Luxury Escapes CEO Adam Schwab shares his 2025 travel outlook, from ‘The Good’ to ‘The Not So Good’ and ‘The Bad’ news for hotel and tourism businesses.
Trying to provide a travel outlook is difficult in normal times, the challenge is amplified with US foreign policy uncertainty led by tariffs and wild fluctuations in global exchange rates (which have a meaningful effect on travel preferences). We continue to see significant bifurcation in demand, while some sectors and destinations remain red hot, others are materially challenged. The 20% drop in the share prices of key hotel chains, including Marriott and Hilton off recent highs (despite a general market rebound) shows how this uncertainty has filtered to investors.
The Good – Forward bookings for the luxury and high-end market remain strong and average order volumes remain at record levels (partly due to the inflation across the product spectrum but also customers purchasing longer and higher-end trips). Destination wise, Fiji remains both incredibly popular and supply constrained, while demand has dropped slightly following the incredible boom between 2021-2024, the market remains tight with forward bookings strong and strong airlift. Japan continues to sell extremely well, across ski, FIT and touring, despite the increase in costs (and recent Yen strength). While Vietnam has historically struggled with a strong USD, demand remains elevated across both touring and FIT products. The Singapore market absorbed the increase in supply in 2024 well, with ADRs remaining well above historical levels and hotels reporting strong occupancy.
The Not So Good – After a huge 2024, the froth has come out of the Bali market. While Luxury Escapes’ forward bookings remain strong, hotels continue to report significant demand drops out of China and Russia which is very seriously impacting occupancies and slowly having an effect on ADR. Thailand, similarly, is seeing a significant impact from the 24% drop in outbound China travellers and a slowdown in Russian visitors. It appears some operators and hotels confused unusual strength out of the China and Russia markets in 2024 with marketing ability, while hoteliers who maintained a wider breadth in source market and channels (rather than turning away from wholesale distribution channels) have been able to hold rate and occupancy. The US remains a challenged leisure market due to significant inflation combined with USD strength.
The Bad – Domestic bookings, in particular to Queensland, which has been the engine room of domestic Australia travel has dropped materially since the impacts of Cyclone Alfred. It’s not just Queensland though, material weakness in domestic bookings to regional areas and capital cities is increasing (and despite the low AUD, international visitors remain well below pre-Covid levels). Domestic bookings appear to be more impacted by cost-of-living pressures than international.
Don’t miss Adam Schwab speaking at AHICE Asia Pacific on Thursday May 8 – Register now.