Unpacking the Strength of the Luxury Travel Market
Our latest survey results reveal how the wealthy feel about the economy, service, and their next vacation.
In early August, I reported on the results of a survey of wealthy U.S. consumers I conducted in partnership with Chandler Mount and his Affluent Consumer Research Company. Among our key findings: Demand for luxury travel was taking off, consumers were splashing out for bigger and further-flung trips, and younger folks use a different set of yardsticks to gauge their satisfaction with a travel brand.
Since then, ACRC has been fielding the survey on a continuous basis, asking the respondents — U.S. adults earning $200,000 or more in household income and residing in affluent-dense neighborhoods — for their thoughts about spending, travel, service, and more. That lets us track how their outlooks are changing over time and helps us forecast trends. I’m pleased to share a few significant takeaways with you here.
The information below is based on a subset of travelers in the survey data, representing those classified as “affluent” or “wealthy,” with an average income of $635,000 and an average net worth (excluding residence) of $17.4 million, with plans for luxury travel in the next three months. The data largely compares two periods: September 1 – November 8, 2022, and July 1 – August 31, 2022.
There’s more to share — if you’d like to see more of the data or have questions about specific statistics, please get in touch!
1. The Overall Financial Picture? Downright Marvelous
Despite market gyrations, rising interest rates, financial disarray in the UK, crypto meltdowns, and constant warnings of a global recession, the affluent luxury U.S. travelers surveyed have remained confident with their personal financial situation. Nearly eight in 10 (78%) said that their financial stability is better than it was three months ago, and 83% predict their finances will be even better a year from now.
That confidence — looking into both the crystal ball and the rear-view mirror — means the wealthy see themselves as doing markedly better than the general affluent population (46% improved over the last 3 months, up four points from July/August). Furthermore, 73% believe the financial stability of the U.S. is better than it was three months ago — suggesting a greater confidence in the economy than many pundits and politicians would have you believe.
The result of all that self-assurance? More affluent luxury travelers (69%) intend to spend higher amounts on luxury goods and services in the next 12 months. And 67% say their spending increased over the past year.
The Takeaway: The always recession-resistant luxury leisure segment is showing itself to be resilient in the face of economic headwinds. That should help the industry get through any potential slowdown in the rebound in corporate and MICE business (which seems inevitable, if Disney’s recent ban on nearly all travel for work is any indication).
2. Contradictory Attitudes About Spending
To back up these numbers, we asked affluent luxury travelers about their overall attitudes about spending in the face of financial instability. More than two-thirds (70%) said that talk of recession doesn’t change where and when they spend their money; 74% say that even in times of financial uncertainty, they buy high-quality products.
On the other hand, 68% agreed with the statement “Now is a good time to limit my purchasing.” That apparent contradiction reveals a delta between what luxury consumers think they should do and what they know they will do — continue to spend their money on things that will make them feel good and provide value.
Similarly, most affluent luxury travelers (70%) agree that political or economic uncertainty makes booking a vacation risky right now… but 71% have luxury travel plans in the next three months. Granted, those are existing plans, and the time period includes the festive season. But the numbers indicate a significant gap between a universal sentiment (“people” in general should be wary of booking travel right now) and a personal intention.
The Takeaway: As we’ve seen in previous financial crises, luxury travelers are sensitive to the fact that they are enjoying an experience that many other people cannot. Discretion is key, ostentation is out. Luxury travel marketers should emphasize quality, reassuring on-the-fence clients that they’re spending their money carefully and well.
3. Travel confidence — local, domestic, international — is going up, up, up.
Among affluent U.S. luxury travelers, confidence in all types of travel is growing significantly, with 80% saying they are very or extremely confident in international trips (+11 pts. from July/August), 85% in domestic trips (+12 pts.), and 84% in local area trips (+9 pts.). Luxury traveler sentiment is confirmed by real world metrics: Trade.gov reported U.S. citizen air departures to international regions in September 2022 was 4.57 million people, or 1.8% more than in September 2019.
More than 8 in 10 luxury travelers (85%) say they are likely to purchase a stay at a luxury-branded hotel or resort in the next three months, 83% intend to book a premium airline seat, 73% intend to book a luxury cruise or yacht vacation, and 27% are likely to book private jet travel. Those numbers have remained largely stable over the course of the survey.
The Takeaway: There’s no doubt that luxury travel is booming, and that’s something we can all profit from… while it lasts. There are several factors at play here, including the strength of the dollar, the relative containment of the Ukraine conflict, and post-election stability in the US, UK, and Brazil. But any of those circumstances (or something else) could shift and change the equation drastically. Don’t count all your chickens just yet.
4. Want to improve service scores? Get a drink.
Hotels in general are earning high scores for service: When we broke down service satisfaction in the past three months by various components of the stay, 77% of respondents say they’ve received excellent or very good service from restaurant staff, 69% from amenity staff, and 71% from front desk staff. The lowest score (57%) was for beverage service staff — and yet, that category was also the highest in the Hotel Service Satisfaction Index, a measure of how important that component is to the overall experience.
In other words, interaction with hotel bartenders and cocktail servers can really make or break a hotel stay from the service perspective. I know this from my own experience: The bar is where I tend to be more relaxed, more open to chatting with a staff member — and more irritated when I can’t get a drink in a timely fashion. The survey shows us that bar service seems to be the most lacking, and I’m guessing that it’s where hotels see more turnover and hire more junior employees. Instead, they should focus on training and retaining good people in that area of the operation (as with all front-of-house positions). A good score here will earn them more lift in service scores overall than other sectors.
Overall, it’s more important than ever to deliver on service given the prices travelers are paying. Nearly three-quarters of respondents (70%) say there’s a disconnect between quality of service and prices. Even more (86%) say that luxury brands must protect the sanctity of service, and 92% say they go where they are treated best. The upshot is that expectations for good service remain very high, and high prices increase the risk of dissatisfaction and disloyalty.
The Takeaway: As you look at setting rates in 2023 and beyond, continue to be mindful of the value proposition — luxury consumers don’t have infinite patience when it comes to service lapses. And be sure ALL your frontline staff is well trained and happy, as it only takes one unpleasant encounter to ruin an entire experience.
Overall, the survey results are very encouraging, and I’m curious if the continued enthusiasm for luxury travel is reflected in your own results.
I also caution us all against complacency.
Now more than ever, we need to make sure guests feel appreciated (cue your CRM strategy), their loyalty is rewarded, and we continue to meet their ever-rising expectations. It may feel as if we’re all sitting pretty as we head into the new year. But as I mentioned above, the situation could go downhill — fast. And as more hotels and destinations open up left and right, competition is stiffening. This is the time to stay on our game.
What about you? Are you planning for sustained growth or hedging against a downturn? Would you be interested in seeing further data from the survey? Let’s keep the conversation going!