We are a share-happy nation.
In fact, the age-old philosophy once relegated to kindergarten classrooms–you must share!–has become a veritable disruptor to the way we think about services, possessions, and even our homes. The rise of AirBnB, ZipCar, and Rent the Runway are just a few examples of the plethora of sharing-based companies that have taken off in the past few years. They’ve now got the numbers to back the surrounding noise, too: AirBnB features more than 300,000 active listings, and Uber recently raised more than a quarter billion dollars in venture funding. Their success makes a lot of sense, especially in light of the recent recession and our ensuing recovery.
But what about the luxury sector? Much of the language attached to shared services advocates benefits that don’t necessarily appeal to high earners: The major focus on money saving is not the kind of message designed specifically to entice an affluent demographic. And broadly speaking, this seems to be true even for services that do offer more high-end options; AirBnB, for example, includes mansions and yachts in its listings, but it does not make this a central, or even actively advertised aspect, of its story and does not ever take full ownership of the experience in a way that a luxury hotel or club does.
However, what has become clear of late is that the luxury sharing economy is ripe for development. “Collaborative consumption” can exist–and even flourish–for high-end products and services, as long as the necessary amount of trust is established. Ultimately, the assumption that those that can afford to buy will always choose ownership over rental is incorrect. High earners can be just as open to the flexibility of shared commodities, assuming they are presented, and marketed, in the right way.
Age and Affluence: Understanding the Divergence
When marketing shared services to the wealthiest consumers, it is essential to keep two major factors in mind: age and affluence. Simply put, the younger the consumer, the more willing they are to share. Much of this is directly tied to income–generally, younger people are earning less, making them more amenable to crashing on a friend’s couch or in a strangers AirBnB-listed apartment.
But the acceptability of sharing is tied to youth in another way, too. Younger generations are already far more attuned to this concept on a broad scale, than their predecessors by virtue of growing up in an Internet-dominated world. This demographic has seen the success and normalization of peer-to-peer early adopters, including eBay and Craigslist. Furthermore, we’re talking about the Facebook generation, after all–this is a group of people that are used to sharing their pictures, their music, and their whole lives online. Sharing an apartment no longer feels like such a leap.
So a younger, tech-inclined consumer who does have money (not exactly a rarity, especially in Silicon Valley) won’t necessarily be a hard sell when it comes to renting a private island, sharing a luxury jet, or even booking a private home. However, failing to account for the older, affluent demographic would be a major oversight, and a major loss of revenue.
How do you appeal to both? By combining the best part of the rental economy–flexibility–with an experience that is managed, controlled, and vetted by a highly trusted source.
Building Trust: Combining Old and New Models
Of course, there is already a well-established model in place for selling rentals to the wealthy: luxury hotels and resorts. For hundreds of years, people have felt comfortable renting a hotel room because they knew that the room would be serviced, that they could expect a certain standard and that they would be taken care of. In the last 50 years, the prevalence of brands–Ritz Carlton, Four Seasons, Fairmont–heightens this level of trust even more.
The accommodation example is a good one, not least because of the success of AirBnB. The Internet has automatically made home rentals more appealing, as evidenced by the rise of Home Away 10 to 12 years ago. By making detailed property photos and information available online, consumers were able to easily look into renting a vacation home for a short period of time, without the involvement of a travel agent.
The ease of access provided by the Internet has greatly contributed to the range of items now available for rental, and the ability for potential consumers to vet before they spend. The key to drawing in the affluent is to ensure this accessibility of information combined with the services, and verification, established by the luxury hotel model.
The Key: Services Must Be Exclusive.
The primary difference between a ZipCar or AirBnB and companies like NetJets, Exclusive Resorts, or Inspirato is that those in the luxury sharing business manage and control the underlying asset. It’s not openly brokered on the marketplace and is under the exclusive control of the company.
For accommodation services, this is particularly important: While you can assume some consistency of set-up and appearance when renting a certain model of private plane, houses can vary widely. For luxury home rentals, companies do well to mimic the better parts of the hotel experience–an expected level of maintenance, concierge services, and so on.
Furthermore, these assets should only be available to a certain subset of people through members-only policies, further removing the risk associated with more open-ended models.
The most successful companies, however, are bringing in a third party that is already trusted by this demographic to add further credibility to their offerings. Trusting a relatively new company like NetJets would seem far riskier if they weren’t backed by Berkshire Hathaway, for example. This gives potential consumers a substantiated level of comfort–sharing is a more appealing proposition when it is vouched for by a longstanding, much-trusted source.
So why spend large amounts to rent a service when you are in a position to buy? The answer applies to all demographics, including the budget-conscious and luxury seeking. Renting allows the consumer so much more flexibility–why buy one vacation house, or two, or three, when you can rent one somewhere new every couple of months? The overall benefit of the shared economy is the ability for consumers to experience more. Avoiding the ties of ownership for a curated, controlled, and verified service is a no-brainer for wealthy consumers. Companies that recognize, and capitalize on this are in a prime position to make a huge impact on the luxury market overall.