This year, are you taking a holiday trip? The response is becoming more and more reliant on your income.
According to a recent survey by the consulting firm Deloitte, households with annual incomes of at least six figures are predicted to account for the greatest percentage of holiday travelers this season (45%), up from 38% in 2023. Additionally, they have increased from 43% of hotel guests last season to 52% this year, putting them on track to account for the bulk of paid accommodation consumers.
According to Kate Ferrara, vice chair for U.S. transportation, hospitality, and services at Deloitte, travelers are seeking to spend money on experiences and enhancements that will make their vacation unforgettable.
However, that is partially a reflection of the people who are initially traveling.
While those with higher incomes are increasing their share of the holiday travel mix, those with lower incomes are decreasing their share: Just 23% of tourists would come from households earning less than $50,000, compared to 28% a year ago, according to Deloitte. (The most recent Census data showed that the median annual income in the United States was approximately $80,600.)
It’s another indication of what real estate data company CoStar’s national director for hospitality market analytics, Jan Freitag, refers to as the wealth effect that ripples across the consumer sector.
According to him, higher-end households are using this holiday season as an excuse to indulge because they feel wealthier due to the ongoing increases in stock and home values. The pattern explains why, despite some wage inequalities closing during the epidemic recovery, racial differences in net wealth have increased.
It also explains why airlines and hotel chains have lost little time in vying for the disposable income of wealthy clients by offering an ever-increasing array of luxury packages and incentives to upgrade, which have become essential for anyone making travel plans in recent years.
According to Jonathan Kletzel, a travel, transportation, and logistics leader for the auditing firm PwC, often known as PricewaterhouseCoopers, travel businesses have done a fantastic job since COVID of drawing in these kinds of clients by tailoring their offerings to this upscale leisure market.
In fact, Virtuoso, a luxury travel network, reported that its high-end clientele had increased their seasonal bookings by 37% from the previous year. During the holidays, upscale hotels’ nightly prices have increased by 6% to little over $2,000 per night. The cost of rooms at some of the most well-liked vacation spots, such as upscale resorts in the Caribbean and Mexico, has increased even more sharply by almost 8%, with nightly rates now exceeding $3,000.
According to the booking website Hopper, domestic flights for the week before Christmas this year are averaging $352 round-trip, which is 9% higher than last year. Additionally, the average price of round-trip tickets to Europe for the week of Christmas is $1,207, a staggering 33% increase over the previous year.
The ultra-rich aren’t the only ones who are driving up costs for everyone else by spending lavishly on luxury travel. According to Misty Belles, vice president for worldwide public relations at Virtuoso, consumers are generally more prepared to forgo experiences than products. However, she emphasized that many customers are also searching for value for their money, and they fully expect service standards to match the costs they are paying, even though they prioritize things like travel.
That holds true for people of all economic levels and outside of the hospitality sector. Customers are still gravitating toward stores where they believe they will receive the best value, and this week’s Black Friday and Cyber Monday sales are being driven by increased price competition.
Even while demand for travel has increased since the outbreak, many people are figuring out ways to go without going over budget.
According to Deloitte, 64% of Americans intend to travel more than once this holiday season, up from 57% in 2023. Additionally, 28% of respondents—up from only 18% the previous year—plan to drastically up their spending during their longest vacation. At the same time, PwC discovered that travelers are more likely to stay with friends and family this year (56% compared to 45% last year) and are less interested in booking name-brand hotels (39% compared to 46%).
According to the researchers, these travel decisions can indicate that consumers are trying to cut expenditures by selecting less expensive options.
According to Ted Rossman, senior industry analyst at Bankrate, there are indications that inflation is still significantly impacting vacationers. Despite a significant 77% of six-figure earners saying the same, the consumer financing company discovered that 86% of households earning less than $100,000 yearly intend to alter their holiday travel plans owing to cost increases.
According to Bankrate, 29% of travelers anticipate taking out loans to pay for their trips this year. This comprises 10% who intend to use buy now, pay later services and 22% who intend to maintain a credit card balance.
According to Rossman, they are prepared to take some short cuts in order to save money, but they don’t want to completely skip the trip.
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