And as luxury products with high margins and strong sales continue to thrive, budget services are feeling the pressure, particularly in travel. The natural selection affecting low‑cost becoming increasingly unsustainable.
Just as budget carriers grapple with softer leisure travel demand, low‑priced hotels are losing ground. Their lag behind upscale properties underscores a key feature of the post‑COVID economy—a K‑shaped recovery in which one segment rises while another falls.
“We are increasingly concerned about the backdrop for lower-end and select service hotels,” wrote Bank of America analysts Shaun Kelley and Dany Asad in a report on Monday.
Multiple factors are driving the downturn. Chief among them is the uneven recovery evident across the broader economy. The trajectories of the nation’s wealthiest consumers versus lower‑income households are diverging, a gap reflected in data on wealth, wages and sentiment. Bank of America’s recent review of aggregate credit and debit card spending highlights the same split, “with materially worse lodging spending for lower income cohorts.”
Weaker income growth among lower‑income families helps explain the declining demand for the most Marriott (MAR) and Hilton (HLT) remain focused on upscale and luxury properties.
