Industry leaders have touted how busy this summer will be for travel, but other data points counter that. Will 2023 be a busier travel season than 2022, or fall flat?
United, Marriott Confident Summer 2023 Will Be Very Busy
Marriott CEO, Anthony Capuano, was interviewed this week responding to questions about lingering COVID pent-up demand, the driving force behind travel growth in the last 18 months. He had an opportunity to hedge, and kind of did so before diving headlong into exuberance.
“I think it’s fascinating to listen to all of the experts predict what 2023 will look like. I’ve been in the industry for 35 years, I’ve been with the company for 28 years, and I’m not sure I’ve ever gone into January with such a wide set of viewpoints on what the coming year will look like. I’ve seen people predict double-digit RevPAR growth in 2023. I’ve seen some predict negative RevPAR growth for 2023. And all that variance underscores the uncertainty around sociopolitical instability, economic headwinds, threat of a recession. Thankfully, the data does not reveal softness today. We continue to see strong growth across all customer segments and in most areas of the world. So I’m quite bullish.” – Capuano for Travel Weekly
He added some comments about residual pent-up demand,
“I think how we characterize that pent-up demand may be a little different; it may have a heavier cross-border component. But I don’t think we’re close to the bottom of that bucket.”
After reporting more than $800 million in profit for Q4 2022, projections for 2023 remained elevated at United Airlines according to Kirby and its management team.
“United Airlines reported fourth-quarter profit and revenue higher than Wall Street expectations and gave a bullish 2023 forecast that assumes people will keep traveling despite inflation and concern about the economy.” – Associated Press
Both American Airlines and Delta Air Lines remained optimistic with 2023 targets.
I was questioned on the same question of pent-up demand and whether it was winding down. We haven’t seen a drop as of yet with plenty of travelers preparing for their summer vacations booking premium trips like luxury all-inclusive resorts and high-end European river cruises. But there’s always a danger in making large proclamations this time of year, especially for summer getaways half a year away. I wasn’t wrong when I first spoke about pent-up demand, but that doesn’t mean I won’t be here.
Award Availability And Prices Counter Narrative
This week mass award availability was released even in premium cabins on ANA, Singapore, and other carriers. Widespread availability in high seasons suggests that those flights are underselling to this point and that’s odd given the other data points.
Some prices appear to have subsided from prior nosebleed high prices. For example, in peak summer season, June 10-17th from New York features sub-$500 Dublin roundtrips, London for the low $600s. July 4th weekend has slightly elevated prices for those wishing to visit Buckingham Palace in London, and the Spanish Steps in Rome for example. August is the nexus month with US professionals and virtually all of Europe are on holiday, but surprisingly prices have dropped again back to June levels.
Prices to Hawaii during shoulder season in May are in the mid $500s to Kauai and Kona, or about double during June, July, and August. Flying from the Pacific coast is routinely inexpensive as it often is for the highly competitive market.
Layoffs, Recession Concerns Remain High
The tech sector has been heavy with layoffs in the last few months though unemployment numbers haven’t taken a dramatic hit.
“Announcements of layoffs, particular in the tech sector, continue, but those job losses haven’t translated into a notable rise in claims,” wrote Nancy Vanden Houten, lead U.S. economist at Oxford Economics.
“That suggests that these workers are finding it relatively easy to find other jobs or are confident they will be able to do so.” – The Hill
Jamie Dimon has long predicted a recession and that prediction has reverberated around the market for some time. I, too, have speculated that the economy is a likely candidate for a recession and I’m not alone. Economists interviewed by Forbes stated that there’s a 70% chance of a recession this year.
“When it comes to economic events, knowing when, where and how isn’t that unusual. What is strange is how far ahead economists forecasted this particular downturn – and how many agree it’s all but inevitable.” – Forbes
Typically, the first thing to go when the economy experiences a downturn is discretionary purchases like travel. With prices at all-time highs through the first quarter, it’s no surprise that summer destinations might experience lower demand.
It’s hard predicting the future but bullish comments may or may not translate into a bullish market for travel. I lean toward the market softening based on summer cash prices, usually higher for this far out during peak season, and the widespread availability we have seen for awards this week. However, I was shocked by lasting pent-up demand that has made travel purchases relentless over the last two years. I’ve been wrong before, I will be wrong again, but I predict we will see some trading higher costs at home and warning signs of a recession will scare some travelers away from big expensive international trips and back to domestic road trips with National Parks as the focus. Only time will tell.
What do you think? Are you expecting a continuation of high travel activity or will we see a slump? Are you concerned about a possible recession or emboldened by relatively strong jobs reports?