The luxury travel market is being reshaped by shifting regional wealth hubs and new generations of consumers, according to a new report.

Architectural firm WATG’s research division has released Evolving Wealth: A New Paradigm for Luxury Travel, which outlines the ways the luxury hospitality sector is changing.

New centres of wealth are redefining the global map of luxury demand. The US and China remain dominant luxury seekers, with 80 per cent of China’s new wealthy consumers being under 50 years old.

India’s affluent class is projected to grow from 60 million to 100 million by 2027 and the Gulf nations are forecast to see a 150 per cent increase in centi-millionaires by 2028.

Southeast Asia and Africa are also seeing a new wave of luxury travel seekers.

By understanding the new luxury travel trends, hospitality facilities can be designed to resonate with these consumers.

The market

Using consumer research, the authors estimate the value of global luxury travel in 2024 was US$219 billion (€189 billion, £165 billion), surpassing pre-pandemic levels and driven by a rise in demand for bespoke top-tier experiences.

The total luxury market, including goods and services, is worth approximately US1.54 trillion (€1.33 trillion, £1.16 trillion). Citing a recent McKinsey study, the research highlights a drastic increase in demand for luxury experiences among Gen Z (52 per cent) compared to only 29 per cent of Baby Boomers. Experiences have more value to younger generations than possessions.

Demographic trends

The demographics and behaviours of luxury consumers are changing, which WATG says should serve as a reminder that serving a one-size-fits-all hospitality model won’t work.

According to data by Cerulli Associates, in the US alone, a US$84 trillion (€73 trillion, £63 trillion) intergenerational family wealth transfer is underway. This is accelerating the spending power among Gen X, Millennials and Gen Z, who already represent a growing share of high net worth individuals.

While Baby Boomers still represent 80 per cent of luxury spending power, younger generations are catching up and their priorities appear to be experiences that promote sustainability, personalisation and immersive cultural trips.

For example, 38 per cent of luxury seekers are willing to pay 30-50 per cent more for sustainable travel features. Gen Z is also driving digital nomadism – moving between global cities such as Miami, Dubai and Singapore.

Millennials are leading the ‘bleisure’ (business and leisure) travel trend, blending work with holidays. This is leading to an increase in demand for long-stay accommodation types that cater to remote working combined with relaxation.

Gen Z seek novelty and self-discovery, according to the authors. They say the industry is evolving to offer immersive, transformative experiences that challenge traditional luxury travel, for example, deep sea exploration and high altitude treks.

Luxury consumer wealth demand drivers

The growth of the luxury travel market is being driven by the increase in the number of millionaires and high net worth individuals around the world. WATG says these consumers seek novelty, culture, history and authentic experiences.

WATG has categorised these:

•Aspiring luxury/ mass affluent
These people are financially secure, often made up of professionals, entrepreneurs or those with dual-income household assets with a value of between US$100,000 (€86,500, £75,300) to US$1 million (€865,000, £753,000).

They represent 35 per cent of the luxury travel market, spend selectively on luxury and prioritise premium experiences while remaining value-conscious.

WATG says these consumers may look for more heavily-branded luxury experiences to validate their decision to splurge on a premium experience.

This cohort is expected to replace the middle class as growth drivers in the coming decade. They will prioritise travel over other forms of discretionary spending.

•Millionaires next-door

These people live more frugally, below their means, despite their assets being worth US$1-5 million (€865,000-4.3 million, £753,000-3.8 million). They often reside in middle-class neighbourhoods and their purchasing priorities include quality, longevity as well as discreet luxury experiences. WATG says these consumers are key customers for well-designed premium hospitality with substance.

•High net worth individuals

These people, with wealth amounting to US$5-30 million (€4.3-26 million £3.8-22.6 million), seek top tier travel experiences and are key players in the global luxury economy. Key growth markets for this population are growing in Asia, the Middle East and North America.

•Ultra high net worth individuals

Those with net worth exceeding US$30m (€26 million, £22.6 million), this group represents less than 1 per cent of the global population but has a disproportionate effect on luxury markets. They are known for distinctive demands and seeking rare, hyperpersonalised and private experiences.

Hospitality

Real estate information company CoStar says the number of available global luxury rooms could reach 1.9 million in 2030, up from 1.6 million in 2023.

The authors of the report say the cost of luxury hotel suites has increased globally by 9.2 per cent and HNWIs in the APAC region spend the most on five-star hotels, compared to other regions.

To read the report, click here.