Here’s What To Expect This Summer In Travel And Tourism

Aerial shot showing an aircraft shadow flying over an idyllic beach scene, Barbados

Abstract Aerial Art/DigitalVision via Getty Images

By Devin Ryder, CFA

According to Hopper’s Summer 2022 Travel Guide, more than half of Americans plan to travel for pleasure this summer, indicating that they are eager to go back on the road. Most tourists are going on vacation or to see family and friends—24% are traveling for the first time since the COVID-19 outbreak. With soaring flight and gas expenses, more than half of Americans who plan to travel for pleasure this summer anticipate spending over $1,000.

Airfares are Soaring

Domestic airfare is up more than 34% from this time last year, currently averaging $383 round trip. Summer airfare is on track for a 5-year high, driven by rising jet fuel prices, growing demand, and lower overall capacity compared to 2019.

Meanwhile, foreign airfare is up a mere 2.5% from 2019, averaging $912 round trip. More specifically, airfare to Europe’s bucket-list destinations will cost tourists $868 on average, which is unchanged from last year; however, airfare to closer destinations in Mexico and Central America, as well as the Caribbean, has increased by 8% and 10%, respectively.[1]

Average summer airfare vs. Domestic summer warfare

Jet fuel prices, like gasoline and diesel, fluctuate with crude oil prices. American Airlines (AAL) said in February that the price of jet fuel increased from $1.48 in 2020 to $2.04 in 2021; that’s by more than a third. It was estimated at the time that each sustained one-cent increase in the per-gallon price would add nearly $40 million to its fuel bill in 2022. In the first quarter of this year, American estimated that it paid $2.80 to $2.85 per gallon. Consumers appear to be unconcerned about rising fuel costs and the resulting higher flight fares. Ed Bastian, CEO of Delta Air Lines (DAL), said Wednesday that despite having 10% fewer tickets available, March was Delta’s highest sales month ever, surpassing a record set in 2019.[2]

Summer Travel Demand

Summer travel demand has continued to expand at a far higher rate than in past years according to Hopper, placing even more upward pressure on ticket prices. Domestic travel search demand has expanded 50% quicker this summer than in the first four months of 2019, with the largest acceleration after the end of COVID-19’s omicron wave in February. Demand is predicted to remain strong until mid-summer, when it will begin to decline seasonally near the end of August and September.

Search demand for domestic travel

In fact, Summer 2022 has been named the summer of “revenge travel,” a term dubbed to describe the eagerness to travel following the lengthy pandemic shutdowns and restrictions. Americans are splurging on “revenge travel” to make up for missed time after two years of pandemic-related cancellations, treating themselves to pricier tickets, finer hotels, and longer stays. Thus, travel remains a top priority for discretionary spending of consumers that are sick of staying home. The result is that “revenge travelers” “are more likely to try exotic locations, spend more money to travel, or a combination of both.”[3]

A study conducted by short-term rental data company AirDNA found that small city/rural and destination/resort markets dominated 2020 and 2021, while 2022 will likely see a comeback to great American cities.[4] According to AAA, travel bookings for 2022 are off to a considerably better start than they were at this time last year, and consumer confidence in travel is on the rise as well.[5] Further, Expedia (EXPE) CEO Peter Kern predicts that Summer 2022 will be the “busiest travel season ever.”[6]

Easing Restrictions

Summer travel will of course be bolstered by easing restrictions worldwide. As COVID-19 progresses from the pandemic stage to the endemic stage, the International Air Transport Association (IATA) has asked nations to ease travel restrictions as quickly as possible. The IATA recommended removing all travel barriers for those fully vaccinated with a WHO-approved vaccine, enabling quarantine-free travel for non-vaccinated travelers with a negative pre-departure antigen test result, removing travel bans, and speeding up the easing of travel restrictions in recognition that travelers pose no greater risk of COVID-19 spread than the general population. Below are a few recent updates related to international travel in a post-pandemic world.

