Is the economy affecting luxury travel?

While it may seem that, with consumer confidence at a 16 year low, that luxury travel would be suffering as wealthy Americans save every last penny.   Surprisingly, even in the face of high gas prices and a poor stock market the wealthy seem rather confident if one were to use luxury travel as an indicator.

People with incomes in excess of $100,000 have continued to travel and vacation as if the economy is still humming right along.   An increasing proportion of hotel room reservations are made by people in this demographic.

Although the luxury market has been holding its own the middle class travel market is bearing the brunt of the economic downturn.   Specifically mid to low tier hotels have been carrying the burden of slow traffic.   The trends show that occupancy in the upper class hotels have been staying steady, but in the lower class hotels the vacancy rates have been steadily climbing.

One of the reasons for this is that most middle Americans are straddling massive amounts of consumer debt, and with the recent changes in credit card regulations, set down by congress, they simply don’t have the leverage to take those extra trips anymore.   The wealthy on average have much less consumer debt and therefore they are able to justify their travels.

Economy hotel chains are optimistic that the economy will turn around soon.   Since the dramatic rise of the stock market over the past year occupancy rates have crept up, but there is still a long way to go.   Many of the middle class families are either unemployed or they are dealing with underemployment issues.  For these hotel chains to really see the business come back we need to see a substantial reduction in the unemployment rate and a loosening in the credit market.   If we can get some stability in these two areas we should see travel come back to normal levels in a rather short period of time.