In a boon for the travel industry, a surprising new study shows the luxury travel demographic is six times larger than marketers are currently targeting. Luxury travelers are taking more trips and spending more money as the demand for high-end experiences continues unabated. However, high-income earners aren’t the only ones willing to pay for it.
Research provided by The Olinger Group found “luxury travel marketers typically target people with annual household incomes of $250K and up. Our research indicates that travelers with incomes of $100,000 and up are luxury travel buyers. They exhibit the same behaviors as higher-income earners and have the same attitudes and expectations.
CEO Jude Olinger shares the study’s biggest surprise was the discovery that the luxury traveler pie is larger than marketers in that field had previously realized. “Being a luxury traveler is more about having a luxury mindset than how much money you earn. So while the luxury travel industry is going after the top 5% of income earners, the pie is 6X bigger.”
Luxury Travel Isn’t Just for the Ultra-Rich
Luxury is defined as “an indulgence in something that provides pleasure, satisfaction, or ease.” While the rich may live a life of luxury year-round, the Olinger Group found the not-so-rich are willing to pay for a luxurious vacation.
Lower-income ($100K+) luxury travelers may have less spending capacity than higher-income luxury travelers. Still, they outspend and take more vacations than all non-luxury travelers, regardless of income.
John with Financial Freedom Countdown shares, “As an early retiree, I love to travel, so I ensure vacations are part of my budget. A safari to South Africa has been on my bucket list for several years and was an unforgettable experience. Although my trip was expensive, I will always treasure the precious memories of seeing the animals in their natural habitat.”
Seventy-eight percent of those surveyed said travel is more important to them now than it was pre-pandemic, and they are willing to pay for it. This is especially true for travelers ages 18 to 34 and 35 to 54, who are excited to explore after years in lockdown.
Luxury Travelers Are Spending More, Even as Hotel Costs Increase
Olinger predicts that luxury travel demand will remain strong in 2023. “Our data shows that luxury travelers expect to spend more – 25% to 33% more, depending on income – in the next 12 months.”
According to Flywire, by next summer, luxury travelers will spend an average of nearly $5,000 per person on each trip.
The hotel industry, in particular, is experiencing an unprecedented price increase. Despite high inflation and fears of a recession, demand for hotels is higher than ever.
Hilton CEO Chris Nassetta predicts the hotel chain will “have the biggest summer we’ve ever seen in our 103-year history this summer.”
In 2022, luxury hotels such as JW Marriott, Ritz-Carlton, and St. Regis saw an increase of nearly 30% in rates in the first quarter of 2022 compared to 2019. As demand continues to rise, so do the rates.
Spending Isn’t The Only Thing Increasing
As travelers’ budgets increase, so do their expectations. They are not only looking for unique experiences, they want to eliminate any hassles along the way.
Olinger says, “They are looking for guidance and unique offerings and services. Social media is one way of getting that guidance, as is using luxury travel advisors, especially among higher-income people, to plan and book their trips.”
Casandra Karpiak with Savoteur shares this about a recent family vacation. “The first time I used a luxury travel planning company, I was hooked. It was the most incredible experience and completely stress-free as the company took care of every detail, right down to the minute ones.”
“Everything was planned for us, including hotels, restaurant reservations, private tours, and even where to park our rental car, so we didn’t have to worry about a long walk back to the car at the end of the day! The best part was the insider knowledge of each location we visited, which allowed us to take full advantage of our time there.”
Memory-Making Experiences Prompt Big Spending
Despite economic concerns, the Olinger study found that the largest motivating factor for spending money on luxury travel is the desire for memory-making experiences. “Luxury travelers value and prioritize these experiences, so they’re willing to spend despite what’s currently happening in the economy.”
Sanjana, with The Female Professional, traveled to Finland for a once-in-a-lifetime opportunity to see the Northern Lights. She shares, “I’m always looking for unique experiences that you can’t get anywhere else. The Kakkslautanen resort in Finland not only has glass igloos but is also known as Santa’s Village, and they have one! I went during the holidays and got the full experience, including hanging out with reindeer plus snowmobiling in the Arctic forest. It was unforgettable!”
Family Luxury Vacations Are Especially High in Demand
Luxury travelers also place higher importance on family vacations and, according to the Olinger Group, take more trips than non-luxury travelers. The study shows luxury travelers go on more family vacations than non-luxury travelers and agree in significantly higher percentages than non-luxury travelers that it brings them closer to their families.
“My family and I recently went to St. Maarten over the December holiday break,” says Monica Fish. While there are certainly less expensive beach vacations, St. Maarten has a well-established high standard of hospitality. They genuinely make visiting a pleasure.”
Fish continues, “Even during their busiest week of the year, we experienced no lines, waiting, or sold-out tours and restaurants. Picking up our rental car at the airport with Starlite felt like a VIP experience. This enabled us to spend much more time as a family and make even more memories, including sharing a fine dining meal with our kids for the first time.”
Olinger also says travel advisors are seeing “enormous demand for multi-generational luxury vacations from their clients this past year. They couldn’t book trips to Italy and Greece fast enough. Some of it was COVID-related, but much was driven by a desire to make memories now with family.”
Luxury Travel Shows No Signs of Slowing Down
Olinger says between the first and fourth quarters of 2022, they saw both spending and the number of vacations rise dramatically. “Luxury travelers are getting out there in the world, and there are no signs of that slowing down anytime soon.”
This article was produced and syndicated by the Wealth of Geeks.