In February at Forbes Travel Guide’s Summit in Monaco, I was speaking with PwC’s U.S. Consumer Markets Industry Leader Ali Furman, who said at the time that consumer confidence was “A Tale of Two Cities.” By this she meant that the luxury market was still going strong despite less confidence among the middle and lower classes.
Everyone I spoke to at that event and again at Travel Edge’s luxury-focused Limitless event in San Antonio in March also told me much of the same: Luxury leisure travel is thriving. Rena Shah, head of Chase Travel Group Lodging & Experiences, said at Forbes’ Summit, “We’ve actually seen really strong discretionary spending. And it’s a signal to us that the U.S. consumer … is on solid footing, and they continue to spend in categories beyond the essentials.”
The March Consumer Confidence Index from The Conference Board agrees that it’s Dickensian: While the Consumer Confidence Index fell in March to its lowest level since the pandemic, and the Expectations Index—based on consumers’ short-term outlook for income, business and labor market conditions—dropped to its lowest level in 12 years, two positives (for this industry, at least) stood out.
For one, households earning more than $125,000 a year were the only group not to report declines in either index. And second, while purchasing plans for both homes and cars declined, consumers planned to spend more on travel, including vacations.
Research published in late March by the Bank of America Institute also shows mixed signals for consumers, but likely more green lights for higher earners. Looking at domestic travel so far this year, spending on lodging is around 2.5 percent below 2024 levels, with spending on tourism-related activity down by a similar percentage. Airline spending so far this year also looks to be around 6 percent below 2024 levels. The data, however, suggests that higher-income travelers are instead traveling abroad, with in-person overseas spending up 2.6 percent from 2024 in January and February.
So, yeah, the research backs up what I’m hearing: Luxury travel is doing more than well to start 2025. But that certainly doesn’t mean it will remain so. The Conference Board’s report noted concerns among consumers about trade policies and tariffs enacted by the Trump Administration—many of which have not been fully implemented yet, and reciprocal tariffs could cause prices to soar. The report also made no mention of the federal layoffs, which, according to travel insurance company Squaremouth, are causing growing concerns among Americans about upcoming travel plans.
This is all to say, make sure you don’t get caught up in the moment and ensure that you’re doing your part to safeguard your business. Consider diversifying your revenue streams with membership/retainer models, strengthening your relationship with ultra-luxury suppliers, keeping in touch with your small business clients as they may be most susceptible to changing economic conditions, and implementing artificial intelligence to reduce the cost of back-office functions to protect your margins.
Let’s hope the good times keep rolling, but let’s also be prepared in case anything falters.
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