Skift Take

What's the final verdict on Q2 travel earnings? Growth remains robust with a strong assist from Asia. But the industry is clearly slowing as travel demand normalizes and pent-up demand exhausts itself.

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Labor Day is in the rearview mirror but, believe it or not, travel companies have only just finished reporting their second quarter results.

How’d they do? We wanted to look at the the entire group – 200 publicly traded travel companies worth a combined $1 trillion-plus.

There’s no one easy way to track them all, so Skift Research is working on new indices and data tools. That’s still to come, but we’ve already dug into the second quarter numbers. Here’s what we found.

1: Travel Revenue Growth Drops Sharply, Remains Super Strong

Revenue for the travel industry grew 19% in the second quarter. That’s blazing fast compared to the S&P 500, which posted just 1.1% revenue growth. However, it’s a big drop from the 47% growth of the prior quarter and the 70%-plus gains of late-2022.

This is part of an ongoing trend towards normalization to more baseline growth rates. Travel has seen a whiplash effect: The revenue collapse in 2020 set up years of high growth from an artificially low base.

Those easy comparisons, along with strong pent-up demand, supported big gains but those twin tailwinds are fading.

2: Travel Operating Profit Hits a New Post-COVID Peak

It’s not just revenues that are normalizing. Travel profits, as measured by earnings before interest, taxes, depreciation, and amortization (EBITDA), were deeply affected by the pandemic. At its worst, in March 2021, the industry posted a -30% EBITDA margin. Today, however, the travel industry has hit a new post-pandemic profitability record.

As measured over the past 12 months, the industry earned a 15% EBITDA margin. That’s up from 11% at the start of 2023 and within striking distance of its 18% margin in 2019.

3: Sector Breakdown: Travel Tech Top-Line Surges and Airline Profits Soar

Skift Research divides travel industry stocks into five major sectors: accommodation, airlines, travel tech, cruise and tours, and ground transportation. Travel tech posted the fastest revenue growth in the second quarter and airlines had the biggest profit gains. Accommodations had the highest profit margins.

Q2 ’23 Travel Sector Earnings Scorecard
Sectors Revenue Growth EBITDA Growth EBITDA Margin
Accommodations12%12%31%
Airlines17%139%17%
Travel Tech32%68%26%
Cruise and Tours20%n/a16%
Ground Transportation5%-17%24%
Total Travel19%86%20%
Source: Skift Research. Data as of 9/5/2023.

Travel tech’s impressive 32% revenue gain was powered by rebounding growth out of Asia. This includes Chinese online travel agency Trip.com Group (159% revenue growth) and Indian booking site MakeMyTrip (38%). Stalwarts Booking Holdings (27%) and Amadeus IT Group (22%) also posted strong top-line performance.  

Cruise and tour companies were also in the top-tiers of revenue growth in the second quarter. That is because they have been slower to recover than other sectors and so continued to benefit from the snap-back in demand and easy comps. Carnival Corporation (105% revenue growth), Royal Caribbean (61%) and TUI (25%) all posted large sales gains.

On the profits side, it was all about the airlines. United Airlines grew revenue by only 17% compared to last year, but its EBITDA shot up by 90%. American Airlines (65% EBITDA growth) and Delta Air Lines (48%) also saw large leaps in profit.

But perhaps the biggest story came out of China where its big three airlines – Air China, China Eastern, and China Southern – swung from the red to the black. In the second quarter of last year those three Chinese carriers burned $2.5 billion. In the same quarter of this year, they generated $1.3 billion in EBITDA. That’s an incredible profit swing of $3.8 billion over the course of one year.

4: Drilling Down: Europe and Asia Driving Gains, ‘Normalization’ Is Coming

We can keep digging into the make-up of the travel industry and split our sectors further into sub-sectors. The below scorecard shows which companies had the greatest impact on travel industry revenue growth by subsector. Across the travel industry, business in Europe and Asia had the biggest influence on sales growth.

Most Impactful Travel Companies in Q2 ’23, by Sub-Sector
Sector/Sub-SectorCompanyRevenue (USD)Revenue GrowthEBITDA Margin
Accommodations
Global Hotel BrandsAccor$1,31145%17%
Regional Hotel BrandsH World Group$76351%31%
Hotel Management and OperationsMinor International$1,14924%31%
Hotel REITSRyman Hospitality Properties$5038%33%
Alternative AccommodationsAirbnb$2,48418%21%
Time SharesHilton Grand Vacations$9103%24%
Airlines
Network CarriersAir China$4,763189%8%
Low Cost CarriersRyanair Holdings$3,98446%27%
Other Airline RelatedBlade Air Mobility$6171%-12%
Travel Tech
Online TravelBooking Holdings$5,46227%33%
B2B TechAmadeus IT Group$1,50722%39%
Cruise and Tours
Cruise LinesCarnival Corporation & plc$4,911105%15%
Tour OperatorsTUI AG$5,77125%5%
Ground Transportation
Ground TransportationLocaliza Rent a Car S.A.$1,420144%12%
Source: Skift Research. Data as of 9/5/23.

These trends support our outlook on the travel industry. Pent-up demand in the U.S. is mostly spent. American sales growth is normalizing, and companies are focusing on returning to pre-pandemic profitability. Europe is following closely behind, though still benefiting from a strong summer of international traffic. Asia was slowest to fully re-open and is loaded with strong pent-up demand, especially for outbound travel.

Similarly, those sectors that grew the most during and directly after the pandemic – ground transportation and accommodations – are normalizing the fastest. While those that fell the most – cruises, tours, and airlines – are still enjoying pent-up demand and easy comps.

Q2 ’23 showed us that normalization is coming for travel. But that slowdown was inevitable. Even with deceleration, the travel industry is still growing faster than the broad economy and is seeing a return to healthy profit.

Skift Research is developing new tools to explore travel insights from stock markets and to understand how the industry’s different sectors and sub-sectors of the travel industry are connected to one another. More to come soon.

Seth Borko is the Director of Product Strategy at Skift Research. Subscribe to Skift Research to read more of his analysis.

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Tags: airlines, earnings, hotels, tourism, Travel Trends

Photo credit: An Air China plane takes off from Sydney Airport. Loren Elliott / Reuters

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