Tatiana Rokou | Travel Daily News | 21 Oct 2022
Global tourism arrivals will rise by 30% in 2023, following 60% growth in 2022, but they will still not return to pre-pandemic levels. The economic downturn, sanctions on Russia and, above all, China’s zero-covid strategy will be among the factors weighing on the industry.
The report finds that global tourism arrivals will increase by 30% in 2023, following growth of 60% in 2022, but will remain below pre-pandemic levels. The economic downturn, sanctions on Russia, and China’s zero-covid strategy will delay recovery.
Ana Nicholls, Director of Industry Analysis, EIU, says: “The tourism industry saw a strong recovery during 2022, and we expect that to continue in 2023, particularly if China starts lifting its zero-covid policy as expected. But the industry certainly won’t be immune to the economic slowdown. Costs have already risen sharply for fuel, electricity, food and staffing, and companies will have to pass those costs onto consumers who are already hurting from the higher cost of living. As a result, EIU has pushed back its forecast for a full recovery in international arrivals. We now don’t expect them to get back to 2019 levels until 2024, although the Middle East is one region that will be ahead of the curve.”
Key trends to watch in 2023 include:
Last year, EIU expected global tourism arrivals to recover to near pre-pandemic levels by the end of 2023, as fear of covid-19 recedes and restrictions are lifted. However, Russia’s invasion of Ukraine in February 2022 and the accompanying political instability, global inflation and economic slowdown - as well as China’s strict zero-covid strategy - have dampened those expectations. We have now pushed our forecast for a tourism recovery firmly into 2024, with considerable turbulence likely in the interim.
Even so, the depth of the tourism slump in 2020-21 means that strong growth is near inevitable in 2023 now that travel restrictions have been lifted in most countries. Globally, we expect pent-up demand for travel to drive growth of 30% in international tourism arrivals, taking them to 1.6bn. This follows growth of 60% in 2022, but will still not be enough to take total arrivals to their 2019 level of 1.8bn. However, the trajectory will differ by region. Much of the Middle East, buoyed by high oil prices, has already seen a full recovery, while Eastern Europe will have to wait until 2025 because of the impact of the war in Ukraine. Other regions will range in between, with most reaching a full recovery in 2024.
Chinese travellers will remain largely absent
While the war in Ukraine has delayed the tourism recovery, an even bigger factor has been China’s zero-covid policy. China accounted for around one-tenth of the world’s tourism departures before covid, but we now expect its borders to remain largely locked until at least mid-2023. There is even a risk that the zero-covid policy could be extended if the pandemic continues to be a threat. If all goes to plan, however, authorities will gradually take a less strict stance towards the virus, easing (but not lifting) mandatory quarantine measures and inbound travel controls. However, frequent mass testing of the population in big cities, and occasional lockdowns in smaller cities will continue to keep sporadic outbreaks from spiralling out of control.
In this scenario, we expect the number of outbound travellers from China to more than double in 2023, to around 59m. Even so, that would be only a little more than a third of the 155m departures in 2019, when China was the world’s biggest source of tourists. This reduced demand will primarily affect tourist destinations in Asia, including Thailand and Hong Kong, which used to be highly dependent on Chinese visitors. But the dampening effect will also be felt in Europe, the US and elsewhere. Even China’s domestic tourism - which also fell in 2020-22 - will be affected by the country’s economic slowdown. We expect GDP growth of “just” 4.7% for China in 2023, which will feel like a recession in a country used to strong growth.
Labour shortages and high prices will add to woes
Inflation will not only affect travellers in 2023, but also the tourism sector. Hotels, bars and restaurants are grappling with high food and energy prices, while airlines are contending with high fuel bills. Airlines also face increasing wage pressures amid a chronic labour shortage. After laying off staff during the pandemic, many companies have struggled to rehire. This lack of staff has caused airport queues and caps on passenger numbers, as well as flight cancellations and lost luggage in the summer of 2022. The chief executive of Heathrow (UK) has warned that problems will last until the end of 2023.
