Does Luxury Travel Face Difficult Trading?

A report published just this week by Pricewaterhouse Coopers LLP (PWC) forecasts a period of prolonged difficult trading for “luxury travel” companies.   It maintains that “aspirational” holidaymakers will abandon the sector in the downturn. What they categorise as HNWI (high net worth individuals) will prove more resistant to any holiday  crunch, but even these people are  just as exposed to the climate of economic uncertainty as other segments  witnessing their net worth erode almost day-by-day.

Postponed Recovery?

Those same HNWIs will adopt a ‘wait and see’ approach, won’t be quite so extravagant and will book closer to departure dates claims the report.    The report concludes that: “As UK growth begins to recover in early 2010, luxury travel firms will be left stranded at recessionary levels until late 2011 or possibly 2012, as even their core customer base of HNWIs becomes more nervous.”

Challenging Market for long haul Holidays

Here at Tropical Sky, we would agree that the travel market will be challenging as many clients pull in their belts.  However we believe the “luxury” end of the market is still very resilient.  For the majority of Tropical Sky customers, main holidays are still right up there as a priority for expenditure, albeit vying for first place prominence with paying off debt at present.

Aspirational Worries

The two types of “luxury traveller” identified by PWC are HNWIs – of which numbers have doubled globally since 1997 and stand at an estimated 10.1 million worldwide – and the “aspirational” consumer with perceived wealth rising from the availability of credit and house price inflation.  House price deflation, lack of credit, employment uncertainty, and bonus reduction, make luxury travel an increasingly discretionary purchase amongst the “aspirational” sector says PWC.

Switching Brands

Our experiences to date, and our projections for the future, indicate that luxury travellers will not want to stop their main holiday and will also be very unwilling to “trade down” from the standard they’ve been used to.  What those consumers will increasingly do is “trade brands”.

For example, a customer may have travelled with Kuoni for 10 years and experienced an excellent service and a wide range of choice from what is a very fine company.    However, professional organisations such as Tropical Sky are now increasingly well positioned as we  have the same choice and expertise to offer, but being a smaller, specialist business,  we are  cheaper  thanks to our much lower cost base.  Customers will do a lot more research and price comparison online and will intelligently shop around for a better offer that might involve switching brands, so they save typically up to 10% on the cost, yet still guarantee the same quality of holiday experience they demand and that they’ve experienced in the past.

Tropical Sky’s Agility

The agility and bespoke ethos of Tropical Sky also allows us to be well placed to meet other customer strategies.  Some clients could be prepared to be more flexible in terms of the actual date of their main holiday and could book late, which will often save money, especially if you are travelling in non peak periods.   Others may decide to cut back the days in their trip, for example: electing to spend 10 nights in Barbados instead of 14.

For the larger, more bureaucratically rigid, luxury travel operator, accommodating these changes of behaviour will prove almost impossible due to the fixed nature of their proposition.  It’s the customer who has to adapt to what’s available from the bigger companies – take it or leave it even at the luxury end of the market!

Cost Efficient Quality

Tropical Sky on the other hand has always created holidays in a flexible and dynamic way that adapts to the needs of our customers.  So creating an entirely bespoke package for them over any number of nights and days is simply not an issue – it’s merely what we do (and always have done) anyway!  So, we agree that the current economic environment will impact consumer behaviour along the lines suggested by the PWC report.  However what is evident to us is that an increasing number of customers are turning to Tropical Sky to provide a more cost efficient service that does not compromise quality.

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