Tourism to grow with income inequality

It may be uncomfortable to acknowledge, but tourism destinations’ competitiveness will depend increasingly upon the choice they make to cater to either the luxury or the economy market. Remaining open to every budget will become increasingly difficult to meet the expectations of both ends of the market as income inequality enlarges the divide between classes. The higher end of the market expects more exclusiveness and distinction while the lower end of the market requires accessibility and affordability. While the concept is hardly new as the hospitality industry has always separated economic and social classes through distinct properties, what is new is the propagation to airlines and terminal facilities which are becoming increasingly segregated along the same economic divide as driven by market demand. The FSC (Full Service Carriers) are moving up market as the LCC (Low Cost Carriers) focus almost exclusively on the economy segment. Terminals and even entire airports are now built or reconfigured to serve either the economy or the luxury class exclusively.

Income inequality and the travel class divide

There is an unmistakable correlation between the growing income inequality in society and the increasing gap in economy and luxury classes in both airlines and hotels. It should be no surprise being that tourism depends mostly on the disposable income that is most sensitive to income disparity.

On one hand, we have the extraordinary growth of LCC (Low Cost Carriers), the shrinking seats in the now spartan economy class of legacy carriers, the emergence of branded very low cost accommodation like Tune hotels (built on the AirAsia operating model) while on the other hand the airlines upper classes are getting more spacious, with better and bigger seats, with more amenities and services and 5-star hotels up their offering, refurbish to more lavish rooms and more services.