Affluent travelers, who have long been accustomed to lavish spending on high-end hotel accommodations, are now starting to feel the pinch of rising costs. Silvio Rebmann, CEO of Cube Travel, highlighted the issue of escalating hotel rates during a panel discussion at Preferred Hotels & Resorts’ Global Conference 2024. Rebmann noted a significant shift in the market, as customers are increasingly expressing concerns over the skyrocketing prices in popular destinations like Italy. This trend has prompted luxury travelers to seek out destinations that offer better value for their money.
Namai Bishop, founder of LuxePrive Travel, observed a similar pattern among high net worth clients who are adjusting their booking habits. Rather than compromising on their travel experience by opting for lower-cost destinations, some travelers are turning to multi-bedroom villas as an alternative to expensive luxury hotel accommodations. Bishop noted a surge in rates for suites at luxury hotels, prompting families to seek out villas that provide more space at a better value. Some clients are even cutting back on other luxury expenditures, such as retail, to prioritize their travel experiences.
Luxury travelers are prioritizing experiences over material purchases, according to recent findings from the Mastercard Economics Institute. The institute’s 2024 trends report revealed that spending on experiences and nightlife has reached its highest level in five years, comprising 12% of tourism sales. As demand for travel surges, suppliers are forced to raise prices to keep up with inflation, resulting in elevated pricing across the leisure and hospitality sectors. Michelle Meyer, Mastercard’s chief economist, warned that the current pricing trend is unsustainable and could lead to decreased consumer tolerance.
While hotel rates have increased since the restart of pandemic-era travel, they continue to rise gradually. Virtuoso executive vice president David Kolner predicts that high rates are here to stay, with the average daily rate for Virtuoso’s preferred hotel network currently ranging from $1,500 to $1,700 per night. Despite the increase, high net worth travelers remain resilient in their spending habits. However, travelers who depleted their pandemic savings may need to scale back their travel budgets. Kolner noted a division between high net worth travelers and those who relied on excess savings from the pandemic.
In countries like Italy, Greece, and France, where pent-up demand led to a surge in luxury hotel bookings, rates are starting to stabilize. Virtuoso data shows that hotel bookings and prices have remained flat in these markets, reflecting a leveling off after record-breaking years. On the other hand, Spain, Portugal, and Germany are experiencing growth in bookings and perceived value for money. Tour operators like Collette are anticipating further price hikes in 2025-26, prompting travelers to be more mindful of their travel choices and potentially turning to alternatives like U.S. tours for more affordable options.
Luxury travelers are facing a dilemma as they grapple with the increasing costs of high-end accommodations. The shift in booking habits, changing spending patterns, and market trends across Europe all point to a need for travelers to be more strategic in their travel decisions. As prices continue to rise, travelers will need to weigh their options carefully to ensure they get the most value for their money without compromising on their luxury travel experience.