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
Q4 2022 hedge fund letters, conferences and more
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 .
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
