The Economics of Experiential Travel: Why the future of travel is good for the budget and for the soul

The Economics of Experiential Travel: Why the future of travel is good for the budget and for the soul
Alessandro Rafanelli

There's a new buzzword floating around the travel community lately. Well, actually it's been around for a quite a while with followers of the philosophy having referred to it by many names – Authentic Travel, Adventure Travel, Slow Travel, Cultural Emersion, and many more. But as of late, the term "Experiential Travel" is getting a little more traction.

There are many good reasons for this. One reason could be that pretty awful economic crisis a few years ago that shifted the value system for a lot of folks from material value to experiential value. On top of that, technology is making it easier than ever to get the local experience when you're traveling to a new city.

As more people I know are shedding their 9 to 5 jobs with salaries, bonuses and healthcare plans in lieu of a simpler life traveling the globe with their partner or moving to foreign country, I hear equally vocal opposition to the economic feasibility of such a decision and the shear impossibility of choosing a life on the road from a financial standpoint.

In some cases, I don't believe these detractors have noted that when making the decision to travel the world, there are many expenses that will simply disappear if you choose to sell a lot of your stuff, rent out your house and store any non-disposable goods. Saying goodbye to car payments, insurance, cable, utilities and even the "cost of working" expenses like commuting, nice clothes, dry cleaning, dining out with colleagues, and more. Of course, these are unique to every person and will be replaced by other expenses during your travels, but the key point is that there is a substitution of expenses, not just a pure addition to your existing outflows.

But most importantly, I feel that these folks are still viewing travel from the lens of the typical tourist, not the experiential traveler. To challenge these non-believers, I thought it would be beneficial to look at a few examples surrounding the economics of experiential travel to evaluate its impact on the price you pay to see the world compared to a typical tourist.

Mingling with the locals is a great way to learn the culture of a new place.
Mingling with the locals is a great way to learn the culture of a new place.

What is Experiential Travel?

To keep things simple, let's just say that experiential travel is a style of tourism that focuses on really getting to know a place by connecting as closely as possible to the way local residents live their lives. This is obviously a broad definition, but let's compare it a little more to our day-to-day lives as an example. Every day, many of us wake up in our home, cook some breakfast with food from the grocery store, head to work, and come home for dinner and relaxation. Some evenings might be spiced up with a walk in the park, exercise, catching some live music, heading to a sporting event, or just sitting outside and watching the stars come out.

While that routine might sound a little boring to some people, it's actually fairly common and it is a beautiful thing. What many of you may not stop to consider is that there are A LOT of people all across the planet have similar routines, with their own unique variations of course. What makes each day special is the interactions and people you are sharing each of these moments with along the way. It's the casual conversation with the clerk at the grocery store, the not-so-fun altercation with the traffic cop, the pick-up game of soccer with 10 strangers in the evening. These types of community interactions occur all over the world. In fact, they are happening somewhere at this very moment.

The ability to engage in as many of these local routines, dialogues and spontaneous moments of joy as a traveler in a foreign land is the essence of experiential travel. It is arguably the only way to truly get to know a culture. And sometimes the only way to achieve that is by chucking the typical tourist conventions of two week holidays, 4-star hotels, and expensive attractions, out the window. A decade ago, this would not have really been feasible, but today access to experiential travel is just a mouse-click, or more likely, a touchscreen-press away. Furthermore, this form of travel can remarkably more economical.

The Economics of Experiential Travel

When speaking to the economics of experiential travel, we're referring primarily to the unit costs of expenses (e.g. per-day basis) and opportunity costs of wasted time. Understanding there are certain scenarios such as holidays, weddings and other special occasions that cannot be missed for personal reasons, it's a little more relevant to just look at leisure travel for this article.

Looking at some of the "new" costs that the traveler has to incur, let's see how it stacks up for the experiential traveler vs. the typical tourist.

Not as glamorous as hotel restaurant spread, but a far more memorable experience.
Not as glamorous as hotel restaurant spread, but a far more memorable experience.

Flights

So let's look at one of the most expensive aspects of travel first: flight tickets. We all know the stress of scouring every vertical flight search site and comparing it with the airlines direct rate to find the best deal on a flight. During peak seasons, even a "good deal" means paying double the off-season fares in some cases. As an example, I'm based in Shanghai, and a visit to see me costs my parents around $1,100 round trip from New York if booked way in advance. However, booking an off-season flight is usually around 36% cheaper at $700 round trip. So over the course of a short 7-day visit, the flight cost-per-day is around $157 during peak season, but only $100 per day during off-season.

For the experiential traveler, the savings is even more significant when the cost is factored over a longer timeframe. Imagine yourself going to Shanghai, China on a month-long (or longer) journey to experience the city more like a local. During this trip, your effective flight cost-per-day drops to only $23! That's an incredible 85% lower than the week-long peak season trip taken by the typical tourist.

Also booking a trip during the off-season means less travelers in the airports, so shorter lines to check in, collect bags, and clear immigration and customs – up to three hours each way or six hours total. If you earn $15 per hour, that is as much as $90 additional savings on your trip. So the experiential traveler could shave another $3 per day from their effective flight cost.

