Travelers Are Back, But They Will Spend Less

(Bloomberg). During 2022, international travel amounted to more than 900,000,000 tourists. This is 63% less than the level of 2019, which was before the pandemic. According to the United Nations World Tourism Organization’s Jan. 17 tourism recovery outlook, global tourist should rise significantly to reach between 80% and 95% of pre-pandemic levels. But with increased costs and global economic uncertainty, a return to the road won’t necessarily mean the industry is out of the red.

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“Economic factors may influence how people travel in 2023 and UNWTO expects demand for domestic and regional travel to remain strong and help drive the sector’s wider recovery,” said Secretary-General Zurab Pololikashvili in a release.

Europe and the Middle East are expected to see pre-pandemic volumes in 2023. Europe and the Middle East are two of the most recovering regions. But contrary to the freewheeling “revenge travel” narrative of pent-up, price-agnostic tourists, the UNWTO projects rising financial worries will see travelers seeking more value for money and staying closer to home this year.

According to the European Travel Commission’s December 2022 report, price and location were key factors for Europeans when choosing destinations for 2023. Like the UNWTO value for money is the deciding factor.

It’s the same story in the US. According to Longwoods International’s January 2023 sentiment survey, half of American travelers believe that concerns about their financial status will affect their travel decisions over the next six months. 56% of respondents cite the high cost of airfares as a major factor. Some 30% say economic concerns will “greatly” impact their travels in 2023, up seven points since late August 2022.

Longwoods’ survey found that nine out of 10 American travellers plan to travel within six month, in spite of economic woes. Similar findings were reported by Destination Analysts in January. A December 2022 survey of American travellers confirmed that, while there is a lot of demand, rising travel costs are becoming a deterrent. Half of those surveyed said they had stopped traveling because of the high cost. 31% claimed that high inflation and high consumer price led them to cancel their trip.

For the majority who remain undeterred, it’s travel or bust, explains Amir Eylon, chief executive officer at Longwoods International. “They’re going to downsize certain aspects of their trip. They’re going to spend less on things that, unfortunately, typically support small businesses: retail purchases such as souvenirs, entertainment, recreation and food and beverage.”

Eylon suggests that you might pack sandwiches to take on a road trip. Or, perhaps, you stay at a limited-service hotel rather than a full-service property. “This is the exact same pattern that we saw when gas prices hit record highs in the United States last summer.”

The Longwoods survey found that 25% of Americans would prefer to drive to fly. And 30% said they would choose to stay closer to home. Eylon states that this is a common pattern associated with economic downturns.

Still, demand from the US for trips to Europe remains strong, the UNWTO says, noting the dollar’s strength against the euro; a big rally for the euro could curb appetites. The return of Chinese travelers will also boost the tourism industry’s recovery in 2023, but it’s unclear how much. According to the UNWTO, 32 countries had placed restrictions on Chinese travel as of mid January.

Bloomberg Businessweek.

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