Luxury travel is booming. Four Seasons launched its private jet experience in 2015, allowing customers to travel around the world in 24 days at a price tag ofUSD135,000. Meanwhile, some of the most anticipated 2017 hotel openings include Miavana, a lodge comprising of 14 villas on Nosy Ankao, an island off the coast of Madagascar, which is only accessible by private helicopter, and the LVMH Moët Hennessy Louis Vuitton’s latest The Cheval Blanc hotel in Chamela, Mexico, which will include an 18-hole golf course, a two Michelin-star restaurant, and 52 rooms starting at around USD4,000 per night.
Distinguishing between ultra and affordable luxury
The above examples can be defined as “ultra luxury” experiences, not accessible to the average global traveller. When investigating the performance of 4- and 5-star hotels against lower hotel segments and short-term rentals, Euromonitor International found that short-term rentals have grown stronger over the past few years, and that the largest hotel companies focused predominantly on growing their select and limited-service mid-market brands between 2014 and 2016.
Democratisation of luxury expands target market
Affordable luxury offers a lot of opportunities for travel and peripheral companies. Most importantly, households with a disposable income of over USD300,000 will account for only 3% of total global households in 2030, but households with a disposable income of more than USD100,000 will account for 21% of the total in the same year. Therefore, the democratisation of luxury travel will greatly increase the target market for luxury providers.
Travel companies are in a position to offer luxury experiences to lower-income households because what is understood as a luxury experience is changing. Rather than grand lounges and fluffy towels, luxury can be found in more intangible services which do not necessarily cost more, like offering a place where people can get time away from their busy lives. As consumers are getting used to living in ever smaller spaces, luxury is not just about offering large spaces, but instead about innovative spaces that work for them. And technological innovations allow for greater personalisation without actually increasing costs. Time, space, authenticity, community, individuality and mindfulness are intangible experiences which are increasingly seen as luxury.
Euromonitor International has released a 2-part global briefing which further explores how expectations of luxury are changing. The first report discusses the demographic drivers which are helping to change the perceptions of luxury, and takes stock of the luxury lodging industry and its future potential. Part two will provide examples of how lodging companies are innovating to cater to changing consumer demands.