The travel industry saw performance and demand improving steadily throughout 2021 and 2022. As the pandemic conditions eased, pent-up leisure demand helped hotels and airlines recover some losses.
According to revealed Deloitte’s latest Travel Industry Outlook, hotels have been able to achieve rates and RevPAR above 2019 levels and U.S. air travel volume has reached at least 80% of 2019 levels every day from July 5 through November 30, 2022, driven by constrained capacity and increased fares. The report is based on Deloitte’s ongoing consumer research, including from Deloitte’s State of the Consumer Tracker.
Despite the recovery, the travel and tourism industry is expected to face new challenges in 2023, after years of pandemic-related setbacks, according to the study. Although health concerns have subsided, new pressures have emerged, including a labor shortage, concerns about climate change, and the possibility that corporate travel will never return to pre-pandemic levels.
“If 2022 was the year of welcomed pent-up demand, 2023 will be a year of coming to grips with some complicated realities facing travel. The year ahead in travel will be defined by the basics — product, performance and price — in the context of economies and societies reshaping themselves on the way of a once-in-a-generation crisis,” the study said.
Key findings of the report include:
- Leisure demand faces a murky outlook: After a prolonged steady rise, the intent to book travel was flat or down across all travel segments. YOY demand for leisure travel at the end of 2022 was flat YOY. After increasing in the summer, Americans’ desire to travel during the winter holidays has decreased. The September softening in demand could be the start of a long-term trend of consumer belt-tightening. The outlook for leisure travel in 2023 remains bleak, whether due to rising consumer financial concerns or simply a desire for many to avoid peak travel dates.
- Challenges in staffing and supply chain will undermine experience: The travel experience has been impacted, especially as companies struggle to keep up amid staffing shortages, technology issues and ongoing supply chain challenges. As travelers demand better experiences and prices remain high, these issues could begin to hurt overall business performance for the industry. While many travelers might opt to travel less or not at all, many are expected to adjust their trips, compromising their budget.
- Corporate’s new normal: Corporate travel will face cost-related challenges. With high airfares and many businesses finding growth harder to come by, there might be some expense-related curbing of trips. Corporate travel is expected to see major gains, primarily contributed by key corporate and industry events scheduled for the year. One-quarter (25%) of business travelers now point to conferences, exhibitions, or tradeshows as their primary reason for travel.
- Sustainability is important but has fewer options: Travelers are eager for more transparency through sustainability reporting, especially as 68% of consumers consider climate change an emergency. And travel suppliers do have sustainability much higher on their agendas than before, Deloitte found, creating opportunities to meet those demands.
- “Laptop lugging” trend will grow: The pandemic-induced shift in work patterns has allowed for greater flexibility in the workplace and among people. Approximately half of all employed Americans can work remotely, and the number of days they prefer to do so has increased (from 3.2 days per week in Nov. 2021 to 3.9 days in Nov. 2022). As a result, “laptop lugging” – the trend of leisure travelers extending trips due to the ability to work from anywhere – is expected to grow further, allowing travel providers to cater to this new market of travelers.
The weakening of financial confidence has threatened travel growth in the last few months of 2022, with the intent to travel becoming unsteady in September after a year and a half of steady growth.
Despite this, performance indicators in the hotel and airline industries have stayed strong. Overall, the travel sector is shifting to a year that will need repositioning and recalibration.