There is a fundamental change in attitude when the topic of COVID-19 and its impacts on how luxury lifestyle is perceived, as well as people’s attitudes about wealth and affluent people, and the attitudes among wealthy people themselves, all come up, and that’s a good thing, says Milton Pedraza, CEO of the Luxury Institute in New York.
The Luxury Institute, based in New York, is a qualitative and quantitative research organization that conducts crowdsourcing projects with its Global Luxury Expert Network – a growing network of high level executives and experienced management representatives from dozens of luxury premium good and service companies. The Luxury Institute issues regular white papers and studies, and provides training and business solutions for luxury goods and services brands.
Pedraza has his thumb on luxury industry trends better than anyone. No one is better connected. Like a lot of well-to-do people who live downtown in big cities, Pedraza isn’t in Manhattan now, where he normally lives. He is living in a house in a suburb 25 minutes out of the city, in a more wide open area, with his young son and ex-wife. He is living in one section of the house. His wife and son are in another section. The only time anyone goes out is to get food.
“It’s not greed, it’s love of beauty, aesthetic, quality, craftsmanship, design. That’s not going to go away.”
It’s tough to find any positives now, as a worldwide pandemic rages around all of us. And it’s tough having a discussion about how the landscape for luxury lifestyle and wealth might look post-virus when they are burying people in mass graves in New York, or painting rectangles in a parking lot in Las Vegas to remind homeless people to sleep six feet apart.
But that’s where we are, on an Easter weekend unlike any Easter weekend in memory. The pandemic has laid bare the worldwide schism between rich and poor. Wealthy people have been in the crosshairs during the COVID-19 crisis. Pro athletes and Hollywood celebrities and Wall Street financiers jumped the queue for testing while those on the mid to lower rungs of society’s ladder had to wait for testing or haven’t been tested at all. Rich people get to the buy the best information and best access to doctors. But, hey, some celebrities did deem it proper to band together online to sing a not-so-stirring rendition of John Lennon’s Imagine, a gift to all of us.
In the U.S., especially, COVID-19 is killing African Americans at a far higher rate, which speaks to impoverishment, lack of access to decent healthcare, underlying health conditions like diabetes, asthma and obesity, and poor nutrition. There are horror stories like this one, where jet setters from London tried to access a ski resort in France via private jet but were turned away by French police. On the local front, affluent people de-camped their downtown Toronto homes for luxury cottages in places like Muskoka and Collingwood, and there were reports of food and product hoarding compounding the irritation levels among locals with the influx of people.
Those people fortunate enough to have the money to afford private jet travel were quick to use that advantage a month ago, as the spread of the virus really started to take hold. Justin Crabbe, Founder and CEO of Jettly (a web-based private jet charter booking platform that we have written on here in the past), talked about how bookings in their evacuation flight department over their platform exploded from mid February to mid March, as the size and scope of the deadly virus started hitting home with people.
“Some are trying to avoid travel bans or impending travel bans and come with very urgent requests willing to spend far more than they would have had they been able to wait even a few days,” Crabbe reported to Regarding Luxury at the time. “While the coronavirus has certainly negatively effected commercial travel, it has dramatically increased the activity in the private charter sector so much that we are tripling our flight support staff to accommodate the influx.
“People are avoiding commercial airlines and airports in fear of the exposure, opting for private travel instead. Some are grouping together with others and we are having to coordinate passports and clearances for large groups of travellers, some of which don’t know each other.”
Plenty, says Pedraza.
There are luxury brands that go back over 100 years, surviving world wars, pandemics and financial crises. As Pedraza adds, there is an inherent desire for people to have the best of something.
“It’s not greed, it’s love of beauty, aesthetic, quality, craftsmanship, design,” he says. That’s not going to go away. The difference maker, then, starts with wealthy people taking a “missionary” approach to wealth and luxury as opposed to a “mercenary” approach.
“Behaviours changed after 2008 and 2009, in particular a downshift in conspicuous consumption”
“You have to be responsible, ethical, take care of your constituents, associates, partners, society,” he says. “You are charitable, and you practice sustainability.”
Therein lies the balance – if one is in it to make money that creates value for society, bringing a greater context to the pursuit of wealth, as opposed to being just a money mercenary, then that individual has the right to benefit from that, and get value back. Post virus, Pedraza says to look for security, privacy, isolation, sustainability being more of a focus for the luxury dollar. That means vacation homes for travel as opposed to hotels, for example. Pedraza says he spoke with the broker for a luxury yacht charter company who is seeing a big uptick in business for private yacht charters in the Mediterranean for this summer, as another example.
If you are CEO of a luxury goods or services company, Pedraza points to a noticeable shift there. He points to companies like De Beers, Hermes, Tiffany & Co., LVMH and Burberry, who have taken care of their employees, including paying them, and pledged money to relief efforts, during the crisis. It’s important to remember that the luxury industry creates employment.
Pedraza says after the 2008 world financial crisis – a contagion in the financial industry caused by raw greed – there emerged a shift in attitude among those in the wealthy class that became a permanent thing. Behaviours changed after 2008 and 2009, in particular a downshift in conspicuous consumption. If you have it, don’t flaunt it. Pedraza sees an intensification of that through this current crisis, including a rise in philanthropy.
“In many ways the great recession prepared wealthy people for the pandemic, in that they became far less ostentatious, far more generous, far more socially responsible, more ethical, and we are seeing a lot of that right now,” he says.
Twitter’s Jack Dorsey last week announced he was donating $1 billion – 30 per cent of his net worth – to fight the coronavirus. New Orleans Saints quarterback Drew Brees donated $5 million to the state of Louisiana. Dolly Parton donated $1 million to Vanderbilt Hospital in Nashville to help find a cure for coronavirus. Bill Gates says he will spend billions of dollars on developing a coronavirus vaccine via the Bill and Melinda Gates Foundation.
“I think the old perceptions of wealthy people, just living the life of leisure, that doesn’t exist anymore,” Pedraza says. “It is shameful to live life like that. Even in families you would be seen as a complete loser. How can you have been so blessed yet been so negligent?
“There is that internal pressure now, family pressure,” Pedraza says. “It used to be that the No. 1 goal was to invest the assets wisely. That’s still important, but by the third generation, the family has been split up, there are problems, the money has split up, some kids have gone AWOL. Now it’s more about nurturing good family governance, and values is top of list for wealthy families. That was never the case ten years ago.
“You are seeing wealthy people understand they have an oversized role to play in terms of generosity during this crisis,” he says. “They understand we are all connected. They need to overplay the role that their entitlement plays. By and large the wealthy around the world have really been contributing. The luxury industry is being a good global citizen right now by and large.”