When the international Afrobeats superstar Davido was forced to cancel a scheduled performance in May due to issues securing aviation fuel for his private jet, it was a big sign that the jet fuel crisis was reaching even the world's wealthiest travellers, and a warning for the hotel and hospitality industry.
Exposed and vulnerable
Though the Strait of Hormuz has since reopened following months of disruption and the most acute fears around fuel supply have eased, with oil pricing falling back to pre-war levels, Davido’s comments as well as those of other public figures was a reminder that luxury tourism ultimately depends on a fragile global aviation supply chain, and it exposed how vulnerable high-end travel can be in period of geopolitical uncertainty.
Luxury hospitality is especially exposed because so much of the segment relies on long-haul, aviation-dependent demand. For example, resorts in the Maldives, Seychelles, Mauritius, the Caribbean and parts of the Middle East compete on ease of access, and if fuel volatility pushes up premium airfares, reduces flight frequencies or makes private aviation less reliable, it can quickly affect high-value arrivals.
IATA director general Willie Walsh has been blunt about the pressure on airlines, warning that “high oil prices will inevitably mean higher ticket prices” and adding that the “big unknown is how long travellers and shippers can tolerate the higher costs of connectivity”.
While a wealthy traveller may be less price-sensitive than the average tourist, they aren’t immune to their plans being disrupted by inconvenience. So when aviation becomes more expensive or less reliable, the effects can ripple through the hotel sector.
Risks at the top end
The Davido incident shows that even if a billionaire or celebrity is able to charter a private aircraft, they still depend on the same global fuel infrastructure as everyone else, and this creates occupancy risk especially for luxury resorts that depend on relatively small numbers of very high-spending guests. Losing a handful of arrivals because flights can’t be fulfilled can have a disproportionate impact on revenue whether it’s in the hotel itself or even when it comes to branded residence sales activity.
Uncertainty in this area also raises questions around destination diversification. Remote luxury destinations are increasingly being favoured on the basis that exclusivity commands higher rates. However, accessibility may become a greater competitive advantage in an era of more frequent geopolitical disruption. Properties within a few hours of major source markets or those served by multiple competing airlines may turn out to be more resilient than destinations dependent on a limited number of long-haul routes.
That accessibility also matters when it comes to branded residence sales as part of the selling point of what are essentially second or third homes for these buyers is an assumption of effortless global mobility. Anything that undermines that convenience risks weakening one of the product's core selling points.
The issue becomes even more significant as branded residences evolve beyond traditional hotel-led models. Jeff Tisdall, senior vice president of mixed-use development at Accor notes: “In the absence of a hotel, what becomes really important is understanding how to recreate that hospitality engine that brings brands like Fairmont, Raffles or SLS to life in a branded living context.” A big hindrance to the success of standalone and to any hospitality ecosystem surrounding a branded resi scheme is if owners and visitors cannot access those homes as seamlessly as expected.
So although hoteliers and developers have topics such as labour shortages, higher costs and climate top of the list when it comes to concerns, aviation resilience also needs to be an area of focus.
Sustainability challenge
Turning to the climate, sustainability conversation across the industry is also impacted by fuel risk. Former WTTC president and CEO Julia Simpson described sustainable aviation fuel as “the single biggest gamechanger for travel & tourism”. WTTC has said sustainable aviation fuel accounts for just 0.3 per cent of global jet fuel use and that production would need to increase more than 400-fold to meet 2050 net zero targets. This creates a dilemma. Destinations dependent on long-haul air travel need aviation to decarbonise but the current sustainable aviation fuel supply gap means greener flying is likely to remain expensive and constrained for some time.
Simpson stated: “Sustainable fuel supply falls dangerously short of demand. If we don't act together, we risk rising costs, limited availability and stalled climate progress. Every hotel, tour operator, travel agency, cruise line and airline has a role to play. Sustainable fuel is not just an environmental necessity; it's a business imperative.”
While the reopening of the Strait of Hormuz should prevent the worst-case scenarios many feared only a few weeks ago as officials stress that fuel supplies are stabilising and exports are recovering, the industry shouldn’t treat this as a crisis that came and went. Just like the pandemic, the war exposed cracks and made it clear that aviation resilience is part of the wider investment case for destinations dependent on flying.
Owners and operators need to build air connectivity into underwriting. Investors should be asking how many airlines serve the destination, how exposed those routes are to fuel cost increases, whether guests have alternative hubs and what happens to occupancy if one or two key routes are reduced. Hotels and destinations need closer partnerships with airlines, airports and tourism boards, and stakeholders need to collaborate to support route development. Developers also need to think more carefully before leaning too heavily into remoteness. Exclusivity will remain valuable but remoteness without resilient access is a risk. Finally branded residences schemes need to take mobility risk into account. In moments of possible future disruption, travel resilience may become as important as the brand above the door.