Older Aussies kickstart travel boom as rate hikes hit family holidays

• Rising rates were weighing on family holiday budgets, while retirees and mortgage-free customers kept travelling, Flight Centre chief executive said on Wednesday.
• The UK and USA rank second and fourth among Flight Centre’s top destinations, while cheaper spots such as Vietnam and Bali are growing.
• The travel group is aiming for underlying profit before tax of $290 million to $325 million in the 2027 financial year, up 4 to 17 per cent.

Five rate hikes this year have stretched family holiday budgets, but Australians who no longer carry a mortgage are still spending on travel.

Travel agency group Flight Centre has grown its leisure sales and profit in the first months of this financial year, chief executive Graham “Skroo” Turner said in an annual general meeting (AGM) speech lodged with the Australian Securities Exchange (ASX) on Wednesday.

“Higher interest rates in Australia are making big-ticket holidays harder to afford for families, but independent retirees and those who are mortgage-free continue to prioritise travel,” Turner said.

“The UK and USA are among our most popular destinations, ranked second and fourth respectively, with solid growth being seen in value destinations such as Vietnam and Bali.”

Rates at an 18-year high

Turner’s remarks follow last week’s Reserve Bank of Australia’s (RBA) decision to lift the cash rate to 4.85 per cent, the fifth increase this year and a level last seen in November 2008, as the central bank tipped inflation to stay above 3 per cent for the next year.

The central bank said higher fuel prices were starting to show up in the cost of other goods and services, and the economy had less spare capacity than it had estimated.

Monthly repayments on a typical $600,000, 30-year mortgage taken out five years ago at 2.59 per cent will have jumped 69 per cent to $4,056 once the latest rise takes effect, as the rate climbs to 7.34 per cent, Canstar analysis shows.

Sentiment among mortgage holders plunged 11.6 per cent to 68.1 in November, a record low in data going back to 1994, according to the Westpac–Melbourne Institute Consumer Sentiment Index released on Tuesday.

Overall sentiment fell 2.7 per cent to 78.2, its weakest since late 2022, and 72 per cent of consumers surveyed after the RBA decision expect mortgage rates to rise again within a year.

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The big four banks and Bendigo Bank have each raised their variable home loan rates by the full 25 basis points.

Relief for savers has been patchier, with ANZ and Westpac lifting only select bonus saver rates that come with conditions, and the Commonwealth Bank and National Australia Bank yet to move as of last week.

Profit outlook

Chairman Gary Smith told shareholders leisure total transaction value (TTV) hit a monthly record in July, beating its pre-pandemic 2019 high, while long-haul trips from Australia were starting to pick up.

Leisure profit took an estimated $60 million hit in the fourth quarter, when Middle East conflict shut flights via the region’s major transit hubs.

Flight Centre posted record TTV of $25.7 billion in the 2026 financial year, while underlying profit before tax slipped 4 per cent to $278 million and statutory net profit jumped 38 per cent to $149 million.

The company is now aiming for underlying profit before tax of $290 million to $325 million in the 2027 financial year, a rise of 4 to 17 per cent.

Flight Centre also expects net interest costs across the group to rise by $6 million to $8 million in the first half, and to stay at that higher level in the second.