Luxury resorts had hoped the aftereffects of the pandemic would boost them through another summer season, but high-earning tourists have parked their pent-up travel demand in favor of balancing the books.
According to new research from Bloomberg, high-end travelers have got a new ceiling for how much they're willing to spend on a hotel every night: $500.
They even said they wouldn't be tempted by upgrades or more eco-friendly options if it meant having to blow the bank.
Unfortunately for them, that rules out a raft of high-end destinations.
Research from travel experts Asher & Lyric found that the average price of a five-star resort at ski mecca St. Moritz comes in at more than $2,000 a night in peak season.
Aspen, similarly, is more than $2,000 at high season, followed by the likes of St Barts, Bora Bora, and the Amalfi Coast—all of which are at least $1,000 a night.
And that's just for a room, not including upgrades like suites, in-house activities, or services like massage treatments or spa passes.
Of the respondents to Bloomberg's MLIV Pulse survey—high earners including traders, portfolio managers, senior managers, and retail investors—24% were willing to spend up to $1,000 a night, 5% said their limit was $2,000, and 2% said $3,000 or more.
The vast majority of 69% capped the budget at $3,500 for seven nights.
Travelers said they were officially done with "revenge" spending to make up for lost time during the pandemic.
Exactly half of Bloomberg's respondents said they were back to "good old pre-pandemic" holidays; 25% said they may splurge a little more by going up just one notch on a service.
Where 7% said they are planning to splash out on their next holiday, 18% said the exact opposite: that they wanted to reduce the amount they were spending on getaways.
But budget-conscious fliers might have to hunt hard for a bargain, with the Federal Reserve of St. Louis posting a jump in the consumer price index for airline tickets of 25% in the last year—the highest since the authority began tracking the index in 1989.
In April of 2022 alone, airfares spiked 18.6%, according to the Bureau of Labor Statistics.
Why are people cutting back?
Reasons for the conservative mindset are economic uncertainty and also value for money, with the perception being that resorts and airlines are continuing to inflate prices without any reflection in service.
Such issues have already been reported at airlines like Delta, which was hit with a spate of complaints of overcrowding in its lounges.
Meanwhile, research from commercial real estate experts CoStar conducted in November 2022 found that luxury room rates were 38.4% higher in April of that year when compared to April of 2019.
The analysis is quick to point out the hike in room rates isn't backed up by an increase in demand outweighing supply. It points out that in September 2022, for example, room demand was down 5% but for the first nine months of that year prices were almost 40% higher than the three years previously.
Redefining luxury
Insight from the premium travel industry paints a slightly different picture, with demand for certain types of high ticket-price holidays still alive and well.
According to Rachel O'Reilly, director of communications at tailor-made travel experts Kuoni, the idea of luxury now encompasses a wider spread of experiences.
She explained that high-end holidays are no longer just five-star hotels in go-to luxury locations, but are leveling up in sophistication.
Demand for safaris, tours in countries in South East Asia and "cold luxury" markets like Scandinavia are all increasing, adding: "Revenge spending never really resonated with me—I think it's more that people want to get out and see the world after COVID. Luxury is much more experiential now; people want hot air balloon rides over the Masai Mara or safaris in Sri Lanka—it's that lifetime experience which you can't get directly through a booking website."
Among the brands O'Reilly works on is U.K.-based luxury experience service Carrier, which had the biggest financial year in 2022 in its 40-year history.
O'Reilly added: "Luxury has diversified, people want that extraordinary experience. It doesn't have to be hotels—we do a lot of work in Africa booking tent-based excursions, people just want that magical experience."
She was echoed by Kerry Golds, chief tour operating officer at London-based luxury travel specialists Abercrombie and Kent, who said: "There has been a surge in demand for outdoor experiences, such as safaris in Africa, hiking trips, and yacht charters. Travelers are seeking destinations that offer wide-open spaces, natural beauty, and opportunities for adventure. It’s no longer just about having the top suite in a hotel or on a cruise, flying first-class or dining at a Michelin-starred restaurant. It is increasingly about privacy and exclusivity, the luxury of experience and more meaningful travel."
Golds added the group –which has a boutique in high-end department store Harrods– has just had its busiest year on record, with its U.S. operations reporting group sizes increasing by 12%, while larger group bookings of five or more guests is up 26% in the future when compared to 2019.
"Many travelers are opting for bigger and more rewarding holidays to celebrate missed milestones, often with extended family, rather than quick getaways," Golds added.
End of 'bleisure'
Americans are also turning their back on blended trips for work and pleasure, where travelers add a couple of days onto the end of a work trip to explore the destination.
Some 62% of professional investors and 56% of retail investors said it wasn't something they were going to look at doing more of this year.
It comes as a new survey from Pew Research Center found that less than half of U.S. workers use all of their vacation days.
Of the 52% who don't use all their holiday allowance, just over half said they feel they simply don't need the time off.
However, the other half felt they couldn't take the time for less healthy reasons, fearing their colleagues will suffer if they are away or worrying it might damage their careers in the longer term.
Respondents to Bloomberg's survey—of which there were 465—were also cautious about airline stock in the future. More than half of the professional investors interviewed said negative economic factors, such as a recession, will undermine airline stocks in the next 12 months.
