Macroeconomic and geopolitical hurdles are slowing the full recovery of tourism.
“The world is a book, and those who do not travel read only one page”, were the words used by Saint Augustine to describe the value of traveling. I have been stuck on one page for a while. First, restrictions and risks related to COVID-19 forced us to avoid international travel for over two years. Now, while the desire to go on a trip has returned, high costs amid surging demand are keeping popular destinations out of reach for us and many other potential travelers.
Few industries were spared from the impact of the pandemic in the past three years, and even fewer were hit as hard as the tourism sector. But optimism has finally returned to this vital area of the economy. International travel is well on its way to recovering to pre-pandemic levels.
Twice as many people voyaged during the first quarter of 2023 than in the same period of 2022. International arrivals reached 80% of pre-pandemic levels in the first three months of 2023. Tourism receipts in countries like France, Germany, Italy, and the U.S. have climbed up to 85% of 2019 levels. Measuring its contribution to gross domestic product (GDP), the leisure industry in 34 countries has already exceeded 2019 levels. The World Travel & Tourism Council (WTTC) predicts at least 50 more nations to meet or be within 5% of full recovery by the end of this year.
After a slow end to 2022, the outlook for business travel is also turning positive. Businesses have adapted to virtual meetings and conferences, which explains the relatively slow recovery in demand for work-related trips. However, businesses are reporting strong demand for face-to-face consultations, amid increased focus on reshoring and rising geopolitical realignment. This should aid the recovery of the segment, which will be vital for airlines. Leisure tourism accounts for the lion’s share of airlines’ passenger volumes, compared to just 12% for business travel. However, the latter is twice as profitable, accounting for up to 75% of airline profits.