EUROPE – The European Union Aviation Safety Agency (EASA) and European Centre for Disease Prevention and Control (ECDC) dropped the mask mandate for passengers on flights and in airports on May 16.[7] “For passengers and air crews, this is a big step forward in the normalization of air travel,” said EASA Executive Director Patrick Ky. This update takes into consideration the most recent developments in the pandemic, including vaccination rates and natural immunity levels, as well as the relaxation of restrictions in a rising number of European countries.

Norway became the first European country to fully remove all covid-19 related entry requirements in February.[8] Ireland, Hungary, the UK, Sweden, Poland, Denmark, Latvia, Slovakia, and Greece followed suit in March and April.[9]

SOUTH AMERICA – Governments across Latin America have lifted restrictions on travel and mask rules that had been in place for two years due to declining coronav
irus infection rates. Argentina, Bolivia, Chile, Ecuador, Paraguay, Peru, and Uruguay are open to all travelers regardless of vaccination status. Brazil and Columbia require vaccinations prior to entry.[10]

ASIA – In recent months, most of the nations in Southeast Asia have loosened their Covid entry requirements. Thailand has declared that it will no longer require pre-departure vaccinations for immunized travelers, while Vietnam eliminated quarantine and post-arrival testing requirements.[11] Malaysia scrapped its mandatory testing requirement for all vaccinated travelers in April as the nation transitions to the “endemic phase” of its COVID-19 strategy.[12]

China’s zero-COVID policy is holding strong, however, prolonging the country’s isolation from the rest of the world. Only foreign nationals with proper residency permits and visas are allowed into the country, and only under very strict conditions.

Conclusion

The economic impact of COVID-19 affected all travel sectors across the globe, from airlines and hotels to leisure attractions and online travel agents. Travelers are already eyeing opportunities to visit their favorite destinations, planning to make up for lost travel time. Growing consumer desire means plenty of returning opportunities for the travel industry to bounce back from the pandemic losses. Easing restrictions and pent-up travel demand are pushing the industry forward, while increasing fares are largely being ignored by those eager to get back on the road.

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Investing involves risk, including loss of principal. Shares of any ETF are bought and sold at market price (not NAV), may trade at a discount or premium to NAV and are not individually redeemed from the Fund. Brokerage commissions will reduce returns. Narrowly focused investments typically exhibit higher volatility. Companies in the technology field, including companies in the computers, telecommunications and electronics industries, face intense competition, which may have an adverse effect on profit margins. Technology companies may have limited product lines, markets, financial resources or personnel. The products of technology companies may face obsolescence due to rapid technological developments and frequent new product introduction, and such companies may face unpredictable changes in growth rates, competition for the services of qualified personnel and competition from foreign competitors with lower production costs. Companies in the technology sector are heavily dependent on patent and intellectual property rights. The loss or impairment of these rights may adversely affect the profitability of these companies. The Fund is a recently organized, diversified management investment company with limited operating history.

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[1] Summer 2022 Travel Guide – Hopper

[2] Fuel Prices Send Airfares Higher, but Travelers Seem Ready to Pay.

[3] Revenge Travel And Where Americans Are Traveling

[4] AirDNA Outlook Report

[5] Traveler Confidence Rebounds; AAA Travel Bookings are Stronger Than This Time Last Year

[6] Expedia CEO Predicts the ‘Busiest Travel Season Ever’ This Summer

[7] EASA/ECDC take first steps to relax COVID-19 measures for air travel | EASA

[8] Norway Removes All Entry Requirements For Tourists As Country Fully Returns To Normal

[9] Countries Without Any Travel Restrictions Or Entry Requirements

[10] COVID-19 South America – Status of Travel (June 2022)

[11] Asia Travel Restrictions: Which Popular Destinations Are Reopening?

[12] Malaysia Scraps Covid Tests for Travelers, Outdoor Mask Mandate

Original Post

Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.

Karen J. Simmons

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