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- 11 May 2010
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Not Quite So Much Domestic Bliss

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How one global luxury forecast didn’t pan out

LONDON – It was one of the most intuitive predictions for 2009 and beyond. Apparently, the whole world would be going domestic. Not only would we be staying indoors more thanks to those already stale buzzwords “cocooning” and “hunkering down”, but when we did travel for leisure, we’d be doing more of it domestically. Increased airport restrictions made international journeys ever more unpleasant; heightened concerns about climate change gave us long-haul guilt; and cheaper holidays inside our borders supported the local economy. It was just good old-fashioned logic.

The top end of the travel market was never going to be persuaded as easily as the budget, middle or premium segments, but the wealthy had reasons of their own to reconsider faraway destinations. Time being their most precious commodity, short breaks suddenly seemed like the ultimate luxury. And for those HNWIs who travelled extensively for work, well, why not avoid the indignity of surrendering their Rolexes to plastic X-ray buckets and getting their socks dirty at security for the odd holiday or two? The whole thing added up to a compelling case: domestic tourism would recover at least some of the revenues lost in a shrinking overall travel market. Or so they said.

The reality, of course, was destined to be far more divergent. No one ever really expects so-called “global trends” to be universal and, in all fairness, no luxury travel forecaster claimed that every single country market would embrace this movement toward domestic leisure. But what does come out of redressing this sweeping prediction is an opportunity to identify the anomalies and gain some insight into why some markets didn’t behave according to plan.

Six months into 2009 and the cracks in the theory started to appear Down Under. Citing figures that suggested domestic tourism was actually at its lowest level in a decade, The Sydney Morning Herald’s marketing editor concluded that the Australian view hadn’t really changed after all. The headline read simply: “For vacations, it’s got to be overseas.”

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The Australian luxury travel industry had banked on luring more locals to top leisure spots like the Wolgan Valley Resort & Spa, which opened in October. A three-hour drive from Sydney, the property is one of only five in Australia listed by The Leading Hotels of the World. By the time the resort launched, the general manager felt compelled to revise his earlier target guest break-down of 70/30 international/domestic to a 50/50 ratio. But the readjustment probably had as much to do with the fact that the resort’s ad campaign hadn’t yet kicked off in key international markets like America as it did with a greater interest from Australian guests themselves. It will be interesting to check in with resorts like Wolgan Valley later in the year to see just how many dollars spent there were actually domestic in origin.

Anecdotal evidence suggests that the region’s airfare and hospitality price war has made foreign resort destinations on Australia’s doorstep like Bali and Vanuatu better value for money than many Australian luxury getaways. And Australia is not alone – the same applies in many other luxury markets around the world.

Many affluent business travellers have been on the austerity wagon for a while now (either having it imposed by management or doing so voluntarily) – which has prompted some to splurge when it comes time to book their own holidays. Consequently, cutting costs isn’t necessarily as high a consideration as marketeers would have us believe. But it is true that if the domestic holiday fails to deliver an incentive when it comes to price, half the battle is already lost.

In Britain too, chins were wagging last year about a boom in domestic luxury travel. A survey by Conde Nast Traveller found that 51 per cent of luxury holidaymakers planned to take a break in the UK in the next few years. What encouraging statistics like this don’t take into account, however, are key underlying motivations and local circumstances like unfavourable exchange rates against the weak sterling that made foreign travel prohibitively expensive. It’s likely that this, more than anything else, is what gave British luxury travellers reason to ponder a summer retreat in the Scottish Highlands instead of the Caribbean for a change.

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In many markets, there are far too many barriers to make domestic luxury travel a viable option. And in others it’s simply a compromise too far. Domestic flights in many smaller countries rarely have proper first class or business class cabins and for journeys where there are, you still face the dreaded airport experience you’d face had you travelled somewhere more exotic. Unless you drive, the schlep from London, for instance, to anywhere remotely resembling a luxury resort would thus involve the clunky train network – where many first class compartments are anything but a pleasure.

Questions of infrastructure and logistics aside, the biggest issue might just be a cultural one. For serial travellers like Australians, the holiday abroad is in their bones. The affluent in India and other countries with a global diaspora regularly travel overseas for family events and business anyway so a holiday stop-over just makes good sense. The trouble that the Chinese have to go through in order to obtain foreign visas should make domestic travel more alluring than in other countries but isn’t this the first time in several generations that they are able to explore the world? There will have to be a lot more development in places like Hainan, China’s tropical southern island province, to ever really compete with the attractions and standards of international resorts and destinations.

Americans, on the other hand, are even more insular now that terrorism has come to dominate the national dialogue and, with plenty of domestic luxury leisure destinations to choose from, it’s hardly surprising that they are staying home more. Ironically, so are the Japanese but for different reasons. They still like Hawaii for some sunshine, but the once uber-adventurous and omnipresent Japanese luxury tourist is far more introspective about his choice of holiday destinations these days. A few mystical nights back in Kamakura sounds pretty charming for a generation exhausted from being so cosmopolitan.

Yes, we have been oversold the domestic luxury travel trend but to underestimate its growth potential for certain markets and demographics would be to miss a golden opportunity at a time when there are few around. Hospitality brands need to tunnel deep into the consumer psyche to uncover the real potential and find ways to persuade locals that an unrivalled first-class experience is closer to home than they thought.

Robb Young