Skyrocketing Prices Fail to Dent Travel

25.08.2023 - 13:03 / skift.com / Royal Caribbean / Hayley Berg / Delta

The post-pandemic travel boom and the high ticket prices that come with it show no signs of slowing well into next year, despite economic uncertainty and dwindling household savings.

While questions linger about how much longer consumers will continue to indulge, airlines, hotels and analysts say travel has remained a top priority instead of the “nice to have” purchase as in years past.

International travel reached around 90% of pre-pandemic levels this year, according to the International Air Transport Association. The rebound was led by visitors to Southern Europe from cooler climates despite soaring temperatures and included swaths of American tourists flying overseas.

“In the wake of the pandemic, a number of folks have reset their priorities and have focused on splurging on travel,” said Dan McKone, a senior partner at strategy consultancy L.E.K. Consulting.

That desire may even strengthen next year, according to travel tech firm Amadeus, whose recent survey showed that 47% of respondents said international travel was a high-priority discretionary spending category for 2023 and 2024, compared with 42% who ranked it as such the previous year. Amadeus sampled travelers from Britain, France, the United States, Germany and Singapore.

Those trends lifted quarterly earnings of travel companies, with cruise operators like Royal Caribbean reporting record results in recent weeks. Travel operators Booking Holdings and Airbnb said revenue was up 27% and 18%, respectively, and air carrier Delta and hotel giant Marriott International forecast strong future demand.

German carrier Lufthansa said bookings for the rest of the year currently exceed 90% of the pre-pandemic level and the summer season extending into October. United Airlines is expanding Pacific coverage this autumn with new flights to Manila, Hong Kong, Taipei and Tokyo.

Overall, global passenger demand is estimated to grow 22% year-on-year in 2023 and 6% in 2024, Moody’s investor service said on Tuesday. Ticket prices, which in some cases have increased by double-digit percentages since the pandemic, are unlikely to plummet.

“Everyone is pricing against demand and this is the basic economic equation,” Jozsef Varadi, CEO of budget carrier Wizz Air, told Reuters. “We are in a high-input cost environment. So, that puts pressure on pricing.”

Hayley Berg, lead economist at online travel agency Hopper, said travelers to Europe and Asia are not expected to see substantial price relief this autumn. She expects air fares on long-haul international routes to remain high until supply outpaces pre-pandemic levels, demand normalizes and jet fuel prices decline further.

The weak spot is U.S. domestic travel, as the end of Covid-19 testing restrictions has