So how's it all stack up? When comparing the 7-day peak season flight with the 30-day off-season flight, the experiential traveler's effective flight cost per day is just $20. Factor in a non-cash savings of not dealing with excessive airport lines and I think we have a clear winner.

Hotels

Probably the second biggest expense in many trips (highly dependent on where you're traveling) is your hotel or accommodation. Sticking with the Shanghai trip mentioned above for consistency, let's break down a typical tourist cost vs. the experiential traveler.

The typical tourist is probably going to stay at a popular 4-star hotel in People's Square district of Shanghai. During peak season, an average tourist can get a good deal for around $135 per night, spending $945 during their week-long holiday. Now let's not deny the fact that good hotels have renowned service, high quality facilities and amenities, and a concierge that can make arrangements and translations for you. And let's face it, when traveling for a short period of time, you want to get a little extra pampering to the stress off of the rushed schedule to which you're trying to adhere.

But the experiential traveler has a different perspective. They travel to get closer to the local culture, not to live a bubble that recreates an environment similar to home. So they seek out other alternatives for lodging, but at what cost? What was once a best kept secret is now a staple in mainstream travel – airbnb.com. Airbnb allows locals to list unoccupied rooms in their home, or the entire home, for rent at daily, weekly, monthly and longer term stays. For the experiential traveler, they can find a place like this in a great local neighborhood for only $45 per night. Sure, they may not have the nice amenities or someone making their bed each morning, but they get their own space, local neighbors, and the true feel for what an apartment in the city is really like. All that, and a savings of 67% per night.

To expand on this rate, at $45 per night, your monthly rent expense is $1,350 in total. This is probably cheaper than the rent many people pay in their home cities anyway. If they chose to leave their current obligations behind to travel, they can find temporary lodging in one of the most expensive cities in the world for just $1,350. This rate goes down significantly when traveling to less expensive cities and countries around the world, making experiential travel that much more accessible.

Just one of the many beautiful residences available on Airbnb.com.
Just one of the many beautiful residences available on Airbnb.com.

Things to Do

Traveling to a new place is a very exciting experience whether done as a typical tourist or an experiential traveler. For the typical tourist, it may involve cranking out a dozen "must see" locations in the short time during their visit. This often means signing up for guided group tours, where you can get stuck on a bus that takes you to one or two places that you really wanted to see along with about three others you couldn't care less about. While the price of these tours is usually a little cheaper (due to big group size), the wasted time on boring attractions is a huge opportunity cost for the typical tourist on a tight schedule. A private guided tour might a slightly better alternative, but at a significantly higher cost.

Let's look at one example of visiting the Eiffel Tower in Paris. Certainly this iconic "must see" activity is on nearly all typical tourists' to-do lists (and possibly experiential travelers' lists as well). However, because the typical tourist is on a tight timeline, they must make haste through their journey and will likely choose the premium priced "Skip-the-Line" ticket for $65, a significant premium over the $9 standard admission fee.

But again, in this modern age of information and technology, most of us are carrying digital guide books with access to the entire information of the world in our front pockets. While everyone has their own unique tastes and preferences, there is something to be said about getting off the beaten path and connecting with the hidden treasures that are in the cities you visit. This is something the experiential traveler understands very well, and is why they begin to look for other alternatives to experiencing the city like a local. Perhaps getting some exposure to the more off-the-beaten-path destinations in Paris such as Pere Lachaise, Chateau Vincennes, or Canal Saint Martin.

Pere Lachaise Cemetery is just one of many often over-looked attractions in Paris.
Pere Lachaise Cemetery is just one of many often over-looked attractions in Paris.

A big part of why we founded Embark.org is because my partners and I wanted to give the experiential traveler a more modern resource to book great experiences. Here, they are able to connect with local individuals who want to host travelers on their next adventure. For example, instead of visiting the Eiffel Tower, they may choose to book a Back-road Biking Paris tour instead for $55. On this tour they would get to see several less touristy, but equally beautiful sites compared to the Eiffel Tower, but can avoid the typical tourist groups, crowds and stress for something a little more physically engaging with a local. On top of all that, they save $10!

Embark.org tour hosts are individuals just like you who want to share their city with open minded travelers.
Embark.org tour hosts are individuals just like you who want to share their city with open minded travelers.

Consequences of Experiential Travel

It's true that experiential travel is not for everyone. Experiential travel is geared towards those travelers who seek to dedicate a portion of their lives to truly connecting with a local culture(s) in an authentic way. This experience is a dream for many, but is often unrealized as it is perceived as financially unfeasible. However, with just a few examples above, we've looked at how an experiential trip over a 30 day period can have a much lower per-day expense than a one week touristy vacation.

When all factors are considered, the experiential traveler will not only have lived more like a local, seen more off the beaten path attractions, and got more exercise, but they would have actually spent less money per day than the their mainstream counterpart. This may only be a small part of the picture, but perhaps it can help you start to answer whether the experiential traveler inside of you is ready to come out face the adventure.

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