its 2014 affluence survey, describing that affluents are focusing and spending more on vacations and leisure activities. Promising for clubs, the survey found that the wealthy are buying more golf and tennis equipment. These types of fulfilling, experience-driven purchases are consistent with what clubs are offering today. Lavish spas, high-end yet casual dining and resort-style pools accommodate members’ preferences for a “stay-cation” at the club. At the same time, affluent spending on discretionary items like handbags and shoes has gone down, as it does not offer the lasting memories the wealthy want, says CNN Money.
In fact, a 2014 study by Unity Marketing, an affluent market research firm, shows that affluent consumers are passing on expensive brands and taking advantage of sales, deals and less prestigious brands. The study also reveals that although luxury demand is up, spending in some categories is down. Unity Marketing’s President, Pamela Danziger writes that affluents recovered post-recession, spending more in 2010 and 2011, but since 2012 their spending has slowed and confidence eroded. And despite increased personal luxury spending on items such as jewelry and electronics during the end of 2013, that number was down 31 percent from 2012. Some wealthy Americans have turned further away from luxury brands and found new niches in mainstream outlets such as Wal-Mart, Amazon and Target, says an Ipsos survey, and many others are enjoying newfound benefits in rewards programs.
Even at the grocery store, due to rising food prices, wealthy buyers are less likely to purchase premium items, says Consumer Edge. Its July survey revealed that 36 percent of those earning more than $100,000 a year have cut spending on groceries, up 20 percent from January.
Nationally, consumers remain anxious about the economy because of gridlock in Congress, job insecurity, increasing concerns over income inequality and other factors. As many as 36 percent of Americans believe the economy will never recover says a study by the John J. Heldrich Center for Workplace Development, though 64 percent do think the economy will recover in upcoming years or already has recovered.
Despite some signs that the economy is improving with a rebounded stock market, new job growth and some financial stability, the overall trend shows that Americans and in particular affluents are at least wary of the future.
BOOMERS, MILLENNIALS AND GENERATION X
Americans 55 and older currently control more than three-fourths of the country’s wealth, making them a highly coveted demographic still, says the International Council for Shopping Centers. They also comprise a plurality of the entire affluent population at 38 percent, says Ipsos.
Approximately 9 million earn more than $250,000 a year and more than half will buy at least two luxury items this year compared to a quarter of their mass market counterparts, says Shullman Research Center. Many of these upscale Boomers are willing to splurge on luxury vacations so much so that they account for 80 percent of all luxury travel spending, reports Pew and American Life Project. Though value conscious, they are willing to pay more for personal service and a high-quality product, says the American Express Platinum Luxury Survey.
Many Boomers have been saddled with their own debts, however. Mortgages, increasing health care costs and their children’s educations have eaten up much of their incomes. The number of mortgage holders age 65 and up increased from 3.8 million in 2001 to 6.1 million a decade later, says the Consumer Financial Protection Bureau. From 1990 to 2010, health care costs have increased 30 percent for those between ages 45 and 54 and 21 percent for individuals age 55 to 64, according to the National Center for Policy Analysis. During that same timeframe, their children’s education costs have increased 80 percent for adults ages 45 to 54 and 22 percent for adults ages 55 to 64.
Millennials and Generation X make up 43 percent of millionaires and more than half of the affluent population says the Shullman Research Center and Ipsos—figures that certainly cannot be ignored. In upcoming years, Unity Marketing predicts that transference of consumer power from Boomers to Millennials will occur between 2018 and 2020. Like many of their Boomer parents, Millennials, too, are experience seekers and learned how to search for bargains and value, not necessarily the “luxury” label. Surprisingly, Generation X, once coined as the “slacker” generation, now spends more on luxury than Boomers, says the American Express Platinum Luxury Survey. These individuals are at the peak of their professional careers, and though they spend a lot, like Millennials and Boomers, they are prudent with their purchases, searching for quality but not willing to overpay for it, notes the survey.
POSITIVE SIGNS AHEAD
There is evidence that portrays a more optimistic outlook. According to the 2014 Ipsos Affluent Survey, the affluent population jumped 8 percent from 2013, to 67.5 million Americans. Similarly, a study by Spectrum Group shows that the number of households with incomes above $1 million (excluding the value of their homes) rose to 9.63—more than pre-recession’s 9.2 million mark. For affluents, their wealth continues to grow in today’s barbell economy, as the top 10 percent of families now own 75.3 percent of the nation’s wealth, according to the Federal Reserve.
Ipsos’ survey also finds that today’s spending and income for wealthy Americans is above 2011 and 2012 levels. The wealthy earned 6 percent more in 2013 than 2012. Even surveys that do suggest that affluents will remain cautious say that the vast majority of them expect to spend the same or more on luxury purchases. Gallup also finds that the nation’s spending has recovered to 2013 highs after plummeting in late 2013. Though affluent spending remains stagnant or down, the Gallup findings are a positive sign for the rest of the economy, highlighted by strong growth for small businesses in Q3 this year. Further, consecutive years of growth for high-income earners bodes well for food and beverage as these affluents account for 54 percent of industry spending.
For clubs, National Golf Foundation (NGF) statistics show that more clubs are “healthy” today than compared to 2008 and fewer clubs are “at risk” today than in 2008. McMahon Group’s most recent Pulse Survey reveals that more than 85 percent of clubs find themselves in “excellent” or “good” financial health. Clubs are now better off than they have been in some time.
CONCLUSION
Clubs are inextricably connected to the wealth around them. Data from NGF shows a clear correlation between the financial health of a private club and the wealth of its surrounding neighborhood. The more wealth a community has, the more likely clubs within that area will have strong returns on investment. Although the country is not yet financially in the clear, it and the club industry are in a stronger position.
Fall 2014 Club Trends