With summer beginning comes travel plans. Since COVID-19, the travel industry took a major hit. Has COVID completely changed the travel industry or are things starting to look up?
Angela Schulte and AJ Cobos, two Atradius Senior Underwriters, gave a brief overview on how the travel industry is moving forward this year. What does it look like through the summer and into next year?
Since COVID-19 related travel restrictions have been lifted, and countries around the world reopened their borders for foreign travel, we have seen positive impact and growth in the travel industry. Overall, the industry has a fair outlook. Air cargo demand reached an all-time high in 2021 but subsided in 2022. 2023 is off to a strong start for the industry, with record advance summer bookings. However, inflation and other macroeconomic pressures such as rising interest rates, and energy price volatility has had a negative impact on the industry. Per Deloitte 2023 Travel Outlook, business travel is expected to rebound in 2023 with a projected increase of 60% compared to 2022.
Operationally, the industry has seen improvement from FYE 2020. Sales have increased and bottom line profitability returned in 2022. Although the industry is on track to achieve higher sales (compared to pre-COVID levels), bottom line profitability is still behind pre-COVID levels.
A strength seen in the travel industry is that the restrictions on travel have relaxed, and there has been an increase in usage and familiarity with the internet, reflected in rapid growth with online travel.
However, there have been higher energy costs, inflationary pressures across several cost categories such as labor, maintenance, rent, landing fees, coupled with staffing issues. The fears of a recession in the US between end of this year and first quarter of 2024 could curb a rebound in travel demand because travel is traditionally one of the most likely expenses to be cut when consumers feel a need to mind their wallets.
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Overall, this year the travel industry seems to be growing again since the pandemic began. There is always a chance that it might slow down in its growth due to consumers tightening their spending, but for now, the industry has a fair outlook.