NetJets fractional ownership model has revolutionised the private aviation industry
The word ‘renting’ does not necessarily conjure up images of extreme luxury. Indeed, the word ‘rent’ itself generally refers to a system whereby consumers experience something they can’t necessarily afford to buy. Whether it is a home or a car, or more recently, a private jet or a piece of fine jewellery.
Hire purchase and financing agreements have allowed the luxury car market to grow far beyond a pool of consumers with the disposable income to collect all of their finest creations. Fractional ownership famously opened up the luxury real estate market to an aspirational segment, which leveraged power in numbers to share expensive overheads.
The logic of such systems has not been lost on the affluent, or at the very least, those marketing to the affluent. With the understanding that many wealthy people have become wealthy (and remain wealthy) because of their ability to manage money in smarter-than-average ways, a host of rental and fractional ownership models are making all kinds of luxury more economical.
“ In the new luxury economy, people look at value & pleasure as a joint proposition ”
“The codes have changed since the crisis,” explained Alexandre Azoulay, president and cofounder of Wijet, to the NYTimes. “We’re in a phase I call Luxury 2.0," he continued, "where people look at value and pleasure as a joint proposition.”
From a value standpoint, the idea of partially owning or renting a yacht or a jet makes an infinite amount of sense. Aside from the oft-gargantuan cost of out rightly purchasing the hardware, significant monthly amounts must be sustained to keep said yacht or jet serviceable, regardless of whether or not it is being used.
Where the value is perhaps less perceivable is in the market for luxury goods. These seasonal products don’t always have a long lifespan, and those that do – namely serious timepieces or fine jewellery – tend to be products consumers like to own, if not collect.
Yet a handful of start-ups are challenging what the industry believes about the desires of the affluent, launching fractional ownership and membership programs for value seeking spenders.
“At NetJets and Marquis Jet, I experienced first-hand how many consumers of luxury products are increasingly interested in access rather than ownership,” explained Randy Brandoff, founder of Eleven James, to Forbes.
The former chief marketing officer of NetJets has launched an annual membership program that provides access to a curated selection of luxury watches. “Members have each watch for two months at a time, long enough to really enjoy it, but not too long for the excitement to wane. They can opt to receive three or six different watches per year – from several different price categories.”
The company is hiring out timepieces from IWC, Patek Philippe, Rolex and Vacheron Constantin, even the iconic Audemars Piguet Royal Oak. Membership fees range from $249 to $1,599 a month depending on the retail prices of watches borrowed and the frequency with which members swap timepieces (Financial Times).
“ Many consumers of luxury products are increasingly interested in access rather than ownership ”
Technology billionaire Michael Saylor is leveraging the model to monetise his own collection of yachts, focusing initially on the charter market in Miami, Florida. Through his Fleet Miami platform, members purchase blocks of credits that are exchanged for charter, with a minimum buy-in of $250,000.
Credits can then be applied towards usage of any of the various yachts in the fleet, though users are then liable for all provisioning costs (including fuel and dockage), crew gratuity, applicable taxes and any other out-of-pocket expenses.
The model is less complicated than most fractional ownership programs, in the sense that members can exit the program at any time and have their outstanding credits refunded in full. The nine-vessel-fleet currently focuses exclusively on the Florida Keys. “Think of it as NetJets for yachts," decreed its founder, "albeit more exclusive and less ambitious.”
As yet, most fractional ownership programs have been squarely aimed at the HNW population, as opposed to the ultra high net worth level of consumers. But just as more aspirational consumers are looking for access when it comes to luxury, for the ultra-rich and their global lifestyles, convenience has become a strong currency in its own right.
Take for example Soleil d’Or, a private high jewellery club based out of London, with a revolving collection of exceptional pieces. The service is designed for the ‘worlds most successful women’ who regularly dress for special occasions internationally, who are unable to travel conveniently with their own jewellery collections.
The business offers its members exclusive access to a curated selection of vintage, contemporary, and bespoke high jewellery from established houses and private collections. Either to “rent” for a period of time or for purchase. Soleil d’Or will also their clients to source individual pieces or build their own fine jewellery collection. Membership is by invitation or personal recommendation only.
“ Global interest in luxury has never been so strong, and consumers have never felt so entitled ”
Realistically, we are seeing the fractional ownership model work across all kinds of luxury industries, appealing to a wide range of consumers and wealth segments.
Whether it be renting a Chanel 2.55 Bag for one week from the myriad of online portals for fashion and accessories, or joining NetJets to most economically leverage the art of private travel.
Global interest in luxury has never been so strong, and consumers have never felt so entitled to luxury. And with the advent of new programs and ownership models, this trend only looks set to strengthen. It will just be interesting to see what actually constitutes ‘luxury’ in the near future, when the market has thoroughly opened itself to all.
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