Travel Isn't Recession-Proof – But it May Be 'Recession-Resistant'

23.09.2024 - 22:29 / skift.com / Anthony Capuano / Pranavi Agarwal / Skift Research

Last month, we wrote about how a potential recession in the U.S. could impact the travel industry. The concern has been that a recession would hit travel spending and you can see it in the stock market: The Skift Travel 200 Stock Index is up only 3% since the start of the year while the global market is up 20%.

Revenues and profit margins have largely recovered to pre-Covid levels, but travel executives were pointing to a slowdown in demand on recent earnings calls. Here’s how some companies described the environment:

At the Skift Global Forum last week, Marriott CEO Anthony Capuano said that even high-income consumers – who’ve been driving travel spending – had “just a little bit of a pullback in ancillary spending on food and beverage and spa.”

The slowdown can be largely explained by an end of Covid-era tailwinds: Consumers have spent their excess savings throughout the pandemic and growth rates have largely normalized to pre-pandemic levels.

There are also signs that the travel industry is lagging behind overall growth in the U.S. economy, indicative of early signs of a potential recession. U.S. hotel demand growth typically trends in line with GDP growth. In a recession, it typically falls by much more.

This year, we can see that hotel demand growth has slowed down below GDP growth.

It’s unclear whether the U.S. will officially enter recession. If it does, it is likely that travel will be impacted.

In previous recessions, such as in 2008/09, hotel demand dropped by more than double the decline in GDP growth. But we believe that travel today could be a little more insulated than it has been in the past: Call it “recession-resistant” – though not fully “recession-proof.”

A recession-resistant industry is one where travel has become more important to consumers than ever before.

We believe that travel has moved down Maslow’s hierarchy of needs. Pre-Covid travel was a fully discretionary item, sitting at the top of the pyramid.

Post-Covid, travel has become an important tool for making connections and finding a sense of belonging in our lives. It has gone from being fully discretionary to being a more fundamental need.

A recession-resistant industry is one where consumers have become more sophisticated shoppers.

Skift Research’s U.S quarterly consumer tracker shows that higher prices impacting consumers. Our survey work shows that 67% of consumers had their vacation plans impacted by higher prices in the first quarter.

If there is an economic downturn where consumers are affected by rising prices, we might see consumers turn to programs such as loyalty and credit card programs to get more value for their money.

But it’s not just about cost. Service has become just as important. Consumers have