Why catering to the rich and their dogs is good business
|A Cocker Spaniel attends the World Dog Show in Budapest May 19, 2013. Photo by Laszlo Balogh, Reuters / related stories: rich, richest|
EAST HAMPTON, New York - Judging by early demand for everything from doggie daycare to Ferrari rentals and fine art, rich Americans are going to make this a strong summer in one of their favorite playgrounds - the beach towns on the eastern end of Long Island collectively known as the Hamptons.
With stock prices surging, home prices recovering, and borrowing costs low, there is a renewed sense of confidence among the wealthy and the merely well off. It may not be conspicuous consumption of "The Great Gatsby" kind but it could be the best season since the financial crisis slammed the U.S. economy in 2008.
It is "new" money coming in that is making the difference, since the "old" money in the Hamptons never really stopped flowing, at least in terms of the ultra-wealthy spending on things like food, wine and household staff.
But discretionary spending did slow down over the past few years, so it's making a noticeable comeback now for vendors like Mark Humphrey, who has owned a gallery on Main Street in Southampton for more than 30 years.
"We had a good winter, and that just never happens. We are usually barely open," he says.
Last summer, he had a lot of browsers, but they rarely opened up their wallets. Suddenly over the past few months, he has been contacted by some of those window shoppers who were finally ready to buy, and he has sold 10 paintings at $5,000 to $10,000 since December.
It is a similar story for American Bull Rentals, which is for the first time expanding into the Hamptons with its rentals of mechanical bulls to bring the rodeo experience to house parties and fundraisers.
"I have a sliding scale, and for Hamptons calls, whatever amount I tell them, they say 'whatever, send the contract,'" says Mike Marrazzo, owner of Prestige Excursions, based in Bellmore, New York, which operates the service.
While rentals in other areas might run $1,400, he's getting $2,800 to $3,000 for his Hamptons bookings.
So far in 2013, luxury spending is correlating highly to the stock market. Both the latest study from the American Affluence Research Center and American Express's Survey of Affluence and Wealth in America, found that spending on second homes, vacation travel, dining in restaurants and new luxury cars is increasing.
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In the Hamptons, second homes can range from a cottage in East Hampton for $1.4 million to an 11,760-square foot mansion in Sagaponack for $13.5 million, with seven bedrooms, 10.5 baths, a swimming pool, tennis court, outdoor kitchen and lower-level entertainment center.
There are about 1,200 active sales listings right now. The Corcoran Market Report for the Hamptons for the first quarter of 2013 showed that the number of sales was up 20 percent over last year but average sale prices were down nearly 10 percent, because there haven't been a lot of high-priced sales so far this year. The next report comes out in July.
Prices may be hotting up. With locals whispering about Jennifer Lopez scouting properties in the area - and the New York Post reporting that she dropped $10 million on an estate in Water Mill - the summer season is just getting going.
As for rentals, there are still some available, but owners are not negotiating and they are going fast, says real estate agent Tom Friedman.
Friedman says his busy season started early this year - he usually doesn't get calls about summer rentals until mid-January, but this year they started in November, right after Hurricane Sandy, which largely spared Hamptons beaches. It didn't trickle off until mid-April, and now he's getting last-minute callers. They don't mess around with seeing dozens of places and looking for bargains, but instead jump on whatever is available - whether it is $20,000 per month for a small cottage or $550,000 for a beach-front estate.
That price probably includes a driveway, but in the Hamptons, there is daycare for your Bentley instead so it doesn't get damaged by the salt air. Good luck finding a space, though. The Bridgehampton Motoring Club, which has slots for 45 vehicles at two locations, is at capacity for now, says co-owner Adam Bellin,
The same goes for renting a Ferrari 458 Italia over the coming Memorial Day weekend for around $2,500 a day from Imagine Lifestyles Luxury Rentals, which services the northeast. The company is sold out of their entire fleet of Ferraris, Bentleys, Porsches and BMWs for the weekend. "We're definitely up this year. People are spending money, and demand is outweighing supply," says co-CEO Ryan Safady, who is based in Pennsauken, New Jersey
Also at capacity: doggie daycares and domestic services. "Memorial Day is busier than usual for us," says April Cullum, manager of the Hampton Pet Club, which has daytime care and overnight "hotel-like" accommodations for up to 35 dogs. She has her usual standing reservations that she's had for the past few years - dog owners who have an annual party and send the dogs out for the night, weekend Hamptonites who board their pets during the week - but also a whole influx of new dogs.
Hampton Domestics owner Vincent Minuto is turning away callers. New summer folk, he says, should bring their own help with them.
The rich are also spending on others. Lavish benefits are a hallmark of the Hamptons social scene, and so far things are going phenomenally well, according to Ruth Appelhof, executive director of Guild Hall in East Hampton, the area's chief arts venue. Overall, her fundraising is up 56 percent since 2009, and the big rise has come in the last year.
In March, a fundraiser honoring the retirement of the chairman of the board of trustees, Melville "Mickey" Straus, raised $2.5 million in one evening, when previous spring fundraisers only made about $500,000. "Mickey wanted to make sure we paid off the mortgage before he left," says Appelhof, noting the special draw of the event. Guild Hall was able to use $1.5 million to close out the balance of a $17 million renovation that it had been fundraising for since 2001, years ahead of schedule.
"We're feeling flush these days, but that's not to say we don't struggle every day to fundraise to keep our programs going," Appelhof says.