COVID-19 has changed the way travellers define luxury holidays. With consumers advised to stay at home and avoid travel, this has given people a fresh perspective and made them re-evaluate what is important to them. Nearly four in 10 luxury travellers now associate luxury holidays with feeling special, while almost a third are focused on making memories. Association with these characteristics has risen significantly in 2020.

The underlying demand for luxury travel is still there; however, the new lockdowns announced in January 2021 will prolong the recovery of the holiday market and consumers will continue to be cautious when taking holidays once restrictions are lifted. Destinations closer to home will remain more popular options compared to pre-COVID-19, while there will be an unprecedented demand for villa and cottage holidays.

Despite their financial power, luxury travellers are as likely as the wider travel market to spend less on travel in the 12 months following September 2020. The uncertain environment will continue to boost bookings made at the last minute, while flexible cancellation policies remain crucial to enticing travellers to book earlier.

Luxury travellers show an above-average interest in multi-centre trips. Visiting multiple destinations during one trip will grow in popularity as people feel safe to travel again. One segment that is set to benefit is luxury train holidays, which have widespread appeal. 

• The impact of COVID-19 on the luxury travel market

• How Brexit will impact luxury travellers’ booking intentions

• Considered luxury holiday destinations and holiday types

• The changing definition of luxury travel

• Opportunities to accelerate recovery

• Company and product trends during the pandemic

COVID-19: Market context

The first COVID-19 cases were confirmed in the UK at the end of January, with a small number of cases in February. As the case level rose, the government ordered the closure of non-essential stores on 20 March. 

A wider lockdown requiring people to stay at home except for essential shopping, exercise and work ‘if absolutely necessary’ followed on 23 March. It was not until 15 June that non-essential stores were allowed to reopen, followed by pubs, restaurants, hotels and hairdressers on 4 July, and many beauty businesses on 13 July.

From 24 July, it became mandatory to wear face coverings in shops and supermarkets. Rules on travel remain fluid: from 10 July, travellers from more than 70 ‘low-risk’ countries or territories no longer had to self-isolate for 14 days, but on 28 July the removal of Spain from this list of low-risk countries dominated headlines in the UK, and further countries (including France, Portugal and Italy) have been removed from this list. Meanwhile, several countries listed by the UK government still impose entry requirements for UK visitors (eg quarantine rules, undertake a COVID-19 test) or have closed their borders to UK travellers (eg Australia, New Zealand). From 25 October the UK government added the Canary Islands to the travel corridor list, which at that point consisted of 58 countries or territories.

By September, it had become clear that the UK was at the start of a second wave, and social-distancing measures were intensified. Continued increases in infection numbers led to Wales implementing a two-week national lockdown from 19 October, England announcing a full month-long lockdown from 5 November, and Scotland introducing a new five-level system of coronavirus restrictions. 

Despite these restrictions, however, case numbers continued to increase, and after a brief relaxation for Christmas Day, a full national lockdown was announced on the evening of 4 January. There is no defined end date for the lockdown: the legislation presented to Parliament extends to 31 March, but Boris Johnson has said that he hopes that schools will be able to re-open after February half term.

The UK’s vaccination programme started on 8 December, and with both the Pfizer-BioNTech and the Oxford-AstraZenica vaccines licenced for use in the UK, the government aims to offer a vaccine to 15 million people by mid-February.

Much of this Report was prepared in December 2020, before the announcement of the January lockdown, and when the extent of the vaccine rollout was less clear.

However, the content was reassessed and, where necessary, adjusted on 6 January January 2020, in order to ensure that our analysis and our forecast expectations still hold true.

Our core assumptions on the path of the pandemic had always included an expectation of severe disruption to markets and consumers’ lifestyles well into 2021, with a strong likelihood that the virus would still be with us even into 2022. Although the second wave of infections and subsequent lockdown puts us towards the negative end of our initial expectations, these developments are still broadly consistent with our previous assumptions.

Similarly, Mintel had factored in the likelihood that an effective vaccine would be available from early- to-mid 2021. The licensing of the Pfizer-BioNTech and Oxford-AstraZenica vaccines puts us slightly ahead of that assumption, but the challenge associated with rolling out a new vaccination programme to millions of people means that our previous assumptions are still broadly consistent with the new reality.

Mintel’s economic assumptions are based on the Office for Budget Responsibility’s central scenario included in its November 2020 Fiscal Sustainability Report. The scenario suggests that UK GDP will have fallen by 11.3% in 2020, recovering by 5.5% in 2021, and 6.6% in 2022. GDP is not expected to return to pre-COVID levels until Q4 2022. The central scenario has unemployment peaking at 7.5% in Q2 2021.

The current uncertainty means that there is wide variation on the range of forecasts, however, and this is reflected in the OBR’s own scenarios. In its upside scenario, economic activity returns to pre-COVID-19 levels by Q4 2021. Its more negative scenario, by contrast, would mean that GDP does not recover until Q3 2024.

The second wave of infections and subsequent lockdown means that the short-term prospects for the country are consistent with the OBR’s negative scenario, but this needs to be balanced against the fact that the vaccine rollout is ahead of even the OBR’s central scenario. Medium- to long-term, then, we are still basing our forecasts and market analysis on the OBR’s central economic scenario.

There is no industry-wide agreement on the definition of the luxury holidaymaker. Mintel has, therefore, approached the luxury travel segment from several different angles and created three luxury segments, based on the findings of our exclusive consumer research:

Big-ticket spenders – these are consumers who have spent either:

• £1,000+ per head for a break of 1-6 nights or

• £1,500+ per head for a holiday of 7-13 nights or

• £3,000+ per head for 14+ nights in the past five years

This group accounts for an estimated 22% of all UK holidaymakers who remember how much they spent on their most expensive holiday.

Five-star big-ticket spenders – these are:

• Big-ticket spenders (as defined above)

• who have also stayed in five-star or above accommodation in the past five years, since this is likely to be seen by most specialist brands as a core element of luxury travel

This group represents an estimated 12% of all UK holidaymakers who remember how much they spent on their most expensive holiday.

All luxury travellers – these are consumers who either:

• fall into the above spending groups

• or who have stayed in five-star or above accommodation

• or spent £250+ per hotel night in the past five years

48% of all UK holidaymakers who remember how much they spent on their most expensive holiday and have fallen into the ‘luxury travellers’ category at some point in the five years to 2020.