Orange County’s wealthiest are starting to spend again.
Resorts are seeing customers return, spas have more clients and yachts are sailing.
But to say that luxury is back would be an overstatement.
“We’re doing better than last summer,” said Cheryl Phelps, general manager for the Hyatt Regency Huntington Beach Resort & Spa.
People are coming, Phelps said, but they’re not spending as much as they did in the years leading up to the recession. Many still are looking for a deal.
The county’s wealthiest largely reined in spending in the past few years as their portfolios took a hit with the rest of the economy.
They’re now cautiously branching back out.
The Montage Laguna Beach resort has seen an uptick in occupancy and length of stays, use of spa services and food and beverage sales.
Sunseeker Yacht Group’s Newport Beach office, which sells yachts 60 feet and larger, reports brisk business.
Sunseeker sells eight to 12 yachts a year, said Joel Romero, vice president of Sunseeker. The average sale is $2.5 million and about 80% of its customers buy with cash.
This sales growth—albeit tempered—can be tracked across a variety of luxury sectors.
Sales are on the upswing at Newport Beach-based Lugano Diamonds, an appointment-only store that features high-end jewelry.
But purchases have been limited to mostly special occasions, said Lugano’s president, Moti Ferder.
While luxury auto dealer sales are up this year when compared to last year, they’re still not seeing the same number of people coming in to the dealerships as they did in 2007.
Those that are coming are looking at higher-priced models, according to Mercedes-Benz dealers.
Sales of the $60,000 Mercedes-Benz E-Class, for example, are up 119% this year over last year at Mercedes-Benz Foothill Ranch and Mercedes-Benz Laguna Niguel.
But overall, the number of buyers coming in to luxury auto dealerships is below pre-recession levels.
Roger Fletcher, general manager of Newport European, which sells Rolls-Royce, Lotus and other luxury cars, said sales are up in general at the Newport Beach dealership.
Rolls-Royce, part of BMW AG, reports that June sales were four times what they were a year earlier.
The automaker produced more than 300 autos in June and all models are sold out until September.
Customers are attracted to Rolls-Royce’s Motor Cars’ new Ghost model which, with a price tag of $245,000, is a relative bargain compared to the $380,000 Phantom.
People are spending with an eye on value.
They’re taking advantage of deals on just about everything, from oceanfront homes to hotel stays, market watchers say.
“We’re seeing a lot of cash (home)buyers that are taking advantage of the reset in values,” said John McMonigle, owner of The McMonigle Group, which sells houses along OC’s coast.
The number of existing homes sold in Newport Beach priced at $3 million or more was up 31% in the first two quarters, compared to the first two quarters of last year, McMonigle said.
Existing homes sold in Newport Beach worth $5 million or more are up 41% for the same time period.
“The stock market makes people nervous, so buying a luxury home and utilizing it is a logical choice,” McMonigle said.
To attract wealthy people who want more for their dollar, resorts, auto dealers and others that sell luxury goods and services are offering more services for the money and lower-priced (relatively speaking) luxury products.
At the Balboa Bay Club & Resort in Newport Beach, guests are looking for value, said Terri Reid, executive director of sales and marketing.
“Our guests still want to experience a beautiful setting on the water, but guests are looking for value,” Reid said.
The Montage is trying to make stays more attractive by adding perks such as breakfast, spa treatments or parking to the rate package.
The hotel also created luxury programs to boost revenue, such as Surrender, a $455 personalized spa treatment.
“Our goal was to increase value, not necessarily to discount anything,” said Todd Orlich, general manager of the Montage.
The Montage targeted repeat guests for these packages.
“That’s worked very well,” Orlich said.
The average length of stay has increased and so has the spa and dining business.
“They’re both doing extraordinarily well this year,” Orlich said.
Revenue is up 17% year-to-date, he said. Occupancy is up 11% year-to-date.
While spending has been a bit sporadic, wealth itself is on the rise, according to David Winter, head of the Luxury Marketing Council’s Southern California chapter. The trade group is made up of companies that sell luxury goods and services.
New York-based Capgemini U.S. LLC’s World Wealth Report released in June estimates that the number of super rich (at least $30 million in assets to invest) in North America is trending upward.
In 2009, the number of the super rich grew to 36,000, up from 30,000 in 2008.
Still, the number of super rich is down from 41,000 in 2007.
The number of people with $1 million in assets fell 19% in 2008, but rebounded 16% to 3.1 million people in 2009.
Winter predicts that it’s only a matter of time before the rich get back to traditional spending habits.
“Those who say that high net-worth individuals will never return to their previous spending habits have never studied history,” Winter said. “As soon as the credit markets open back up, so will the wealthy’s wallets.”