While questions remain over how long consumers will continue to indulge themselves, airlines, hotels and analysts say travel has remained a top priority instead of buying ‘nice to have’ like in the past.
International travel has reached around 90% of pre-pandemic levels this year, according to the International Air Transport Association. The rebound was led by visitors to southern Europe from cooler climates despite soaring temperatures and included swathes of American tourists traveling abroad.
“As a result of the pandemic, a number of people reset their priorities and focused on splurging on travel,” said Dan McKone, senior partner at strategy consultancy LEK Consulting.
That desire may even grow stronger next year, according to travel tech firm Amadeus, whose recent survey showed 47% of respondents said international travel was a high-priority discretionary spending category for 2023 and 2024. , compared to 42% who classified it as such. last year. Amadeus sampled travelers from Britain, France, the United States, Germany and Singapore.
These trends have boosted quarterly profits for travel agencies, with cruise lines like Royal Caribbean posting record results in recent weeks. Tour operators Booking Holdings and Airbnb said revenue rose 27% and 18%, respectively, and airline Delta and hotel giant Marriott International forecast strong future demand.
German carrier Lufthansa said bookings for the rest of the year are currently over 90% of pre-pandemic levels and the summer season extends through October. United Airlines is expanding its Pacific coverage this fall with new flights to Manila, Hong Kong, Taipei and Tokyo.
Overall, global passenger demand is expected to grow 22% year-on-year in 2023 and 6% in 2024, Moody’s Investor Service said Tuesday. Ticket prices, which in some cases have increased by double-digit percentages since the pandemic, are not expected to fall.
“Everyone sets their prices based on demand and that’s the basic economic equation,” Jozsef Varadi, CEO of low-cost airline Wizz Air, told Reuters. “We’re in a high input cost environment, so that puts pressure on pricing.”
Hayley Berg, chief economist at online travel agency Hopper, said travelers to Europe and Asia are unlikely to see substantial price relief this fall. She expects air fares on long-haul international routes to remain high until supply rises above pre-pandemic levels, demand normalizes and jet fuel prices fall further.
The weak spot is domestic travel in the United States, as the end of Covid-19 testing restrictions sparked pent-up demand from Americans to vacation abroad.
“They said earlier in the year, ‘Look, I’m going to do this international trip that we wanted to do,’ and it created a lot of places packed with Americans in Europe,” Glenn Fogel told Reuters. .
Inbound international travel to the United States in May rose 26% year-over-year to 5.37 million visitors, but is still about 20% below pre-pandemic visitor volumes reported in May 2019, according to the US National Travel and Tourism Board.
The average domestic air fare is currently $246 round-trip, down 8% from 2022, according to travel booking app Hopper.
Executives said hotel rooms in the United States could become more expensive due to lack of supply, but slowing demand could mitigate that effect.
“Growth is expected to remain higher internationally than in the United States and Canada, where we are seeing a return to more normal seasonal patterns,” said Marriott Chief Financial Officer Kathleen Oberg.
Looking ahead, some airline groups like the owner of British Airways said it was unclear whether demand could be sustained. Analysts said lower consumer savings could lead to lower spending if inflation does not ease.
