Conventional wisdom has always asserted that high-end and low-end products tend to fare well in a recession while middle-tier products are more susceptible to economic conditions.  The reasoning behind this is that the wealthiest consumers aren’t price sensitive in a downturn while all other consumers get increasingly price conscious.

The thing that fascinates me about this recession is how much of the conventional wisdom is getting thrown out the window.  There are a number of clear signs that the luxury markets will be anything but resilient this time around.  The biggest reason is that many of the world’s wealthiest individuals have lost 30%-50% of their net worth in the past 18 months.  Losses like that can curb the spending of even the most dedicated luxury consumer.

I’ve been thinking a lot lately about how this shift is going to affect the luxury adventure travel companies that focus on the luxury niche.  Like all recessions we’re going to see some companies go out of business but those who make it through the next 18 months will come out stronger (and have less competition!)  Here are some things the luxury operators need to keep in mind if they want to be around 18 months from now.

• Your greatest asset is your customer list. Call some of your repeat customers and ask them what it’ll take to get them on a trip this year.  Use that as a jumping off point when revamping itineraries.
• Stay true to your brand. Yes you’ll need to offer some lower price points but remember your customers are accustomed to a luxury experience.  Even if you are changing the price points do what you can to still offer the luxury experience associated with your brand.
• Develop new trips at a lower price point. The obvious way to do this is to offer slightly shorter trips but there are other ways to alter itineraries to be profitable at a lower price point.
• Yield management and price discrimination allow you to reach consumers in multiple price points without lowering overall revenue.  See my revenue management post for ideas.
• Don’t cut capacity too much. Luxury operators are in a more challenging position than most tour operators because of a greater reliance on trained staff and larger capital invesments (e.g. helicopters and lodges).  Small capacity changes are in order but make sure your revenue is sufficient to keep your assets and key employees.

**Image courtesy of Train Chartering, Private Hire Trains & Rail Cars’