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High-End Hotels Slumping as Inflation Soars

High-End Hotels Slumping as Inflation Soars

High-End Hotels Slumping as Inflation Soars

Travelers on a budget are looking for deals.

By Julia Horowitz, CNN

(CNN) – While international tourism is finally returning to pre-pandemic levels, rising inflation dampens many higher-end travelers' itineraries. And it’s also having an impact on high-end hotels.

Many tourists are now hunting for ways to keep costs down, from opting for shorter trips to steering clear of higher-end hotels.

“You have real wage contractions in quite a lot of markets,” Axel Hefer, CEO of search platformTrivago, told CNN. “What that means is you need to save money somewhere.”

Two- and three-star hotels are gaining in popularity, while four- and five-star options have become less desirable, Hefer said.

Travelers are also looking into less expensive destinations. For example, those using Trivago’s platform – which allows users to compare hotel prices around the world – have shown a growing interest in Morocco and Portugal, according to Hefer.

Meanwhile, domestic travel remains strong in countries like the United Kingdom, which has seen big swings in the pound in recent months. Currency fluctuations can make it harder to plan for future trips abroad.

“People still do want to travel and do travel, but they're still trying to compensate for the increase in prices,” Hefer said.

Thanks to robust demand and high prices, the travel industry is expecting a strong year ahead.

The International Air Transport Association has projected that global airlines will return to profitability in 2023 for the first time in four years, even as economic growth continues to slow.

For now, bookings for air travel still lag pre-pandemic levels. From the beginning of the year through February 2, global flight reservations remained 22 percent behind the same period in 2019, according to data from ForwardKeys, a travel analytics firm.

But that could change soon, thanks to China's removal of strict Covid-19 quarantine and testing requirements, reopening the world’s largest pool of global travelers. The World Tourism Organization thinks international tourist arrivals could touch 80% to 95% of pre-pandemic levels this year, "depending on the extent of the economic slowdown, the ongoing recovery of travel in Asia and the Pacific, and the evolution of the Russian offensive in Ukraine."

Hefer said he expected a surge in people traveling from China to top cities in Asia, Europe, and North America over the summer. That could prop up prices for hotels and flights. Airfares have increased sharply yearly due to ongoing labor shortages and delays in the delivery of commercial jets.

Tour operator TUI said Tuesday that booking figures for the past four weeks were above pre-pandemic levels, with higher average prices. The company noted that it hosted 3.3 million customers in its first quarter, up from 2.3 million a year earlier, and that it had 8.7 million bookings for the current winter and summer seasons.

Even low-cost providers can charge more in this climate. Ryanair, which has been capturing market share from rival carriers, expects it will be able to raise prices for flights over Easter and the summer due to strong demand from American and Asian tourists and less competition from other airlines.

It reported record profits for the last three months of 2022 after increasing fares by 14 percent during that period compared with its pre-pandemic level.

— Chris Isidore and Hanna Ziady contributed reporting.

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