Tourism is booming thanks to low-cost travel

Travel, especially international travel, was once only for the wealthy, but as airfares have come down and accommodation options have become wider and more affordable, travel agencies such as LCCs (Low Rate Carriers) low prices) and Airbnb were able to target a wider range of customers. .

LCCs create more travelers

Most airlines that offer cheap tickets serve certain regional routes and airports. This allows airlines to reduce overhead costs such as airport tax, allowing them to offer more competitive prices, undercutting FSCs (full service carriers). Purchasing these flights could save the consumer up to 80% according to TheBudgetDiet, especially when booked in advance.

Over the past decades, the growth of commercial air transport has been closely linked to different parameters such as higher revenues and lower average costs per flight. In 2011, LCCs accounted for around 25% of all aircraft seats sold, but GlobalData projections predict that this figure will increase to almost 30% by 2022. It is well known that there is reciprocity between airlines and globalization: traditional and low-cost airlines promote global economic development and at the same time, this phenomenon can explain the growth of airlines.

There is a strong correlation between intra-European tourism and low-cost airlines, which need many destinations to guarantee a high tourist flow. Falling flight costs are good for tourism, as it means consumers who would normally not be able to afford to travel now have the opportunity to do so. However, in recent years, it’s not just LCCs that have benefited the tourism market. New developments in the accommodation sector have shaken up the industry and provided travelers with the opportunity to combine low cost flights with high quality cheap accommodation options.

Innovations in the accommodation industry have changed the landscape

According to GlobalData’s Thematic Research on Low-Cost Evolution, advancements in technology have seen the popularity of the sharing economy increase. The sector has changed the way travelers book travel and the business model and has significantly disrupted the hospitality industry, just as budget airlines have done to the airline industry. Airbnb has revolutionized the interaction between buyers and sellers. The asset-light business models that these companies have adopted result in lower prices being offered in the market, which in effect lowers the rates for many hotel rooms.

As smartphone usage continues to grow, the popularity of sharing-economy-based operators is also expected to follow suit and could threaten the traditional low-cost business model of budget hotels. This is a positive step for the tourism industry as a whole. However, more traditional business models need to modernize their approach.

There is now an opportunity for economic hardship

The 2009 global financial crisis took the world by surprise and the financial pressures on consumers hit the travel and tourism industry hard. However, it continued its low-cost evolution as more consumers turned to budget travel options than before. Today’s travelers have become much more price driven. In a global consumer survey conducted by GlobalData in Q3 2021, 58% of respondents said price was the most important factor in deciding where to go on vacation. Thus, low cost travel agencies and the sharing economy will continue to thrive in this environment and will likely continue to do so as economic conditions fluctuate during the pandemic.

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