Cost-Of-Living Is Starting To “Bite” Vacation Plans

The recent Travel Trends 2023* study by global consultancy Simon-Kucher reveals that 14 percent of UK consumers will not go on vacation this summer, largely due financial constraints – the cost-of-living crisis is driving consumers to prioritize essential expenses and avoid traveling during the peak season. The study, which surveyed nearly 5,000 consumers across seven countries, also revealed that 40 percent of travellers are booking their holidays well in advance. Among this ‘early bird’ segment, nearly a half of travellers are driven by fear of inflation of prices.

“We’re at an interesting intersection in the travel industry – on the one hand, consumers are still very keen to travel and experience holidays, following two years of a pandemic that restricted them to do so; on the other hand, the cost-of-living crisis is starting to hinder their ability to spend on travel,” says Dimitris Hiotis, Partner at Simon-Kucher. “For travel providers, the heightened willingness to travel will help them have a good summer financially, but they need to start thinking of putting attractive offers and offer good value for money to consumers, as cost pressures, further compounded by increasing interest rates, will hit customers’ wallets and willingness to spend in the near term.”

Leisure travel budgets are growing, but spending is becoming more deliberate
While financial concerns are the leading driver for those who do not plan to book a vacation this summer, overall the number of leisure travellers who indicate they will not go on a holiday this year (14 percent) has reduced compared to the previous two years (25 percent in 2022 and 44 percent in 2021). Globally, consumers in the UK and the Netherlands are the most likely to have already booked or plan to book a holiday this summer, whereas consumers in the USA are least likely to. Similarly to the rest of the markets, UK travellers indicate that they are opting to book more personalized vacations, rather than all-inclusive trips. While there is a general rise in splurge travellers (travellers who plan to spend more than they did in the previous year), the growth is much more dominant among those who book personalized trips.

On average, consumers who will be traveling are expecting to spend seventeen percent more on their 2023 holiday than they spent on their 2022 holiday). To offset inflationary concerns, travellers are expecting to spend more on essentials like food and beverage, but relatively less on clothing and local experiences.

Business travel is slowing down and trips are getting shorter
Rising costs are putting a strain on business budgets — around 20 percent of business travellers are choosing not to travel for work, while those who do travel are opting for shorter work trips. Nearly one in three businesses encourage their employees to travel by train instead of plane when possible. This indicates that sustainability is a key priority for business as well as consumers when it comes to travel.

Sustainable travel is taking off
With sustainability becoming the norm rather than the exception, a clear shift towards sustainable travel is evident. Along with a general preference to travel by train instead of by plane or car, many respondents indicated that they are willing to sacrifice an increase in journey time to do so (30 percent say they prefer train irrespective of journey time).

Despite increasing prices, some consumers are also willing to spend more on sustainable holidays, in particular the young, wealthy and city dwellers. A larger percentage of consumers are willing to pay more for more sustainable accommodation (49 percent), dining (45 percent), and flights (44 percent), but less so on smaller ticket items like activities/excursions (21 percent) or shopping (15 percent). However, there is limited enthusiasm for paying for carbon emission charges on flights.