Rising Inflation Has Europeans Budgeting More For Travel

While one would expect that inflation would dampen travel demand, GlobalData reports that the reaction of many European travellers is to budget more when booking a holiday due to inflation.

The data and analytics firm notes that with national inflation rates increasing dramatically in recent months across Europe, the purchasing of cheaper tourism related products and services has allowed many European travellers to satisfy their desire of holidaying abroad while ensuring they can make ends meet back at home.

Ralph Hollister, travel and tourism analyst at GlobalData, observed that: “This level of inflation would be expected to severely dampen demand for international travel. However, stories of packed airports across Europe continue to emerge, demonstrating that the pandemic induced demand for international travel is still present even with inflation squeezing levels of disposable income.”

The UK’s inflation rate has shown similar stark increases to the Eurozone in recent months. However, demand is still present for international travel across all social grades.

In fact, a GlobalData survey found that even in the less affluent social band of ‘DE,’ one in five respondents (20.8%) stated that they are still planning to travel internationally this summer, with consumers in this category set to be impacted the most by inflation.

Said Hollister: “A significant portion of European travellers in less affluent social bands will still be able to travel by trading down in terms of the travel related products and services they purchase in the ‘pre’ and ‘during’ stages of a trip. This will certainly play into the hands of companies that already target budget travellers.”

For example, travellers that usually stay in midscale hotels may now lean towards budget forms of accommodation to keep costs down for their main summer holiday. This could play into the hands of low-cost providers such as Airbnb. With hosts likely feeling the pinch of inflation themselves, they may actually lower their prices to ensure occupancy is maximized during peak season and to remain competitive.

GlobalData said that it could also spur emerging low-cost trends such as carpooling. Ride-sharing apps such as BlaBlaCar have already been experiencing solid growth in terms of users in recent years. These apps connect budget travellers with drivers that have seats going spare in their car for medium-to-long journeys. This type of app may be used by travellers looking for cheaper transportation alternatives this summer.

Hollister concludes: “The impact of inflation across Europe will no doubt extend the recovery timelines of travel and tourism companies. However, the strong desire of travellers to continue travelling as a period of economic downturn looms will be facilitated by trading down, with cheaper products and services being prioritized to counteract the impact of inflation.”

NOTE: The chart shows the percentage of consumers within each social grade who are planning a holiday in the UK, abroad or do not have one planned this summer.

Percentages for each social grade do not sum to 100% as respondents could select both holiday in the UK and holiday abroad.

Data is derived from GlobalData’s 2022 monthly survey of 2,000 respondents. AB: Higher & intermediate managerial, administrative, professional occupations.

C1: Supervisory, clerical & junior managerial, administrative, professional occupations. C2: Skilled manual occupations. DE: Semi-skilled & unskilled manual occupations, unemployed and lowest grade occupations.

Go to www.globaldata.com for more.