luxury travel

A sunny outlook for the luxury travel market

In General News, Investment News, Research News, Understanding Audiences by Caitlin WilkinsonLeave a Comment

Private Equity interest in luxury travel and accommodation in the UK has soared in recent weeks.

This month alone, Blackstone made a $4.8 billion offer for high-end hotel property business LaSalle, and French investor Foncière des Régions acquired a portfolio of 14 four-and five-star hotels across the UK for £858m. Earlier this year, Wyndham Worldwide Corporation sold its UK travel brands, including James Villa Holidays, Landal GreenParks, Novasol and Hoseasons for an estimated $1.3 billion.

Why are investors so interested in the sector? At a time of political instability, a perceived threat from international terrorism, and an ever-growing budget travel market, this interest is perhaps surprising. However, a new report published by Allied Market Research predicts that the global luxury travel market is expected to be worth $1,154 billion by 2022, with a compound annual growth rate (CAGR) of over 6% between 2016 and 2022.

In the UK, demand for luxury travel has remained strong. According to research by PWC, London hotels have seen occupancy rates grow by 2.6%, and ADR gains of 6.3% compared with last year.  The firm also forecast that acceleration in hotel supply in 2018 London could result in more “new rooms opening” than in the last growth peak of 2012.

The weak value of the pound has contributed to the UK’s popularity as a travel destination, as well as strong investments in infrastructure and regeneration in major UK cities. A growing middle class worldwide with money to spend is also driving growth in the UK internationally.

Worldwide, expansion factors include the inclination of people towards unique and exotic holiday experiences, increased disposable income amongst middle and upper classes and the “social media effect,” which has made travellers more willing to spend for high-end trips, so long as they can document them on Instagram or Facebook.

The fact that alternative lower-cost providers such as Airbnb have fallen foul of regulators and have been banned in European cities in 2017 is more good news for the luxury travel industry.

So, if your portfolio includes high-end hotels or luxury travel agents, how can you ensure you take advantage of this favourable environment?

Chris Photi, head of travel and leisure at accountants’ White Hart Associates, recommends a ‘good technology platform’ and potential for international expansion. Digitisation is often key in creating value in the leisure and hospitality sectors, but is even more important for luxury sectors, as customers expect a seamless experience and support on demand.

When it comes to luxury travel, effective use of apps and chat-bots can transform customer experience, as well as provide invaluable data on traveller’s tastes and opinions. An increasing number of hotel brands such as Marriott International are incorporating voice control into their offering, and some airlines have adopted VR to let passengers view the cabin before their flight.

Digital insights are also essential to understand the luxury travel customer. In the face of ever-rising expectations, demand and sentiment data gained from social media posts, forums and review sites can help brands identify potential risks and improve their offer. For those who use the “social media effect” of travel to their advantage, the returns on luxury travel could be huge.

For more information on how onefourzero’s digital analysis can help you understand a brand’s equity, click here or contact fleur@onefourzerogroup.com

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