Luxury travelers may trade the typical beach vacation or amusement park trip for more exotic and adventurous destinations, such as Costa Rica or Naples, Italy. And this segment is willing to spend big on their excursions. But many luxury trips can run aground without effective and innovative payment solutions to help travelers meet and manage associated costs.
The luxury travel market is booming: The PYMNTS Luxury Travel Study found that luxury travelers from the United States spent $1.1 trillion on their vacations last year. A projected 139 million people – more than half of the nation’s adult population – plan to take luxury vacations next year. And a significant share of luxury travelers express high levels of interest in using innovative payment solutions to fund their future vacations.
From home-sharing platforms to experiential marketplaces and hotel reservation sites, digital innovators are making it easier for consumers to book luxury travel and pay for their trips. These are some of the ways travel companies are making it easier for consumers to take off to their next destination, and find luxury experiences as well as accommodations:
Luxury travel vacation is a booming, $1.1 trillion market. To help capture that base, sharing economy marketplaces are bolstering their luxury travel efforts. Airbnb, for instance, unveiled its Luxe product earlier this year that includes over 2,000 high-end homes. Airbnb’s Global Marketing Director for Luxury Eshan Ponnadurai said, per earlier reports, “The last couple of years, we’ve been focused on how do we create an Airbnb for luxury travelers.” He added that the luxury tier moves forward the company’s goal of “creating an Airbnb for everyone.” Many of the Luxe listings are rural vacation homes. The platform, however, also has some city listings, like a cottage in the vicinity of London’s Kensington Palace and a Los Angeles French country-style mansion.
Adventure travel vacationers are younger and bigger spenders, representing 13.6 percent of the broader luxury vacation travel market. Activities marketplace Fixers, for instance, sees millennials as their target market, as they tend to prefer experiences over things. (Millennials make up about a third of the U.S. population and the majority of the workforce, according to past reports.) This market might go out on the town on Friday night, and then might want to go to a yoga class the next morning. “This is how they want to travel,” Fixers Founder and Chief Creative Officer Lisa Simpson told PYMNTS in a previous interview. The platform asks around 30 different questions during onboarding to discover what travelers like and how much they want to spend on their experiences.
More than half – 50.7 percent – of respondents are most likely to cite the cost of a luxury vacation as a key factor that derailed their ability to finalize such plans. But online platforms are becoming more creative with the options offered to travelers. Splitty Travel, for instance, allows consumers to combine two rate plans to make one itinerary for their stays. The platform, in one case, lets a traveler have breakfast as an option on the first day of his trip (presumably if the hotel charges for breakfast). And, in another scenario, a traveler might know she can stay for one night, but is not sure whether she can make the last two days of her stay. In that case, a traveler could book the first night at a non-refundable rate and the others with a rate that allows free cancellation until, say, the day before check-in. The company can also split reservations into different days to take advantage of deals and specials.
Innovative payment solutions could unlock new travel opportunities. And not all trips are associated with extreme wealth. There are often situations where the trip costs $25,000 on paper, but a closer inspection determines that friends from college are splitting it up to go on their annual vacation together. The ability to book these trips – to make it possible for consumers to really ride the experiential travel trend – is a massive opportunity for companies as the market grows ever larger, Flywire CEO Mike Massaro told PYMNTS in a recent conversation. But it is not a simple opportunity to capitalize, and it isn’t the traditional high-end travel transaction of the past. The payments and commerce infrastructure have to be as modern as the use case it is facing. “It’s not like this is a simple transaction where someone is going to take out a black Amex and run it for all $25K,” Massaro noted. “There will be 10 people who will individually have to pay for spots on this trip.”
Luxury vacation travelers prefer splitting the costs, with 38.3 percent of all respondents indicating they traveled with at least one family member, couple or companion. And travel platforms are catering to the group travel market – and raising capital. Stride, for instance, provides group travel packages and describes itself as offering “experiential multi-day and multi-destination packaged trips planned by experts.” It had notched $2.5 million in a seed funding round from JetBlue Ventures and NFX, per reports in June. The firm was launched in 2016 by Gavin Delany, an ex-Starwood Hotels and Viator executive. It had also debuted a feature called TripFinder that lets people search from over 30,000 travel itineraries.
From Stride to Airbnb, innovators are catering to the needs of luxury travelers who may want to explore the world in groups or stay in high-end lodging. And innovative payment solutions could be their ticket to seeing their luxury vacation plans become a reality.
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