Travel

Brace yourself for a major recovery in travel and tourism this year, according to a new study

Brace yourself for a major recovery in travel and tourism this year, according to a new study

Travel and tourism in the United States will exceed pre-pandemic levels this year, with the sector expected to generate $2 trillion, or 6% more than in 2019. That’s according to new economic modeling from the World Travel & Tourism Council (WTTC), in collaboration with Oxford Economics.

The London-based group, whose members include executives from more than 200 companies including United Airlines, Japan Airlines, Expedia, Hilton, Royal Caribbean and others, said in a Press release dated February 9 that this year’s recovery depends on two conditions: 1) a steady deployment of vaccines and 2) the lifting of restrictions on international travel.

If all goes according to plan, travel and tourism could contribute $2 trillion to the US economy in 2022, up from $1.87 trillion the year before the pandemic began.

At the global level, the industry should contribute $8.6 trillion economic activity this year, according to the WTTC, which is only 6.4% below the $9.2 trillion generated in 2019.

Bullish on a full recovery

I am convinced that these expectations can be met and even exceeded, and I am not the only one.

Airline confidence improving, says January poll conducted by the International Air Transport Association (IATA), with almost all airline CFOs (96%) reporting that passenger demand increased in the fourth quarter of 2021. Another recent survey found that nearly three quarters (73%) of business travelers thought an increase in business travel would be very or extremely likely this year.

The market also appears to be seeing an end to the most restrictive travel mandates and border closures sooner rather than later.

Shares of Expedia Group hit a record high last week after the company reported fourth-quarter net profit of $276 million, or $1.70 per share, compared with a loss in the same quarter a year earlier . Expedia, which owns Orbitz, Travelocity, Hotels.com and more, had gross bookings of $17.5 billion during the period, a remarkable 131% increase from the fourth quarter of 2020.

Expedia CEO Peter Kern pointed out that although the travel industry has been disrupted by the emergence of Omicron, the impact has not been as severe as previous waves. “Notably, the travel industry and the traveling public are proving more resilient with each passing wave, and we continue to expect a strong overall recovery in 2022,” Kern said.

We like and invest in Expedia as well as its US peers Tripadvisor and Booking Holdings (owner of Priceline.com, Kayak.com, OpenTable and others). We also like the Chinese group Trip.com and the Japanese AirTrip Corp. for their international exposure.

Travel restrictions had little effect on the spread of Omicron

Online travel agencies and commercial airlines are set to reap the rewards of governments lifting travel restrictions, especially after new search showing that European Union (EU) efforts have had little impact on controlling new infections.

A December-January study of pre-departure testing measures from Italy and Finland found them to be completely “ineffective in preventing the spread of Omicron”. Given that testing was mandatory six to eight weeks after Omicron first appeared, the variant was likely already seeded in those countries, making new travel restrictions unnecessary. The study, conducted by Edge Health and Oxera, goes on to say that even if the testing requirements had been in place earlier in the Omicron wave, “they would not have had a significant impact on the spread of Omicron in Finland, and would have had a small impact on the distribution of Omicron in Italy.

In light of this research, IATA urges the United States to end the tests before departure for fully vaccinated passengers. “There is no point in closing the barn door after the horse has run away,” says IATA Director General Willie Walsh.

Such a move would not only make the flight experience more enjoyable, but could also stimulate demand. After the UK government announced in late January that it would end Covid-19 testing for inbound vaccinated passengers, flight bookings soared, according to travel trend research firm ForwardKeys. The day after the announcement, in fact, combined inbound and outbound bookings jumped to 84% of pre-pandemic levels.

Australia to welcome vaccinated travelers

In the meantime, I am happy to see that Australia will open its borders for the first time since the start of the pandemic in March 2020. From February 21, the country is expected to welcome international travelers vaccinated against Covid.

Qantas Airways, Australia’s flagship carrier, has reportedly seen a “significant” increase in bookings from travelers keen to visit the country after nearly two years. Reservations are the strongest in the United States and the United Kingdom, with peaks from South Africa, India and Canada, according to Andrew David, CEO of Qantas Domestic. To meet demand, the airline, whose founding dates back to 1920, will bring back six overseas links, including Sydney-Dallas, Sydney-Manila and Brisbane-Singapore.

Last week, Qantas shares traded near AUD 5.60 in Sydney, the highest level for the stock since November 18. With revenue set to jump thanks to an influx of new travelers, the stock could well hit $6.00 and above, a price last seen in February 2020.

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