World outbound travel is booming and, according to IPK’s World Travel Monitor®, the global travel industry set new records over the first eight months of 2017. The luxury travel sector in particular has embarked on a paramount transformation fueled by changing consumer preferences that will have far-reaching ripple effects in the years to come. While luxury travel only accounts for 7% of all international trips, it encompasses nearly one-fifth of global travel spending due to its high prices. Bouncing back from an underperforming 2016, the International Luxury Hotel Association (ILHA) forecasts that the global luxury travel market is to generate $1,154 billion by 2022, growing a compound annual growth rate (CAGR) of 6.4%.
Evolution of Travel
Gone are the days of camcorders, backpacking, and in-person travel agents—though Polaroids and vinyl have made their way back into the mainstream. The premium travel market, traditionally composed of affluent consumers and senior business executives, is being transformed by aspiring upscale travelers and shifts in consumer demands.
With consumers spending more on travel regardless of economic standing, the luxury travel segment is being divided by the rich and the richer. There are those who are affluent and want the typical top-notch service, those who are affluent but don’t always need high-end treatment, and those who splurge for special occasions. However, others have found ways to enjoy multiple extravagant vacations throughout the year without really splurging at all. Studies show that millennials are more tech-savvy than previous generations, giving them the opportunity to find low-cost flights among other things. Trends also show that more and more people are buying experiences rather than products.
The term “luxury” shifts from traditional, material goods to intangible, memorable moments. The ITB World Travel Trends Report predicts that two-thirds of luxury hospitality will be experience-based by 2022. Many aspiring upscale travelers are looking beyond “universal and consistent” hotels in search of “unique and personalized” experiences from luxury hotels.
Airbnb has dominated this “unique and personalized” experience front. The room-sharing company sold more than 79 million bookings in 2016, up 40 million from the previous year, and is continuing to experience this rapid growth. By leveraging mass personalization and over four million listings, the company provides consumers with the local immersion and experiences they want; and, with their upcoming “Beyond” section featuring full-service, deluxe listings, Airbnb mimics the qualities consumers love about luxury hotels.
Nowadays, it seems everyone is off on once-in-a-lifetime vacations with unparalleled views and lavish accommodations. But, could it be a façade?
You’re Never Traveling Alone
There is no doubt that luxury traveling is steadily growing. It is not that this trend is flawed, but it could be misleading. Technology has revolutionized many industries, including the travel industry. It is no longer just about experiencing different cultures, taking in the scenery, and enjoying local food—no vacation is complete without a few Instagram posts in a bikini under palm trees, several Snapchat stories broadcasting cocktail hour at a trendy bar, and an entire Facebook photo album dedicated to the 5-day long outing. Going scuba diving in the Caribbean and relaxing at a five-star resort is fun, but it’s even better when there are people back at home living vicariously, albeit jealously, through social media posts.
While on a trip, 60% of travelers and 97% of millennial travelers share their travel photos. A recent study by Adweek shows that 52% of users dream about vacation while on social media platforms. Social media is bombarded with vacation photos, aspiring others to plan their next trip and mobilizing the “fear of missing out,” or FOMO, epidemic.
However, not all of this is attributed to organic user-generated content. Travel influencers are reshaping marketing strategies and social media. Sponsored by travel and lifestyle companies, travel influencers create inspiring, posh content and feed it to the masses. Out with old travel magazines and in with seemingly authentic influencers that are changing how people plan, where they go, and what they do. By promoting trendy, high-end companies and products, travel influencers are also helping prompt the growth within the luxury travel market.
Work Hard, Travel Harder
Inspired by friends, followers, and influencers alike, people are doing whatever they can to be on the other end of the FOMO dilemma. According to the 2017 LearnVest Money Habits and Confessions Survey, 74% of people say they’ve traded off financial stability for a vacation, owing an average of $1,108 in debt. Americans, accounting for a majority of global travel, spend 10% of their annual income on vacations on average, while some admit to spending 15% or more. In 2017, the spike in summer vacation spending represented a 12.5% increase over the previous year, showing an overall increase in American spending habits for the second consecutive year.
Vacation expenses are not limited to plane tickets, hotel stays, and restaurant outings—a great amount of money is also spent getting “vacation ready.” In preparation for trips, travelers buy new clothes, various travel essentials, and go to the salon for haircuts or manicures.
Travel accounts for a substantial part of annual income, yet over half of Americans have forgotten or failed to include travel expenses in their annual budget. The lack of budgeting contributes to increased spending and, perhaps, is how most travelers go through with such luxurious adventures.
So, What Does This Mean?
The redefinition of “luxury” from high-end products to personalized experiences demands a reformation in the hospitality industry. Technology is breaking barriers in luxury travel and companies like Airbnb are reaping these benefits. This industry will continue moving toward unique and personalized experiences. For hoteliers moving forward, here are some things to consider:
- Complement high-end approaches with high-tech applications. Revamp the hotel’s website, ensuring that it is robust. Rethink the digital marketing strategy, reach potential guests and turn them into repeat guests.
- Digitize content. Make everything, such as concierge service, accessible through mobile devices.
- Luxury traveling means luxurious amenities and experiences. Consider partnering with high-end spas, restaurants, and gyms to provide incomparable guest packages.
- Utilize social media. Encourage guests to use hashtags and consider hiring a travel influencer.