Surging Travel Costs Fail to Dampen Adventurous Spirit

The travel boom that followed the pandemic and its high ticket prices will continue well into next years, despite uncertainty in the economy and shrinking household savings.

Airlines, hotels, and analysts all agree that travel is no longer a "nice-to-have" purchase, but a priority.

According to the International Air Transport Association, international travel this year reached 90% of its pre-pandemic level. Visitors to Southern Europe, who had been in cooler climates before the pandemic, led this rebound despite the high temperatures.

TUI, the largest holiday company in the world, reported on Wednesday its first net profit since the pandemic, thanks to robust bookings and demand for travel during the three-month period ending June 30.

"In the wake of the pandemic, a number of folks have reset their priorities and have focused on splurging on travel," Dan McKone mentioned, a senior consultant at strategy consultancy L.E.K. Consulting.

Amadeus, the travel technology firm, found that this desire could even grow next year. In its recent survey, 47% of respondents ranked international travel as a top discretionary expenditure category for 2023-2024, up from 42% in 2017. Amadeus surveyed travelers from Britain and France as well as the United States, Germany, Singapore, and Germany.

These trends have helped travel companies report record quarterly earnings. Cruise operators such as Royal Caribbean reported record results over the past few weeks. Booking Holdings, Airbnb, Delta Airlines, Marriott International and other travel operators reported revenue increases of 27% and 18%, respectively.

Lufthansa, the German airline, said that summer bookings are now extending well into October. United Airlines will expand its Pacific coverage with new flights this fall to Manila, Hong Kong Taipei, and Tokyo.

Moody's Investor Service said that global passenger demand will grow by 22% in 2023, and 6% in 2020. Tickets prices are not likely to fall, even though they have risen by double digits 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, told Reuters. "We are in a high-input cost environment. So, that puts pressure on pricing."

Hayley Berg is the lead economist for online travel agency Hopper. She said that she does not expect to see significant price reductions this fall.

She believes that air fares will remain high on international long-haul routes until the supply reaches pre-pandemic levels and demand returns to normal.

Travel to the United States is still a weak point, due to the fact that COVID-19 testing has ended and Americans are now eagerly looking for vacations abroad.

"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 CEO Glenn Fogel stated.

The U.S. National Travel and Tourism Office reports that international inbound travel in the United States rose by 26% in May compared to May of last year, to 5.37 millions visitors. However, this is still 20% below the pre-pandemic visitor volume reported in May 2019.

According to the travel booking app Hopper, the average domestic airfare for a round-trip flight is $246, down by 8% since 2022.

Hotel executives say that the lack of hotel rooms in the United States may cause prices to rise, but a softening of demand could moderate this effect.

Marriott CFO Kathleen Oberg said: "Growth is expected to remain higher internationally than in the U.S. and Canada, where we're seeing a return to more normal seasonal patterns."

Some airline groups, like British Airways' owner IAG, said that it was unclear if demand could be sustained in the future. Analysts say that if inflation continues to rise, dwindling savings by consumers could lead to a decline in spending.

Source: voanews.com