Missed Skift Research's discussion of the current state of travel? We've got you covered.
The travel industry faced unprecedented challenges during the pandemic, but its recovery is proving to be remarkable. Travel stands tall as an absolute megatrend, with immense potential for growth despite short-term economic concerns. This was one of the main takeaways of a LinkedIn Live session with the authors of Skift Research’s State of Travel report.
Watch the LinkedIn Live Session
The Current State of Play
The global economy is still on a bumpy road, with economists predicting higher inflation in various regions worldwide. This is likely to impact travel spending to some extent. However, amid these worries, the report highlights a silver lining. Travel remains under-indexed relative to the broader economy, leaving ample room for expansion and opportunity.
Despite rising prices since 2019, U.S. hotel and airline prices have shown restraint, rising less than the overall rate of inflation. Moreover, the travel industry’s recovery has just begun, even as the global GDP experienced significant growth. This indicates considerable untapped potential in travel across all regions.
The report reveals that in 2025, the industry will be around 240 million trips below its full pre-pandemic potential. However, there are positive data points that contribute to the optimistic outlook. In 2022, the U.S. witnessed a surge in passport issuance, making international travel more accessible than ever before. Developing countries like China and India are expected to play a vital role in shaping the future of the travel industry, offering both opportunities and challenges.
There has been a strong recovery in most countries, especially outside of Asia, reaching full recovery relative to 2019. However, international tourism in many regions still has significant room for improvement, with only the Middle East fully recovered, while North America, Europe, and Asia are still lagging.
Key Trends Highlighted by Our Analysts
During the LinkedIn Live session, the Research analysts went over some of the major trends that came out of the report.
Senior Research Analyst Varsha Arora highlighted the rise of remote work arrangements, which accelerated during the pandemic. Remote work has increased shorter trips and extended travel periods, combining business and leisure travel, and boosted the usage of coworking spaces. Hotels have an opportunity to cater to the needs of remote workers and become de facto offices.
Luxury hospitality has experienced a boom, with luxury hotels leading the recovery in the U.S. and Europe. Senior Research Analyst Pranavi Agarwal noted how luxury consumers tend to be recession and inflation immune, often resulting in strong performance even in uncertain economic times. Skift Research’s work suggests that Hyatt and Accor, with their exposure to luxury and Asia, are likely to outperform other hotel brands in this context.
Tour operators have faced challenges in their recovery, as highlighted by Research Director Seth Borko, but in 2023 they are witnessing a burst of growth. The shift towards cultural and long-haul tours presents an emerging opportunity for multi-day tour online travel agencies (OTAs). As the rise of OTAs continues, big brands are driving direct bookings to compete with third parties.
Lastly, there was an extensive discussion on Hopper, an online travel company, which has gained significant market share, showcasing its disruptive presence in the legacy OTA market. Its suite of fintech products addresses consumer pain points and has been successful in monetizing travel industry chaos.
Overall, the travel industry is navigating through challenges with resilience and embracing opportunities for growth. With the rise of remote work and shifting consumer preferences, the industry is adapting to new trends and embracing digital solutions to stay competitive in the ever-changing travel landscape.
Photo credit: Tourists taking photos on the roof of the D’uomo cathedral in Milan, Italy. Skift