Is tailored travel valued enough and rewarded enough to survive in a world where the customer feels entitled to a tailored suit provided "at cost"? A ferrari with the same mark-up as a fridge?
A tailor is understood and valued. Part of an established profession. And anyone going to a tailor understands there is a premium to be paid. A premium over and above that paid for short-run high-end products, such as an Yves St Laurent suit. That short-run high-end standard product (the suit, or the Rolex, or the Gucci shoes or the Ferrari) also has its own established mark-up. Interestingly, the mark-up on production is actually higher than for a tailor due to the very high costs of marketing and distribution (advertising, offices, catwalk etc.). So, even though the suit from the tailor costs more than the off-the-shelf high-end brand, more of what the customer pays goes into the actual product. The materials, workmanship etc. Whereas what is paid for the high-end brand essentially funds the promotion of that brand.
But, going back to the start, the suit from the tailor costs a lot more than an "ordinary" suit, and the market does not have an issue with rewarding the tailor. The full article I found most useful can be found here. A top London tailor would have direct production costs of 33% of the sales price of their suit. Doing a very rough approximation of indirect costs as 100% of direct costs, the margin would come out at roughly 34%. Every single luxury travel company I know would absolutely love a margin like that. We pay our staff probably half of what a London tailor does, and we still have margins of under half of what a tailor does. Our production costs are also well more than twice the norm. So the value for money to the customer is really most excellent.
One must wonder (as one of our clients did), if this is sustainable. That's a serious question. Are customers interested in paying enough to ensure a truly tailored travel service continues to exist? At the moment a large part of this lack of sustainability is borne by idealistic companies like ours who believe it should become possible. How long will that enthusiasm last? I was told 15 years ago my business model would never work. Other companies which started with high ideals like ours have adopted a more mechanized approach to life. Thanks - in large part to the individuals who advised us to charge a little for our time a number of years ago - to the management fee which has not halted our 30%+ growth year on year, we have managed to hold the line as a true tailored travel company which has never once in 15 years repeated an itinerary. We still can't afford a swimming pool at home, but we have a profitable company with high-energy hugely motivated staff providing leading edge service to our clients from around the world.
And - most importantly - there is a growing group of clients out there who truly value what is provided by a company like ours and has no issues with us charging what seems like more for an enhanced experience/service. Note I say "seems like more" as there are many ways for companies to hide margins in quotations. Standard practice actually.
So let's look at the other side. What does a tailor actually do for a living? They are master craftsmen, know where the finest materials are, how to best put them together. And also understand the difference between what the client asks for, what the client truly wants, what the client needs and what the client has never mentioned but would surely value highly. Great, we do the same. But that's where things start becoming a little different. A tailor would have maybe a few dozen suppliers. We have a few hundred. A tailor would have little time pressure. We are expected to turn out a preliminary design in 24-48 hours. A tailor gets paid according to their invoice. We get questioned. (hotel x has a special on their website 4% cheaper) And expected to match the lowest global cost - which is of course possible, but the re-negotiation with the supplier takes time which of course equals money. A tailor puts together an item or a set of items for an individual. We have to put together a coherent portfolio of items for multiple family members across multiple situations. Where everyone expects the highest individual satisfaction. A tailor has established suppliers and can plan for growth. We have suppliers who get filled up quickly and others who decide to play the futures game on the internet with multiple booking engines. And then of course we manage the "production" of our clients holiday in New Zealand bearing in mind weather, tiredness, injury and everything else which impacts on human beings.
Wow. And we get paid half of what a decent tailor makes while pulling off this major production? Crazy. And I can fairly much guarantee our margins are well below any business activity which has allowed any of our clients to look at a high-end tailored trip to New Zealand. (that's for the people who question our management fee - almost unsustainably low at 6%)
So yes - the last luxury bargain on the planet is luxury travel. I certainly hope it will become less of a bargain so I can pay my staff more and build my swimming pool. But for the moment I think the world doesn't know how lucky it is.