After enduring more than two years of pent-up travel demand due to border closures and pandemic-related restrictions introduced back in 2020, last year saw consumers take to the skies, seas, tracks, and roads in record numbers.
What was initially considered to be the rebound season of the travel, leisure, and hospitality industry soon turned into the summer of travel chaos. Thousands of canceled or delayed flights, lost luggage, and labor shortages played out against a backdrop of macroeconomic problems, geopolitical tension, and sudden pandemic-restriction changes which left travelers terror-stricken and businesses unclear of what to expect.
Figures indicate that international tourist flow in July 2022 was 19.9% below July 2019 levels across most OECD countries. Destinations including Denmark, Greece, Luxembourg, Portugal, Slovenia, and Spain all surpassed 2019 levels as pent-up demand for these destinations experienced swells of foreign visitors.
In the east, Asia-Pacific experienced perhaps the most positive growth, as travel returned for the first time since the onset of the pandemic. According to a Travel & Economic Impact Report, analysts predicted that the region could be the first to fully recover, seeing travel revenue grow by 71% in 2022.
Lockdowns and border closures gave the region a much-needed break from over-tourism, which had in years before the pandemic caused major environmental and biodiversity concerns for governments and indigenous groups.
With everything now back to normal, 2023 could potentially be another record-breaking year, but before travelers can start booking their flights, or searching for adventurous hideaway accommodation in the Swiss Alps - ongoing economic problems could pull them further from their international getaway.
Travel Stock Performance
The last three years have seen travel stocks perform under extreme conditions, and by the spring of 2022, some companies already started seeing a resurgence in stock performance growth due to pent-up travel demand.
During the same time, the stock of Marriott (NASDAQ:MAR) rose 5% after positive reports, while Airbnb (NASDAQ:ABNB) bounced upwards by 8% as demand steadily increased. International vacation rental management company, Vacasa (NASDAQ:VCSA) also piqued the interest of investors, offering big-time growth opportunities in the market.
This year the outlook remains strong, with some analysts from Morgan Stanley predicting that airline stocks, more so Delta Airlines (NYSE:DAL), and hotel group, Hyatt Hotels International (NYSE:H) could bring hopeful returns for investors.
Across the board, it seems that the attitude of whether to invest in tech or travel and leisure stocks has kept investors on their toes for much of the year, as many anticipate another booming season for the industry.
Delta reported a second consecutive quarter of profits in Q3 2022, with topline revenue hitting just under $14 billion, and earnings per share (EPS) came in at $1.51 for the quarter, just under the $1.53 estimate. Hyatt managed to see topline revenue jump by 80% year-over-year for Q3 2022, reporting $1.54 billion in profits, far exceeding analysts' estimates.
With demand and spending up across the industry, cruise stocks will also enjoy more steady waters this year, despite Carnival Cruise Lines (NYSE:CCL) and Norwegian Cruises (NYSE:NCLH) still well below pre-pandemic levels. This is partly due to high demand, and tight labor conditions, but this could be the year where cruise liners make a full post-pandemic return.
Several household travel and leisure stocks will make it onto investor portfolios this year, despite uncertain economic conditions looming up ahead. If demand continues to grow, and spending goes up - which is possible seeing that prices have surged in recent months - some companies could beat their top and bottom line performance indicators by the end of the year already.
Prices Will Continue To Climb
Consumers who traveled during the Thanksgiving and Christmas holiday peak might have noticed the price for a domestic flight is a lot more than what they could remember back in 2021.
Airfares have dramatically increased, with international fares in the United States up 31% between September and November 2022, while domestic fares jumped by 16% during the same period. Even more worrisome is that airline tickets are roughly 19% higher than in 2019, and almost 45% higher than in 2021.
Some regions that were once considered cheap getaways have also seen significant airfare increases. Early last year, the Indonesian government allowed airlines to increase airfares in line with new regulations, seeing some carriers charge an additional 15% of the upper limit for jet aircrafts. Smaller propeller planes saw ticket prices jumo by 25%.
At the start of July 2022, the Philippines also raised ticket prices due to ongoing fuel increases. The regulations allowed aircraft carriers to apply a surcharge on ticket prices to help them cover fuel-related costs.
Some local airlines levied this proposal, but due to surging demand for domestic flights in the region, and seeing heavier interest for top tourist spots in Cebu and Boracay, and other popular destinations, flight prices have remained elevated for much of last year.
In November last year, the Philippines Civil Aeronautics Board (CAB) calculated that domestic passenger volume increased to nearly 16 million as of September 2022, far surpassing figures seen in 2020 and 2021 during the same period.
It wasn’t only the price of airline tickets that’s gone up through the roof, nearly everything else from lodging, car rental, dining, and tourist experiences are now more expensive than what they were before the pandemic.
