This article is featured in our latest edition of The Rising Tide, a weekly online publication for business people and economic developers. To read the entire edition, subscribe here.
Surging costs are pushing some Americans to change travel plans, whether by reducing their number of trips or finding cheaper activities. But still, about 85 percent of Americans will likely travel this summer, according to the U.S. Travel Association.
Crowds are driving up demand as travel companies continue to deal with labor shortages. Fuel prices set record highs and have fallen only slightly. Rental car shortages continue and inflation spares no traveler’s budget.
“Definitely every single category is more expensive now than it was this time last year,” Sally French, a travel rewards expert at NerdWallet told The Washington Post.
The American Automobile Association reports that 2022 travel bookings are off to a much stronger start compared to this time last year, while the CEO of Expedia Group predicts this summer will be “the busiest travel season ever.”
“We think this summer is going to be gangbusters for travel,” Marriott CEO Tony Capuano told last week.
Marriott saw an 81 percent rise in first-quarter revenue compared to the same quarter a year ago as more leisure and business travelers got back on the road as Covid restrictions eased.
Despite concerns around inflation, Expedia CEO Peter Kern said he does not see travelers canceling plans because there’s so much pent-up demand following the pandemic.
“We haven’t seen any signs of consumers being impacted in terms of travel spend. We all know there were pent-up savings and underspend during Covid,” said Kern to CNBC.
Demand has driven the average daily rate at U.S. hotels up 40 percent compared to a year ago, according to hospitality analytics firm Smith Travel Research.
Higher Gas Prices Will Alter Some Plans
Higher gas prices historically haven’t stopped people from traveling altogether, said Ashley Schroeder, an assistant professor in tourism management at the University of South Carolina in Columbia, S.C.
“It changes where and how they travel,” she told The Wall Street Journal, for instance by taking fewer trips, driving to destinations closer to home, and spending less on recreation and dining.
AAA reports a national average price of $4.43 for a gallon of regular gas. After several weeks of steady declines through March and April, average gasoline prices in the US have risen sharply in May.
A survey from Bankrate.com in April found that 69 percent of Americans said they would take a vacation this summer. A March poll by Bank of America found that 62 percent found of respondents expect to travel more than usual in the next 12 months, while 41 percent found said they plan to make up for previously canceled travel in 2022 or 2023.
Airline fares rose 12.7 percent in February 2022 compared to last year, even though they’re still down 14 percent compared to 2019, according to new data from the Bureau of Labor Statistics. The Airlines Reporting Corp. found the average ticket price for a roundtrip ticket jumped to $464 in February 2022 — up from $409 in January.
The Economic Impact of Tourism
Tourism is widely regarded as a key sector for economic development. It creates jobs and increases the wealth of an area. It can and often does lead to improvements to the natural environment as well as man-made infrastructure, such as roads and waste-treatment plants. Tourism also provides an economic stimulus by allowing for diversification of employment and income potential.
But as we learned from the Covid-19 pandemic, the tourism industry can be quite vulnerable to disruptions. An estimated $500 billion loss in travel spending resulting from the pandemic has cost the U.S. $1.1 trillion in economic output, according to the United States Travel Association. Prior to the pandemic, the U.S. travel industry experienced 10 straight years of growth.
In 2021, domestic business travel spending remained 56 percent below 2019 levels and international travel spending remained 78 percent below 2019 levels.
Prior to the pandemic, direct travel jobs accounted for 6 percent of the workforce, and total travel-supported jobs accounted for 11 percent of all jobs, but with the onslaught of Covid in 2020, direct travel jobs accounted for a disproportionate 35 percent of all jobs lost, according to USTA.
Employment in leisure and hospitality is still down by 1.4 million jobs, or 8.5 percent, since February 2020 despite the long string of robust monthly job gains.
Of the 428,000 jobs added in April to the U.S. Economy, a hefty 78,000 jobs were in the leisure and hospitality sector. Restaurants and bars added 43,800 jobs, hotels and other lodging businesses tacked on 22,300, and performing arts and spectator sports businesses added 13,300.
A report by the World Travel & Tourism Council in April stated the tourism sector is expected to create nearly 126 million new jobs within the next decade. The EIR report shows Travel & Tourism’s GDP is forecasted to grow at an average rate of 5.8 percent annually between 2022-2032, outstripping the 2.7 percent growth rate for the global economy, to reach US$ 14.6 trillion (11.3 percent of the total global economy).
The sector’s contribution to GDP is expected to grow a massive 43.7 percent to almost $8.4 trillion by the end of 2022, amounting to 8.5 percent of the total global economic GDP – just 13.3 percent behind 2019 levels. This will be matched by a boost in Travel & Tourism employment, which is expected to approach 2019 levels in 2023, only 2.7 percent below.
Dean Barber is the principal of Dallas-based BBA, offering consulting services to economic development organizations and companies. We ask the right questions and find practical and tactical solutions that work. Need a speaker? Call Dean.