How Rising US Travel Costs Reflect Opportunities and Cautions for Dubai Property Investors
Summer air travel – typically a far cry from the end of summer madness of Labor Day – has kicked into a higher gear of late, with average round-trip prices to top destinations in the U.S. clocking in at $788.20, an increase of more than 20% over same time period last year and far above the typical 2% increase in average price for a round-trip ticket in the domestic air travel market, according to AAA.
It appears that in a number of markets consumers are prepared to pay a premium for certain destinations such as Seattle, Orlando and Boston but not for others. In terms of property in Dubai, this type of consumer behavior will be worth watching in order to gain insight into the growing demand for luxury travel in Dubai and the ways in which Dubai property is perceived as a leisure investment opportunity.
It’s a different story for international air travel. Prices have actually fallen 4% on average with fare to head to European cities like Rome and to destinations in Canada like Vancouver experiencing strong demand. In the hotel sector prices are up a further 9% on the domestic market and 12% on the international market.
Cruising, an exception in the rising costs to travel, fell 4% to average $2,700 for a booking in this year’s survey. For those interested in purchasing property in Dubai, likely to experience growth in the luxury segment of tourism, that there are opportunities to capitalize off travel packages could prove advantageous. A cruise terminal or integrated resort is the type of property to follow.
There’s a catch, however. Affluent travelers, who in the past would have paid a premium for luxury travel experiences, may begin to reduce their levels of travel or seek out bundles of different products and services to help make their vacations more cost-effective, as they face increasing costs for flights, hotel stays, gasoline, and even time spent in traffic. The issue is therefore becoming more acute for the luxury property market and for the growth of the premium segment of Dubai property.
What This Means for Your Portfolio:
- Be aware of international airfare decreasing in price to Europe by 4% and potentially redirecting post-pandemic travel to Dubai for seasonal periods.
- Evaluate current and upcoming developer projects which are located near cruise terminals or integrated resorts – as the cost of cruising is lower than other forms of travel it will continue to support demand for travel to destinations with ports of call.
- Be very careful when investing in price sensitive products such as short domestic trips or very expensive city hotel stays.
- Monitor Dubai travel policies and infrastructure development to identify measures that alleviate traffic congestion on roads to holiday destinations.
The key insight for the Dubai property investor is the shifting dynamic in how luxury is bought and the importance to the developer of embedding value within their product and community offering as global travel behaviors continue to evolve.
