Luxe Influx: The high-end travel resurgence.
Travel is back despite years of pandemic-related hardships, and neither inflation nor still-recovering economies seem to be slowing it down. Just last year, air travel soared to 70 percent of its pre-pandemic levels worldwide. Hospitality was also booming across the globe, as hotel occupancy averaged almost 70 percent last summer–a 5 percent increase from summer 2019.
While tourism is booming overall, high-end travel is standing out as the current sector to watch. In 2021, the market was worth $638.2 billion globally. By 2031, it’s projected to hit $1,650.5 billion. This year, luxury travelers are expected to spend 72 percent more on airfare, experiences, and accommodations than they did before the COVID-19 era. Specifically, these travelers plan to spend an average of $5,000 per person on their next luxury vacation.
Factors driving luxury travel
While the pandemic threw a wrench in the tourism industry, it might ironically be one of the keys to its current resurgence. Many tourists are making up for years of lockdowns, restrictions, and social distancing by booking their dream vacations–and they are willing to shell out big bucks to make that dream come true. In fact, almost half of the participants in a recent survey specifically cited lost time during the pandemic as their reasoning behind plans to spend more on their next vacation.
Today’s travelers aren’t letting high prices stop them from making the luxury trip of their dreams a reality. Overall, 30 percent of tourists report having a higher vacation budget since the pandemic. An Expedia survey found 43 percent are open to splurging on their trips.
And when it comes to splurging, younger travelers reign supreme. The same Expedia survey found a large majority of Gen Z and millennial respondents (80 percent) were more likely to purchase upgrades on vacations. Younger tourists, particularly travel-loving millennials, are also helping to grow this sector thanks to honeymoons and other pricey romantic getaways.
Experiences are also boosting the market. By far, safaris and other adventurous excursions are the main drivers of growth and are expected to remain hugely popular. However, interest in lavish cruises (including river cruises and yachting) is growing among travelers and is expected to triple in market share by 2031.
Opportunities for the industry
Renewed ability to travel paired with larger vacation budgets present a host of opportunities for those in the industry. In addition to upscale cruises, airlines are also investing in upgrading their first-class offerings. The hospitality sector should also see a boost, as guests splurge on accommodations, concierge services, and experiences.
These eager tourists are also looking to advisors to ensure their pricey vacations are priceless, making luxury travel advising an in-demand business. Last year, a Flywire survey revealed a majority of luxury travelers rely on an advisor. Take Virtuosa, a company specializing in luxury travel consulting, which has seen a 47 percent sales increase this year compared to 2019.
After years of setbacks, luxury tourism is finally hitting a stride. While the pandemic and turbulent markets showed us how volatile the business of travel can be, it’s encouraging to witness the industry (and travelers) take off once again.
Danilo Diazgranados is an independent investor in the global food and wine, financial services, real estate, and the hospitality sectors.