Five nights at the Ritz Hotel in Paris or a Hermès Birkin handbag? That is the question. Broaden it to whatever location, hotel, or brand – and the dilemma remains: choosing how to allocate your travel budget.
Would you rather spend a fortune (however you define that) on a hotel room or, alternatively, experience the locale and do some tourism shopping. You know, hypothetically, get a new bag or several. Just as a souvenir, wink, wink.
Our query stems from concerns about a “richcession,” an economic slowdown affecting wealthier, perhaps more corporate, employees. Not necessarily the uber-rich who are seemingly immune from the vicissitudes and variability in economic news, but rather the “somewhat” rich; people with disposable income who enjoy luxury experiences and purchases but are not immune to the daily financial news headlines like layoffs at tech (eg Meta) and mainstream (eg McDonalds) corporations. Investment bankers are expecting big cuts in their bonuses, which amount for a substantial (if not majority) of their annual income. Interest rates are up. Some housing prices are down. Banking crisis or not. And so on.
A recent MLIV pulse survey claims these wealthy travelers are tightening their budgets. Remember the revenge travel of last summer (2022), making up for the time lost to the pandemic and its restrictions? Apparently those days are fading. Of those surveyed 18% plan to reduce spending on travel this year. About half are sticking with pre-pandemic travel style; that is, no revenge upgrades. That means nearly 70% of the respondents are either spending what they spent in or about 2019 or less.
When you take into consideration that virtually everything seems to cost more nowadays, your travel budget, no matter how “rich,” just doesn’t go as far. For starters, anyone planning a trip right now is facing expensive flight costs, however you choose to travel. Unless you’re willing to shift from first or business class to nonrefundable economy, there’s little room for big savings on skyrocketing airfare prices, short of not flying. On the other hand, as they say, flying in the back of the plane gets you to your destination in the same time as the front. Maybe that’s a tradeoff you’d like to make.
Perhaps as a result, among the first items to be cut from the travel budget are hotel rooms going for over $500 per night. 69% of the survey respondents said they wouldn’t spend more than $500 on a hotel room. 24% reported being willing to go to $1000 per night.
While it might not seem a big deal – au revoir Georges V in Paris, bonjour smaller hotels – for those accustomed to a certain level of travel, it’s a change. Moreover, in popular cities like London, Paris and Rome, at $500-1000 per night, you are not staying in the top exclusive hotels. A quick check on the Ritz in Paris lists a five night stay in a basic guest room for €10,400 ($11,362) or over $2000 per night.
Four Seasons George V in Paris. Image courtesy @dr_asma_aldarweesh
Further, for the hotels and other businesses catering to these clients, it’s really a big deal with implications for the economy as a whole. Think top-end restaurants and private touring. Visitors may scale back, selecting one or two instead of seven expensive restaurants, and one exclusive tour rather than several.
Data has shown that high-end luxury revenues have been not affected thus far in 2023 by economic uncertainty. Both Hermès and Louis Vuitton’s parent LVMH report strong 2023 Q1 financial results. If sales have grown rather than contracted during this volatile quarter, it may indicate stability in the luxury market.
Read:
LVMH Revenues Soar 17% in Q1 of 2023 Due to Asia and Fashion & Leather Goods
Outside the Ritz Paris. Image courtesy @stephshojee
Which brings us back to the original question: Uber-luxurious hotel room or Hermès handbag. What do you choose? Many pundits and experts posit that luxury goods are at risk as the more or somewhat affluent begin to retract or reduce spending. That brands like Hermès, Chanel, and Louis Vuitton cannot count on tourist shopping to fill coffers, as they did last summer. Add to that a less favorable exchange rate between the US dollar and euro (1.09 at writing), as compared to July 2022 when it was about 1.02, one can understand how pursestrings might clamp down on purse purchases.
But, we say, not so fast. When the PurseBop team hit Paris last month (March 2023), the bags were flying… off the shelves. For many brands and items, prices are still lower for American (and other non-EU residents) in Europe than at home. And that doesn’t consider any applicable VAT refund.
Moreover, for many, shopping is an integral part of the travel experience and budget. Just think how many people fly over with lists of US prices to compare with what’s in boutiques in Paris, or other cities. Whether as a gift, a souvenir, or just something you crave, maybe you’d choose a lesser hotel if it leaves you with money for that special handbag.
Let us know how you feel.
Read related articles:
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Love PurseBop
XO
Updated: April 17th, 2023
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