In 2006, the first baby boomer will turn 60, and American business is taking notice.
At every stage in their development, the baby boom generation has redefined American culture and business. When they got their first jobs, consumer spending soared. When they bought their first homes, the housing market boomed. And now that they are approaching old age, they will no doubt once again inject excitement into certain sectors of the economy. The trick is knowing which sectors will be most affected by the shifting demographics and determining how to put yourself into the thick of the action.
One of the key features of the baby boomers is that they spend, and heavily, on themselves. Analysts and demographers say it is unlikely that this generation will simply settle down with a book and a rocking chair, and hope to pass on their life savings to their children. On the contrary, the baby boomers will be looking to go out with a bang. They will be traveling, buying second homes and flocking to fitness centers, plastic surgeons and health care facilities as they seek to extend youth as long as possible.
In recent years, there has been a trend in the domestic tourism industry toward more individual-centered travel. HoJo's and the Holiday Inn won't disappear any time soon, but there is a great deal of new investment in smaller scale travel options, such as boutique hotels and bed and breakfasts. This trend will accelerate as the baby boomers reach retirement age (even if demographers say actual retirement may yet be a few years off for them). The boomers will, by and large, prefer scenery to adventure, and quiet to crowds. Analysts say such options as wine-tasting tours, guided historical tours, health spa getaways, relaxation centers and gourmet restaurants will increasingly be favored.
The boomers are also beginning to buy second homes in record numbers. Although low interest rates certainly aren't hurting this trend, analysts say it has more to do with the baby boomers buying vacation homes in favored retreat locales and with their looking for investment alternatives to financial instruments. As the trend deepens over the coming years, the surge in home ownership will mean more opportunities for home improvement suppliers. The average buyer of a new home spends nearly $9,000 in the first year of home ownership in such areas as decorating and furnishing, remodeling, gardening and maintenance and cleaning. The boomers have more disposable income than most, and their home improvement spending will represent a significant opportunity for business owners in these fields.
The health care and fitness industry is also getting a big boost from demographic trends. Let's face it, growing older means more trips to the doctor and, generally, more maintenance needed to keep our bodies functioning properly. While the bulk of this money will obviously go to doctors and hospitals, there are also emerging opportunities for small businesses. As the boomers enter their 60s, they will spend more money on fitness centers, vitamins and supplements, alternative medicine, exercise equipment, tanning salons, hair removal and health spas.
Although there is no such thing as a sure thing, analysts say it is a safe bet that small businesses in these sectors are poised for growth. In the coming years, such businesses will increasingly be dominated by the needs and tastes of this demographic group. Now is therefore the perfect time to get ahead of the trend by considering investment options that will target the aging boomers.