As Times Turn Tough, New York’s Wealthy Economize: Plastic Surgeons, Jewelers, Yacht Builders Brace for Leaner Times; Saying No to Caviar September 19, 2008 – Posted in: Press

By ELLEN GAMERMAN, CHERYL LU-LIEN TAN and FRANCINE SCWADEL
Published: September 19, 2008
Wall Street Journal

A nose job in a hospital with a private nurse in attendance had been something of a rite of passage for Joan Asher’s children. But when her fourth and last child was ready for her own rhinoplasty recently, Ms. Asher asked her to postpone it.

The financial markets were simply more out of whack than her 16-year-old’s proboscis.

“The other noses were more prominent,” the stay-at-home mother from a tony New York City suburb in Westchester County told her 16-year-old daughter. She could get hers done when things settled down.

The financial crisis on Wall Street has New York’s well-to-do reeling. The people who fuel the area’s economy with their spending on art, fashion, cars, restaurants, plastic surgery and other luxe goods and services are starting to cut back once-lavish budgets. As a result, those who cater to their every whim — from nanny agencies to jewelers to yacht builders — are seeing clients tighten their belts on expenses from the millions to the thousands.

At luxury boat builder Northrop & Johnson Yacht and Ship, headquartered in the British Virgin Islands, director Kathleen Mullen says a New York investor called this week trying to put off the purchase of a more than $25 million megayacht. The client’s debating whether to back out of the deal completely. He’ll still have to pay 10%, Ms. Mullen says, since he’d already signed the contract. “He’s undecided about what he wants to do,” she says. “People have been very shaken.”

On Thursday, a New York mother of two young children asked Carol Solomon, the owner of New York Nanny Center Inc., whether she could find a good nanny willing to work for less than the $1,200 a week sought by a candidate she had found elsewhere.

“Based on everything that’s been going on with the market,” the mother told Ms. Solomon, “I’m concerned about committing to that kind of salary.” Ms. Solomon suggested another nanny seeking a more modest salary of $750 a week.

As with Ms. Asher’s daughter, cosmetic surgeons are feeling the pinch in their nips and tucks.

Disappointing Birthday

For her 50th birthday, Annette Pucci, a New York retail manager, planned to treat herself to a facelift by cashing in $15,000 in stocks. But after consulting with her husband, a manger with Consolidated Edison Inc., she realized their stock portfolio had taken such a hit that it was out of the question.

“It was a very big disappointment,” Ms. Pucci said. Her consolation: a $1,200 Botox treatment she had this week instead.

Plastic surgeon Z. Paul Lorenc says one patient recently asked him to inject half a syringe of Restylane and save the rest for later to save money. He refused. “Every single patient that I have seen today so far has mentioned that there’s uncertainty on Wall Street,” Dr. Lorenc said this week. “Everybody’s waiting for the other shoe to drop.”

Ms. Asher was able to let her daughter get her nose job before school began after plastic surgeon Alan Matarasso said he could do the procedure in his office operating room on Manhattan’s Upper East Side for about $2,500 less than if they went to a hospital, stayed overnight and hired a nurse. At home, Ms. Asher stayed up most of the night after the surgery, putting cold compresses on her daughter’s eyes every 20 minutes. “She was fine,” she says. “It came out great.”

On the party circuit, many New Yorkers aren’t canceling events, but some are seeking to make them less ostentatious, says Bronson van Wyck, who runs New York event firm Van Wyck & Van Wyck LLC with his mother and sister. Earlier this week, the children of a Wall Street executive who are planning his 65th birthday party contacted the firm to change the menu. Out went the caviar and truffles and in came Wagyu beef instead. The new menu won’t cost any less, Mr. van Wyck says, but “it’s less overt.”

Bright Spot Dims

Expensive jewelry — one of the few bright spots in the luxury-goods industry until now — appears to be a new victim of the financial crisis. Patricia G. Hambrecht, who helps private clients buy and sell high-end jewelry, this week watched a client in the financial-services industry slash his budget for his wife’s wedding anniversary present to $20,000 to $25,000 from $50,000.

Another client, a woman who had been eyeing a $30,000 pair of diamond hoop earrings, explained this week that her husband works in the financial sector, and “this isn’t a good moment,” Ms. Hambrecht says. “There’s a reluctance to spend money right now,” she says.

Jewelry designer Tina Tang said August sales were down 50% year over year and foot traffic was off 75% at her Gold Label by Tina Tang store in Greenwich Village, where she caters to professional women with items that go for as much as $16,000. She expects sales to fall more this month. To clear merchandise and generate cash flow, Ms. Tang is holding her first ever storewide sale, slashing prices on all items by 25%. “We’re feeling it,” she said.

Art and Money

Despite Sotheby’s record-breaking auction of Damien Hirst’s artworks in London this week, many galleries fear fallout from the crisis on Wall Street. Chelsea art gallery owner Nick Robinson says he expects the work of popular artists who command prices of more than $250,000 in his gallery will still sell well, because people will consider the art an investment. But mid-career artists with lower-priced pieces may suffer because the value of their work is less certain, he says.

For example, a couple just backed out of purchasing a $12,000 photograph from Mr. Robinson’s gallery. When he called to finalize the sale, he says, “It was a vague, ‘Well, I don’t really need it anymore.’ ” Mr. Robinson, who thinks the problem was cash flow, says it’s highly unusual for a customer to back out at the last minute. “It’s the only time it’s ever happened to me,” says Mr. Robinson, who’s been a dealer for 10 years.

The full impact of the financial crisis on those who sell to the wealthy won’t be known for months since much of the big spending by folks on Wall Street is fueled by the bonuses they receive between December and February. The prospect of smaller bonuses this year has realtors, retailers and renters of villas in the Caribbean on edge. Glenn Ormiston, a reservations agent at Wimco Luxury Villa Vacations and Hotels, in Newport, R.I., says her company’s villas on the island of St. Barts are all booked for Christmas but notes that clients have until mid-October to pay in full, cancel or trade down to a smaller property.

Some businesses, of course, are benefiting from the crisis. Todd Walter, chief executive officer of Red Door Spa Holdings, which operates 30 Elizabeth Arden Red Door spas in the U.S., said the spa chain has seen an uptick in foot traffic for treatments like massages and facials this week.

“There’s tremendous uncertainty and a tremendous amount of stress out there. People are coming in and looking for a small amount of relief,” Mr. Walter said, noting that spa revenue is up 5% to 8% this week from a year ago.

At Roundabout New and Resale Couture, a consignment shop on the Upper East Side, manager Kristjansen Villanueva says a woman came into the store for the first time on Wednesday saying the “resale” sign in the window caught her eye.

Mr. Villanueva says the customer told him she’s watching her spending because her husband works at Lehman Brothers and their finances were “a little bit shaky.” He says she bought an Armani pinstripe suit for $499 — when buying it at a boutique would have cost her $2,500.

The Family Jewels

Tobina Kahn, vice president of House of Kahn Estate Jewelers, which buys and sells high-end jewelry, said she’s been “bombarded” with calls from people seeking to sell their jewelry and gold watches quickly since the financial headlines turned particularly dire this week. Ms. Kahn, whose company is based in Chicago and Palm Beach, Fla., said she normally gets four to five calls a day from sellers but has been getting about 40 calls each day this week from people in their 30s to those who are retired.

“I’ve lost my voice talking to people,” she says. “We’re not seeing panic, but these are items that they’ve inherited or perhaps bought when they had great salaries and they’re thinking, ‘Boy, I’d better cash out now.”