By Sabrina Escobar
A slowdown in spending on high-end travel and experiences would be a troubling sign for the U.S. economy, given the outsize economic contributions of the nation's highest earners. That's why Delta Air Lines' recent warning that sales slowed in February sparked a wave of worry in the stock market and elsewhere.
It shouldn't have.
The pullback stemmed largely from a reduction in corporate travel and bookings by price-sensitive customers, Delta said, while sales for international travel held up well. Indeed, the luxury travel market continues to thrive, travel agencies, tour operators, and hospitality companies tell Barron's.
"We're not seeing people try to save," said Huw Beaugié, co-founder of The Thinking Traveller, a European luxury-villa rental company whose nightly rates range from $3,000 to $20,000. "Our average booking value has gone way up."
Households making about $250,000 a year or more account for roughly half of all consumer spending and almost a third of gross domestic product, according to an analysis by Moody's Analytics Chief Economist Mark Zandi.
A record-breaking stock market and rising real estate values have bolstered these consumers' balance sheets, giving them the confidence to splurge on both goods and experiences. Their spending, in turn, has given the economy "a lot of juice" in the past five years, Zandi said, helping drive growth even as inflation crimped the purchasing power of less wealthy households.
The economy's reliance on the wealthy is a vulnerability as much as a strength, however. If high earners turn more cautious and rein in their spending, "then I think it's game over for the economy. We're going into a recession," Zandi said.
They haven't turned cautious just yet. According to February data from Deloitte's ConsumerSignals tracker, 75% of high-income consumers planned to spend on a hotel within the next three months, and 45% planned to take an international flight, compared with 31% of all survey respondents. The luxury travel market overall is expected to grow by 5.2% this year, to almost $1.8 trillion, according to a report from The Business Research Company.
So far, travel companies that serve the high-end market have seen few signs of trouble.
Hotel chain Hyatt has experienced a "bit of a dip" in its brands that serve mass-market clients, but its luxury portfolio, which comprises about 30% of the hotel's brands, hasn't been affected, said Katie Johnson, vice president and global brand leader of Hyatt's luxury and collection brands.
Hyatt still sees high-net-worth clients booking long-haul travel, including to upscale destinations in Asia and Europe. "Demand continues to rise just because there are more affluent travelers out there willing to pay a premium rate," Johnson said.
She added that the luxury travel agents Hyatt works with haven't seen any decreased demand, either.
Casey Holt, sales and service manager at luxury travel company Scott Dunn, said the firm is projecting a strong 2025 travel year. The first quarter of the year is always a busy time for the agency as people try to iron out their summer travel plans, she said. As of now, the company, with offices in the U.S., the U.K., and Singapore, isn't seeing a "dip at all" in terms of intent and planning, with 35% of its existing guest pool indicating they expect to take more vacations this year than in 2024, Holt said.
Virtuoso, a network of luxury-focused travel agents, has seen a 57% yearly jump in bookings valued at more than $50,000, and an 81% year over year increase in future bookings valued at more than $150,000, said Misty Belles, Virtuoso's vice president of global public relations. Roughly 70% of Virtuoso's client base is U.S.-based, she said.
"We do look at it pretty closely and we're not seeing any shift or significant paring back at all," Belles said.
Demand for ultraluxury travel, involving private jets, yacht charters, and villa rentals, remains red-hot, agents have said, fueled in part by expensive multigenerational family getaways that help drive up trip costs.
The stock market gains and asset-price appreciation of the past few years are helping to keep travel plans on the books. Wealthy households may also be getting a boost from higher wages. In February 2025, after-tax wages and salaries for the higher-income cohort grew by 3.5% year over year, according to data from the Bank of America Institute, compared with a 2.4% increase for lower-income households.
"It's not going gangbusters, the high-end labor market, but neither is it looking especially soft, so I would be cautiously optimistic that the momentum of the higher-income consumer can continue," said David Tinsley, senior economist at Bank of America Institute.
That's not to say wealthy Americans are wholly insulated from macro trends, including the uncertainty that has weighed on consumers this year, fueled partly by the Trump administration's tariff plans. Analysts have noted that spending on luxury goods is slowing, even though demand for experiences remains robust.
Executives at luxury-cruise operator Viking Holdings said on the company's fourth-quarter earnings call this month that clients would be "somewhat impacted" by stock-portfolio declines, adding that bookings slowed in February after a record January.
Even so, Viking said it has sold nearly $2.6 billion in advance river-cruise bookings for 2025, 24% higher than last year, and that just under 90% of its total room capacity for the year is already sold. Booking trends for 2026 are ahead of the same point in 2025, executives said.
Luxury travel agency Abercrombie & Kent has also seen slower bookings, said Stephanie Schmudde, senior vice president of global product strategy. Some clients have gone into wait-and-see mode while others are opting for safer, more traditional destinations, such as Europe, over riskier adventures, she said.
But at the end of the day clients are still planning to travel, and spend. Abercrombie & Kent's bookings started this year softer than last year but spending per booking is increasing, Schmudde said. The company is optimistic that 2025 will be another record-breaking revenue year, she said.
"[Customers] are still strong and they're still very eager to travel, but they are also patient and waiting for perhaps some of the uncertainty to die down," Schmudde said.
It's only March, and the picture could change for the economy, the stock market, and the travel industry. But so far, there is little concern among companies who serve high-income travelers that a meaningful slowdown, much less a recession, is on the way.
Write to Sabrina Escobar at sabrina.escobar@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
March 21, 2025 03:30 ET (07:30 GMT)
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