Low-cost travel era ‘evolving into era of value travel’
The era of low-cost travel is not over, but is gradually evolving into a "value travel" era, a WTM London panel agreed.
The debated how airfares, hotels and cruises had become more expensive after Covid due to pent-up demand, constricted supply and increased labour costs, but agreed the increases were flattening out.
Richard Johnson, CWT global vice-president for Solutions Group, said there had been a “massive spike” after Covid. “The good thing is we have seen great moderation – single-digit percentage year-over-year.
"We expect a 1.9% increase [in air fares] this year, year-on-year, and 0.6% in 2025.”
This, he said, meant an average fare of $701 this year and $705 next year. “Prices are increasing, but they are moderating,” he added, albeit while admitting the $705 price point was ahead of 2019.
One factor highlighted by the panel was how corporates were now mandating "purposeful travel" and taking sustainability into account.
However, Johnson said businesses were more concerned with the travel experience and ensuring travellers were well enough rested to ensure they worked at their peak, adding corporates would pay more to ensure this.
On the leisure side, Dimitris Hiotis, global head of leisure, travel and transportation at consultancy Simon-Kucher, said it was “too early” to talk of the death of low-cost travel.
He gave the example of Ryanair, whose recent results highlighted a 10% increase in passengers with only a 1% increase in revenue. “People have been burned by high prices; I think the spike was definitely temporary,” he said.
Hiotis compared this with staycation brands, which saw a price spike a year ahead of airlines as domestic tourism boomed, before rates then fell.
Sarah Sheppard, Sabre’s senior director of global product management, added: “We are seeing people prioritise value over price sensitivity. That has been driven by travel expectations.”
These included ancillary purchases like extra legroom seats and priority boarding, she said. “Research showed travellers will pay for additional personalisation. We had not heard this before, so prioritising value over price alone is here.”
The panel agreed that while revenue management systems had become more sophisticated, this would not end low-cost travel. “Airlines can’t just price whatever they want and travellers will pay,” Johnson added.
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