The momentum of the post-pandemic travel surge and its accompanying steep ticket costs seem poised to continue robustly throughout the upcoming year, even in the face of economic ambiguity and decreasing household savings.
Airlines, hotels, and analysts claim that travel has continued to be a top priority rather than a “nice to have” purchase as in previous years, however, it is unclear how much longer customers will continue to indulge.
The International Air Transport Association estimates that international travel this year was about 90% higher than before the pandemic. Despite record-breaking temperatures, travelers from colder regions of the world, including many Americans, were the reason for the renewed increase.
“In the wake of the pandemic, a number of folks have reset their priorities and have focused on splurging on travel,” said Dan McKone, a senior partner at strategy consultancy L.E.K. Consulting.
According to the latest study from travel technology company Amadeus, 47% of respondents said foreign travel will be a high priority for discretionary spending in 2023 and 2024, up from 42% the previous year. This suggests that the desire may even grow next year. Amadeus selected travelers from Singapore, Germany, the United States, the United Kingdom, France, and other countries to do the research.
These developments have driven up quarterly profits in the travel industry, with cruise lines such as Royal Caribbean (RCL.N) recently posting record profits. Booking Holdings (BKNG.O) and Airbnb (ABNB.O), two travel services companies, reported revenue increases of 27% and 18%, respectively. Airline Delta (DAL.N) and hotel giant Marriott International (MAR.O) both predicted strong future demand.
According to the German airline Lufthansa, bookings for the rest of the year are currently 90% higher than before the pandemic, with the summer season continuing into October. This fall, United Airlines is adding flights to Manila, Hong Kong, Taipei and Tokyo to expand its Pacific service.
According to a Moody’s Investor Service report released Tuesday, global passenger demand is expected to grow 22% overall in 2023 and 6% in 2024. Airline tickets won’t suddenly get cheaper, although there have been double-digit percentage increases in some cases since the pandemic.
“Everyone is pricing against demand and this is the basic economic equation,” Jozsef Varadi, CEO of budget carrier Wizz Air (WIZZ.L), told Reuters. “We are in a high-input cost environment. So, that puts pressure on pricing.”
The senior economist at online tour operator Hopper, Hayley Berg, said there will be no significant price cuts for tourists in Europe and Asia this fall. She expects airline tickets for long overseas flights to remain high until supply exceeds pre-pandemic levels, demand returns to normal and jet fuel prices continue to fall.
The weak point is domestic travel within the United States, as the lifting of COVID-19 testing restrictions has increased Americans’ appetite for international travel.
“They said earlier in the year, ‘Look, I’m going to do that international trip that we’ve been meaning to do,’ and that’s created a lot of crowded places with Americans in Europe,” Booking Holdings (BKNG.O) CEO Glenn Fogel told Reuters.
According to the U.S. National Travel and Tourism Office, the number of international visitors to the U.S. in May increased 26% year-over-year to 5.37 million but is still about 20% below pre-pandemic visitor numbers reported in May 2019.