Premiumization in Travel and Tourism, 2022 Update – Thematic Research

Smart cities and destinations will help to create hyper-personalized services and products. The advanced technologies involved in a smart destination work in tandem to gain a deep understanding of travelers’ needs, while optimizing experiences based on their preferences. Growth in the smart city market will help to enhance personalization even further for the likes of city break tourism, which will meet the needs of travelers in the upscale and luxury markets that require highly bespoke offerings. Some of the key players in the travel & tourism premiumization include Burj Khalifa (Emaar Properties), Cathay Pacific Airlines, Crystal Cruises (Genting Hong Kong), Black Tomato, Flexjet, among others. The tourism suppliers in the travel & tourism premiumization include primary suppliers, secondary suppliers, and third-party suppliers.

What are the main trends shaping the premiumization theme in the recent future?

The trends are being categorized into three categories: technology trends, macroeconomic trends, and industry trends.

Technology trends: In recent years, the rapid proliferation of consumer electronics, the emergence of cloud technologies, the declining cost of server and bandwidth usage, the improving price-to-performance ratio of hardware components, and a dramatic rise in demand for a bird’s eye view of the earth have steadily opened the market for the civilian use of drones-both as recreational devices and in commercial applications. Smart tourism contributes to real-life experiences and allows the creation of immersive experiences. Technology plays a major role in smart tourism and destinations, but it is there to enhance and elevate the traveler’s experience. The destination’s tourism product should always be in the foreground, while the advanced forms of technology in a smart destination help to enhance aspects such as personalization and sustainability. Smart tourism helps to create smart and bespoke offerings, which makes a traveler’s touristic experience more efficient.

Macroeconomic trends: Worries regarding virus transmission played into the hands of private jet companies, with many travelers that would fly in business class before the pandemic opting to spend extra on private or semi-private flights. By flying privately, travelers no longer had to crowd around packed boarding gates or sit on crowded aircraft where the chance of virus transmission increased substantially. Slow tourism is a type of tourism that is often undertaken by high-yielding travelers and incorporates sustainability. This type of tourism often requires significant sums of money to be spent, as trips can often last over a month. Due to its nature, travelers will often utilize alternative transportation methods that have a lower environmental impact, such as rail, bus, or boat.

Industry trends: The more niche an experience is, the more it tends to cost, making the themes of niche tourism and premiumization highly interlinked. One trend within niche tourism is premium adventure experiences. Adventure tourism has grown in popularity in recent years, and this is especially the case in the upscale and luxury markets. The trend of high-yielding travelers opting for adventure holidays has grown rapidly in recent years, so much so that it has caused over tourism in specific locations. Loyalty is of the utmost importance for luxury brands, as a lifetime of loyalty from a high-net-worth individual can result in millions of dollars being spent during the customer relationship. Although loyalty schemes may not be as commonplace in the luxury travel market, many travelers may not reject this type of proposition if it is done correctly.

What are the insights of the travel & tourism premiumization market?

The US dominates in terms of high-net and ultra-high-net-worth individuals: The US dominates within every monetary bracket in the study, from having the highest number of individuals with more than $100 million, to having the highest number of individuals that are worth between $1 million and $1.5 million. This means that luxury destinations and tourism companies need to be targeting the US source market when promoting their products and services, as campaigns are likely to have the biggest impact when aimed at this market.

Middle Eastern countries dominate in terms of average spend per domestic tourist: The top five most valuable countries for average expenditure per domestic tourist are situated in the Middle East. In Qatar, Oman, and Kuwait, the average spend per domestic tourist on retail is more than $150, with this channel of expenditure being the most valuable for the majority of these countries. In the last decade, it has been evident that many Middle Eastern destinations have tailored their tourism products to meet the needs of domestic and international retail tourists, and this is especially the case in the luxury market.

The most expensive luxury accommodation is mainly found in Europe: Seven out of the ten countries that have the highest ADR in their luxury hotel sub-sectors are found in Europe. The continent contains a range of luxury destinations that are established or still emerging. This helps to attract a range of different travelers that have vast amounts of disposable income.

What are the segments of the travel & tourism premiumization value chain?

The premiumization value chain has three main segments – primary suppliers, secondary suppliers, and third-party suppliers.

