The travel industry is largely recovering, but the high prices in the luxury sector, which rose due to the Covid pandemic, are not returning to pre-pandemic levels. In fact, they are steadily increasing. Luxury hotel rates reached record highs this year, with average daily rates up 70% compared to 2019, according to luxury travel company Virtuoso. An 85% increase compared to July 2019 was noted for July 2024.
Moreover, the price for luxury train travel is also surging. Rates for Accor’s yet-to-be-opened La Dolce Vita Orient-Express climbed 75% in 16 months, going from 2,000 euros in late 2022 to 3,500 euros ($3,776) last month. Also, prices on another European luxury train, Belmond’s Venice Simplon-Orient-Express, rose this spring, going from £3,530 in February to £7,060 ($8,925) in March.
Many factors contribute to this increase in travel prices such as inflation, rising labor costs, supply chain issues, and debt service rates. But what appears to keep these high prices is the travelers’ readiness to pay these new rates, indicating that the prior prices for a five-star holiday may be a thing of the past.
Despite inflation and rising costs, luxury travel prices remain high as the demand is, according to Henry Harteveldt, president of Atmosphere Research Group. Wealthy travelers, for whom 1000 euros or more a night is not a big deal, are constantly seeking new and exclusive experiences, such as luxury train travel.
For budget and mid-scale travelers, competition could still lower costs, with budget airfares, in fact, declining because competition is growing in this field. Booking early can save money on airfares while hotel prices can fluctuate.
Lastly, the strong overall demand for travel continues despite some travelers resisting the costs. However, this does not seem to impact the luxury travel sector to the same degree, as per Dave Goodger, managing director for Europe, the Middle East, and Africa at Tourism Economics. The industry is still seeing upward pricing pressure for luxury experiences due to travelers looking for more luxurious experiences and the financial health of high-net-wealth households.
The luxury travel sector is experiencing continually rising prices, with luxury hotel rates at their peak and showing a 70% increase from rates in 2019, according to Virtuoso, a luxury travel company. Also, luxury train travel prices are on an upward trajectory, with Accor’s La Dolce Vita Orient-Express climbing 75% in 16 months. The Venice Simplon-Orient-Express has seen a sharp rise in rates this spring too.
Various factors have contributed to this increase in travel prices such as inflation, rising labor costs, supply chain disruptions, and debt service rates. However, despite these soaring prices, travelers are still willing to pay, showing that the demand for luxury travel remains strong. It is suggested that the past rates for five-star holidays may not return.
Henry Harteveldt, the president of Atmosphere Research Group, explains, “Money is almost no object for some of these guests. These are the wealthy and ultra-wealthy travelers, and for them, 1000 euros, $1,000 or more a night, is nothing. It’s like maybe $250 to most consumers.” These wealthy travelers often seek new and exclusive experiences, which boosts the demand for luxury travel.
Nevertheless, for price-conscious travelers, competition can reduce costs in the budget and mid-scale sectors. Harteveldt further explains that budget airfares have been decreasing due to increasing competition. Moreover, budget and mid-scale hotels, which are the fastest-growing sectors in the hotel industry, introduce lower pricing as they expand their properties.
Despite many travelers feeling the pinch of rising travel cost, luxury travel isn’t suffering the same effect. Dave Goodger, from Tourism Economics, notes that “the luxury boom continues despite the flatlining economic activity in some major developed markets.” The upward pricing pressure for luxury experiences is likely to persist since travelers are opting for more luxurious experiences and those of higher net worth are still in a healthy financial position.
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