Affordable Luxury Gains Popularity Despite Squeeze On Vacation Budgets
Despite the squeeze on vacation budgets these days, a new report indicates that ‘affordable luxury’ is becoming increasingly popular.
Produced in association with Oxford Economics, the WTM Global Travel Report reports that consumers generally remain determined to go on holiday and many of them are prioritizing upmarket options.
In fact, the report released during this year’s World Travel Market in London, found that ‘affordable luxury’ is becoming more popular ‘amid promising sentiment overall.’
The report notes that this growth area in travel aligns with a broader trend for consumers to seek out new and unique experiences on holiday.
“After the pandemic and restrictions on travel, many have wanted to upgrade their experience … as consumers proactively catch up on missed tourism experiences,” the report states.
Some of this demand may be the result of continued pent-up demand and savings accumulated during lockdowns – and relatively low unemployment rates in most countries.
It also points out that: “Consumers unaffected by economic downturns are likely to continue opting for luxury destinations. Meanwhile, those in lower income groups might increasingly feel the impact of squeezed personal incomes and seek out more budget travel options or reduce their travels overall.”
The report cites US consumer data from MMGY that suggests that the cost of living is having more of an effect on households with annual incomes under $50,000. However, those earning more indicated a ‘high likelihood’ of future travel.
Nonetheless, the report warns that some of the post-pandemic drivers of travel demand may have ‘gone into reverse in recent months,’ posing a risk to continued expansion.
It points to persistently high costs and the recovery of sterling and the euro, which is making the purchasing power of the US dollar weaker in Europe.
The price of jet fuel is significantly higher than at the start of the year, putting pressure on airfares.
Meanwhile, the travel industry continues to face supply side problems, amid geopolitical events such as Russia’s invasion of Ukraine – and staff shortages still affect many markets because large numbers of workers switched to other sectors during the pandemic.
Consumers’ personal disposable income is also under pressure as their own transport and other living costs rise.
Despite these headwinds, the report notes: “Higher costs have not yet been a significant deterrent to growth and travellers appear willing to pay higher prices.”
Juliette Losardo, Exhibition Director at WTM London, said: “We are witnessing a remarkable resilience as people are still prioritizing travel and many are seeking ‘affordable luxury,’ such as higher rated accommodation or premium economy and business cabins instead of economy.”
Losardo continued: “This offers those in the travel industry a chance to help consumers who want simple travel hacks to get more bang for their buck, such as being more flexible with departure dates or finding destinations that offer better value for money.”
And she added: “Savvy travel firms can capitalize on this tendency for consumers to value comfort over saving money by providing top tips for clients, loyalty schemes or added extras, for example.”