Inflation isn’t dampening people’s desire to travel — but travel companies may be missing a trick

Business
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March 11, 2023
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Inflation and higher living costs may be weighing on consumers’ wallets, but there’s one area where many are unwilling to cut back: their desire to travel.

Almost one third (31%) of travelers said that they intend to spend more on travel this year than they did in 2022, according to a recent report from the World Travel and Tourism Council and booking site Trip.com.

That’s after the vast majority (86%) of respondents said last year that they were upping their 2019 travel budgets.

Consumers are “spending more on travel than any other experience,” Julia Simpson, president and CEO of the WTTC, said Monday at the opening of the ITB Berlin travel conference.

“We are now growing strong and getting back to — or even exceeding — 2019 levels,” she said of the travel sector.

The number of people willing to fork out more on travel could be even higher, as costs rise.

There’s a real disconnect between travelers and the industry

Jennifer Andre

More than four in 10 people (43%) said that they would increase their travel budget in 2023, while one third (31%) would keep it the same, Expedia Group’s latest survey of 11,000 people across 11 countries found.

“That’s significant, given the economic headwinds we’re hearing about,” said Jennifer Andre, global vice president of business development at Expedia Group Media Solutions, whille presenting the report Wednesday at ITB Berlin.

That figure nevertheless still falls short of industry expectations — one in six (58%) travel professionals had anticipated that holidaymakers will spend more this year.

That mismatch could leave travelers wanting.

“There’s a real disconnect between travelers and the industry,” Andre said.

Disconnect between travelers and the industry

While many consumers said they plan to allocate a higher share of their wallets to travel this year, inflation still ranked as the number one concern impacting travel plans over the next 12 months, Expedia’s study found.

Many industry professionals failed to recognize that pain, rating health and safety risks and travel restrictions as of higher concern for consumers.

More than a quarter (27%) of consumers said that finding atypically low travel prices was their top travel criteria this year — a trend identified by only 15% of the industry.

Inflation and higher living costs may be weighing on consumers’ wallets, but many are unwilling to cut back on travel.

Jackyenjoyphotography | Moment | Getty Images

The disconnect could mean travel companies might fail to provide consumers with the deals they’re looking for.

“Industry professionals underestimate the impact of inflation and consumers’ current sensitivity to price. Across all modes of travel, accommodation and activities, low pricing is within the top three considerations for consumers,” the report noted.

In fact, stretched finances are already impacting travel habits.

Because it’s more expensive, they want to make sure they make the most of it.

Karelle Lamouche

global chief commercial officer, Accor

“The consumer is choosing to protect their travel spend,” even as they face inflation and higher energy costs, Karelle Lamouche, global chief commercial officer of hotel group Accor, told CNBC Travel.

“But because it’s more expensive, they want to make sure they make the most of it,” she said, noting that many guests are now opting for longer stays when they do travel.

The same is true for in-trip activities, according to Johannes Reck, founder and chief executive of Berlin-based global tour bookings platform Get Your Guide.

“People are very price sensitive,” Reck said of consumers, who largely fall within the 30- to 50-year-old age bracket on his platform. Customers are also now booking further in advance, he said, which prompted Get Your Guide to launch a reserve now, pay later option to help travelers spread their travel costs.

Airbnb has also seen an increase in people using the platform to supplement their incomes, with private room listings up by 30% over the year. Overall, 40% of those with listings said hosting helps with their costs of living, said Kathrin Anselm, a general manager for Airbnb.

‘Revenge travel’ here to stay

Consumers’ enthusiasm for travel has helped the industry’s recovery following years of restrictions.

The United Nations World Tourism Organization said that it expects the global tourism market to recover 80% to 95% of pre-pandemic levels this year. In 2022, that figured reached around 63%.

Valencia, a popular holiday destination on Spain’s southeast coast, recorded its best-ever January for tourist arrivals this year, according to Ximo Puig, president of the regional government.

“Tourism is no longer a nice to have [thing],” he said, noting that visits in 2022 were up to the levels of 2019.

The boom of revenge travel is going to stay.

Johannes Reck

founder and chief executive, Get Your Guide

“The Covid recovery has been strong” in Jamaica, the island’s Minister of Tourism Edmund Bartlett said, suggesting that it had reached 99% of pre-pandemic arrivals in 2022.

New consumer groups are also growing fast elsewhere.

“Indians are traveling within India, and they’re not doing it cheap — they’re spending. India’s middle class have started traveling big time,” said Gopinath Parayil, founder of Kerala-based sustainable travel company The Blue Yonder.

That has the industry optimistic that the era of so-called revenge travel — in which consumers returned to travel apace following the easing of Covid restrictions — is here to stay.

“The urge to travel remains high,” said Olympia Anastasopoulou, secretary general for tourism policy and development within Greece’s Ministry of Tourism. She noted that last year the country reached the tourist levels of 2019, recording revenues of $18 billion. “2022 saw revenge travel. 2023 shows it is continuing.”

“The boom of revenge travel is going to stay,” Reck added.