Primary suppliers: The industries classed as direct primary suppliers are the most necessary direct distributors in the creation of premium trips. It is imperative that the companies in these industries, or the destination, offer premium services and products that are experience driven, unique, and provide a first-class service. They are classed as primary suppliers as a premium trip cannot be assembled without utilizing them.

Secondary suppliers: The industries classed as direct secondary suppliers may be necessary to some high-yielding travelers, and not so much for other ones. For example, many high-net-worth travelers will not be concerned regarding the airport that they fly into, regardless of its premium offerings, or whether the restaurants and attractions they visit are luxurious.

Third-party suppliers: The main industry that can offer premium products and services in the third-party supplier’s segment is the OTA industry. Many OTAs have emerged as the internet’s influence in travel and tourism has grown. Online-based travel agencies resell services and products on behalf of other businesses and organizations.

Travel & tourism premiumization market, by category

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Which are the leading players in the travel & tourism premiumization market?

Some of the leading companies in the market are Burj Khalifa (Emaar Properties), Cathay Pacific Airlines, Crystal Cruises (Genting Hong Kong), Galeries Lafayette, Las Vegas Sands, Black Tomato, Flexjet, Hong Kong International Airport (government-owned), IYC, and Kempinski.

Travel & tourism premiumization market, by key players

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Market report scope

 Scope

• This report provides an overview of premiumization in travel and tourism.
• This report explains why premiumization will continue to grow in importance.
• This report outlines how premiumization will be adopted in the future.
• This report provides examples of what companies and organizations in the travel and tourism industry are doing in reaction to this theme, and how they create differentiation.
• It highlights travel and tourism companies that are leading in this theme, such as Four Seasons, Royal Caribbean, Las Vegas Sands, and Flexjet.

Key Highlights

As well as being the driving technology behind smart cities and destinations, IoT technology allows for ultra-comfort and convenience in the upscale and luxury markets. According to GlobalData’s Q3 2021 Emerging Technology Sentiment Analysis Survey, (xx) of respondents stated that they have become ‘more positive towards this technology’ in the past year when asked about their perception of IoT. This growing appreciation for IoT has especially been seen in the lodging sector. For example, a traveler may return to the same upscale hotel every winter. The hotel company using a smart thermostat could set the heating to the customer’s preferred temperature when they return, which is remembered from last year. Such small, personalized services could go a long way for many customers, especially in the luxury market where attention to small details is greater than in the midscale or budget segments.

According to GlobalData’s Q3 2021 Consumer Survey, (xx) of global consumers stated that they ‘somewhat’ or ‘completely’ agree that they are more loyal to brands that support environmental causes. When looking at Boomers (that are most often the wealthiest generation in many countries), (xx) echoed the same sentiment, demonstrating that the need for sustainable offerings is not just required by the likes of Millennials. Because of this, sustainability and luxury are becoming increasingly intertwined in travel and tourism. ESG matters are now of high importance for many luxury consumers. If a company is not able to demonstrate that it is acting responsibly, it could now lose out on valuable business. Many luxury consumers now also perceive sustainability to be an important pillar of premium offerings, with responsible services and products reflecting quality.

The highest average overseas expenditure channel for the US, Spain and Australia was transportation, with these source markets spending an average of (xx) on this channel. One particular reason why these markets spend significantly more than the global average is due to the destinations they most frequently visit. For example, within Australia’s top 10 outbound destinations for 2021, seven of them would be classed as long-haul destinations, due to the average flight time being more than six hours. For the US, six out of its top 10 outbound destinations in 2021 are classed as long-haul. This point fits in to the theme of premiumization as the developed economies of these nations allow many travelers to pay premium prices for flights to visit and experience far-flung destinations that boost their social status.

Reasons to Buy

• To understand the key theme of premiumization and its current and future impact on the industry.
• To assess the strategies that leading companies are adopting in the theme of premiumization.
• To identify the leading and challenging companies in this theme.
• To understand how this theme is being shaped by a range of different technology, macroeconomic and enterprise trends.
• GlobalData’s thematic research ecosystem is a single, integrated global research platform that provides an easy-to-use framework for tracking all themes across all companies in all sectors. It has a proven track record of identifying the important themes early, enabling companies to make the right investments ahead of the competition, and secure that all-important competitive advantage.