2.5.1. FLUCTUATIONS IN CURRENCY VALUES IMPACTING TRAVEL COSTS FOR Long term fluctuations of exchange rates between 2019 and the forward projection to 2035 will also
INTERNATIONAL TRIPS raise the level of financial risk of luxury travel businesses. A company who offers a package the price
of which is fixed months ahead, is exposed to a risk of currency changes for which it gets the
Currency value swings are a major headache for the global luxury travel market. This is especially true for payment only later. This may reduce the margin of the business at one point, which will be later or it
international trips where you pay in different currencies. So, from 2019 to the expected period of 2035, has to resort to hedging strategies and dynamic pricing models. As for consumers, the
exchange rate fluctuations have regularly been a macroeconomic factor affecting the affordability of travel unpredictability of currency changes can lead them to postpone a booking, reduce the time of their
and people's decision to go.
Luxury travel generally refers to those costly trips where a person can use a lot preparations, or make them more inclined to choose a resort which they consider as stable from a
of money for international flights, lavish hotels, private tours, luxury shopping, and exclusive experiences. currency point of view, thus changing the pattern of luxury demand at the global level. Hence, the travel of the rich is mostly vulnerable to currency fluctuation. In case a traveler's home currency
becomes weaker against the currency at the destination, the overall trip cost goes up in real terms, even if
local prices stay the same. Such an unpredictability makes it difficult for wealthy travelers to make a budget
Country 2019 2020 2021 2022
and also causes pricing and revenue management problems for luxury travel providers that operate
internationally. Japan 109.01 106.77 109.75 131.50
Currency depreciation in the countries of destination may considerably raise the real cost of international Indonesia 14147.67 14582.20 14308.14 14849.85
luxury travel.
In case a domestic currency loses its value in comparison with major global currencies like the
U.S. dollar, euro, or pound sterling, travelers have to spend more money to get the same level of services Argentina 48.15 70.54 94.99 130.62
abroad. This may affect the choice of destination, the length of the stay, and the premium services selected. Pakistan 150.04 161.84 162.91 204.87
Besides, high-net-worth individuals might also reconsider the luxury expenses when the fluctuations in the
exchange rate last, especially if they plan long, haul or multi-country journeys where several currency Ethiopia 29.07 34.93 43.73 51.76
exposures together increase the total costs. Turkey 5.67 7.01 8.85 16.55
Conversely, currency appreciation in some regions inevitably leads to a reduction of global luxury travel
demand, however, it can only cause a shift in flow pattern. A stronger home currency enhances purchasing Nigeria 306.92 358.81 401.15 425.98
power abroad, encouraging outbound luxury travel from those markets.
Anyway, since such a thing exists
Sri Lanka 178.74 185.59 198.76 322.63
only on a local market scale, globally the whole situation is imbalanced, i.e., the destinations whose
currencies have strengthened may face a decrease of the people coming in because they will have to pay Malawi 745.54 749.53 805.90 949.04
more. Hence, luxury hotels, private aviation services, and high-end tour operators are forced after each
Congo, Rep. 585.91 575.59 554.53 623.76
exchange rate variation to change their pricing policy, contracts and marketing tools so that they remain
attractive to the competition. Source: World Bank MARKET CHALLENGES
2.5.3. CLIMATE CHANGE AFFECTING ISLAND AND COASTAL DESTINATIONS
Island and coastal locations once considered the epitome of a luxury holiday with crystal clear water, untouched beaches, and private hotels face climate change which is a great threat to the worldwide luxury travel
market. Nature, which is the biggest attraction of such places to affluent travelers, is directly endangered by rising sea levels, more powerful storms, and coral bleaching. These phenomena might lead to the
disappearance of beaches, destruction of important facilities, and damage to ecosystems which are the main reasons for luxury travel.
Some premier luxury travel brands and destinations, therefore, are not only
protecting their hotels but also the natural attractions that generate demand for them by raising the value of the environment in their activities. To illustrate, The Ritz, Carlton and Four Seasons have revealed an array
of green activities such as minimising carbon emissions, actively engaging in coral reef restoration, and promoting the use of water sustainably at their beach hotels. At the same time, these businesses want to keep
the attractiveness of their destination and show their managemen