Hotels have also experienced eye-watering price increases since the start of the pandemic. In a report published last year, researchers estimated that the average price per hotel room has gone up by almost 200 percent compared to three years ago.
In a report by American Express Global Business Travel hotels across several cities including Buenos Aires, Pairs, New York, Stockholm, Dublin, São Paulo, and Seattle among others will see steady price increases in the coming months.
Hotels in Buenos Aires will see the steepest increase of roughly 30%, while the average price per room in cities like Sydney, Melbourne, and Hong Kong have the slowest increase of 4.3%, 1.2%, and 1.2%, respectively.
Prices will remain elevated for much of the year, and while inflation only dives deeper into consumer wallets, silently eating away at their disposable income, the wanderlust of travel could potentially start to wane as costs start stacking up.
Staffing And Supply Chain Challenges Will Remain
If by chance travelers were hoping for a more relaxed and organized experience at airports, train stations, bus stops, and seaports this year; there’s a big chance that staffing and supply chain issues from last year are following travelers into 2023.
Labor and staffing issues across the aviation, leisure, hospitality, and travel industry were caused by employees demanding better benefits and employers unable to provide them with workable and viable solutions they could agree on.
Employees were seen quitting in droves as they demanded higher pay and better wages against increasing costs and peaking inflation.
Hotels, guesthouses, and away-from-home lodging have been struggling to fill positions left vacant during the pandemic era after many employees were laid off or quit due to ill-performing management. The U.S. Bureau of Labor Statistics said that in August 2022, hotel employment was down by more than 400,00 jobs compared to February 2020.
Currently, hotels are struggling to fill 115,000 open positions, with housekeeping seeing the highest number of vacancies across the country. In an American Hotel & Lodging Association (AHLA) survey, around 87% of respondents indicated they are currently experiencing staffing shortages, while 36% are experiencing “severe” shortages.
Since the publication of the survey, hotel groups have raised wages to $22 per hour, but higher wages, better schedule flexibility, and working conditions have done little to attract potential job seekers.
Over in the aviation industry, airlines and airports have yet managed to fill a mountain of open jobs from last summer. The industry which shed more than 2.3 million jobs at the start of the pandemic experienced a turbulent return last year, as airports were overrun by crowds of travelers, and airlines were unable to keep up with the demand.
The sudden surge, against a backdrop of staff shortages, meant that flights were either delayed by several hours or completely canceled without reason. On top of this, ground personnel were also seen quitting their jobs one after the other, citing that increased working hours and low wages were among the reasons for leaving.
Though the situation was able to calm closer towards the start of fall last year, some airlines have yet been able to fill positions that are still open, from pilots, cabin crew, luggage handlers, or check-in staff.
With thousands of positions still vacant, and the travel season hoping to kick start over the next several months, passengers will find themselves again standing in queues wrapping around the airport and luggage being stranded on the sidewalk or forgotten at its origin-destination.
Slow Technological Adoption
With the travel industry still collecting the pieces from last summer, and lost revenues experienced throughout the COVID years, slow technological advances and digital opportunities could potentially be a growing problem for the industry.
Although some businesses and companies were able to rapidly transition to digital or virtual ecosystems as the pandemic raged on, some areas of the industry still rely on primitive models to see them through.
The rise of digital transactions and online bookings has meant that travel companies and airlines can now accept payments from nearly any person, anywhere in the world. And while a growing number of platforms have integrated fintech solutions to help cope with increased demand, a new wave of travelers - crypto travelers - are looking to put their digital currencies to use this year.
A growing number of travelers are looking to utilize cryptocurrency as a form of payment when booking tickets or paying for hotel reservations. According to one survey, around 22% of American travelers want to use their crypto to pay for vacations and getaways.
In 2021 it was reported that around 70% of all bookings on Travala.com, a holiday booking platform were completed with digital coins, with either one of 50 other cryptocurrencies or the company's native AVA altcoin.
Although the crypto industry is pinned against the wall with volatility, demand for digital currency utilization could spark companies to rapidly start adapting new models and software to accept forms of Bitcoin (BTC), Ethereum (ETH), or other types of crypto as payment.
With last year’s problems still staring down the throat of the travel industry, it’s uncertain how the next coming months will play out, and whether the industry could shake up to resolve these problems before the summer travel season starts.
Yet, while the industry can control labor issues, and resolve supply chain problems or a lack of digital innovation - ongoing macroeconomic problems from soaring inflation and higher interest rates will be perhaps the biggest challenge to overcome.
Now that the industry is out of the dust of the pandemic, it’s time for them to step up against an economic epidemic that will truly test the industry’s resilience.