The UK faces particular issues, because Brexit has stemmed the flow of seasonal workers from the EU. However, there are also labour shortages across Europe and in the US, where employment in the leisure and entertainment industries is still nearly 1m short of 2019 levels. The economic slowdown should make recruitment easier if job losses mount elsewhere. Several countries, including New Zealand and possibly the UK, will also ease visa requirements. Even so, it will take time to replace skills lost during the pandemic. Moreover, this labour-intensive industry is also likely to see more disruptive strikes in 2023 as workers themselves demand higher wages to cope with the higher cost of living.
Airlines will edge closer to profit
Major airlines in the US cut costs throughout the pandemic by laying off staff, restructuring fleets and borrowing heavily. They also received big government bailouts, particularly in Europe, North America and parts of Asia. Loans, wage subsidies and deferred taxes collectively totalled US$243bn in 2021. Nevertheless, the International Air Transport Association (IATA) expects airlines to suffer a combined net loss of US$9.7bn in 2022, after losing around US$180bn in 2020-21.
Despite the difficult economic conditions, the signs for 2023 are brighter, and IATA suggests that airlines may even head towards profitability if travel rebounds as expected. One big risk will be fuel costs: although oil prices are now softening, they are priced in US dollars, and the dollar is strengthening against nearly every currency. As a result, US-based airlines are the most likely to be profitable in 2023, while airlines in other regions will struggle.
The impact of climate change will increase
Climate change has already started to have an impact on key tourism destinations, with ski resorts lacking snow and summer resorts affected by droughts and wildfires. In 2023 these impacts will become clearer if weather-related events continue to get more extreme. Indeed, back in 2009, the Association of British Travel Agents pinpointed 2023 as the key date for its sustainable tourism drive, which aimed to protect the environment and develop sustainable transport. However, not enough progress has been made—tourism now accounts for between 5% and 8% of global greenhouse gas emissions. Nepal is one country that is setting 2023 as the start of a new sustainable tourism drive.
Travellers’ awareness of the environmental consequences of tourism may also change their travel plans in 2023. According to the European Investment Bank, 37% of Chinese people, 22% of Europeans and 22% of Americans say that they will avoid flying because of climate-change concerns. Some of those who still want to travel will be prepared to pay higher prices for more eco-friendly options, or carbon-offsetting efforts. Regulators will pile on the pressure too. 2023 will see the conclusion of the voluntary pilot phase of the Carbon Offsetting and Reduction Scheme for International Aviation to reduce emissions from international flights. Eight more countries, including Cambodia, Cuba and Zimbabwe, will join, bringing the total number of participating states to 115.
Saudi sojourns: The Middle East has seen an extremely strong revival in tourism in 2022. International arrivals rose by 287% year on year in January to July 2022, taking them close to 2019 levels. Saudi Arabia, which has seen the resumption of the Hajj pilgrimage, has particularly big plans for its tourism sector under its Vision 2030 economic development plan. These include the development of the Red Sea Project, with 50 hotels spread over 22 islands. Although not due for completion until the end of the decade, the project will take in its first visitors in early 2023.
Venetian fees: Some major tourist attractions are experimenting with tourism fees and taxes to help reduce crowds or fund infrastructure. From January 16th day-trippers to the ancient Italian city of Venice and some of its islands will have to make a reservation at a cost of between 3 and 10 euros (US$3-US$10), depending on demand. The long-threatened fee will not only cut crowds, it will also cut taxes for resident Venetians. Overnight tourists will be exempt because they will already be paying for their stay. Thailand and the Maldives introduced tourism fees in 2022, and London is also considering one. Good sports: Sporting events will spur travel in 2023. China has pulled out of hosting June’s Asian Cup football tournament, but it will ease its covid restrictions in order to host the postponed Asian Games in September. Meanwhile, France will hope to convert the Rugby World Cup into a boost for its tourism industry.
Key risk scenario: A new pandemic or war could upend travel
The travel industry was the sector hardest hit by the covid-19 pandemic, with international arrivals and flights down by over 70% on 2019 levels in both 2020 and 2021. A new pandemic, or even a new deadly variant of covid, would therefore have the biggest impact on the sector’s recovery. It would deter China from reopening its borders, and could prompt other countries to reimpose travel bans. A widening of the Russia-Ukraine war could have an equally devastating effect. The war is already affecting the tourism industry in several ways: the loss of Russian and Ukrainian tourists, restrictions on airlines and the use of airspace, and higher food and fuel costs. However, a wider war would land a big hit to traveler confidence and disposable incomes, as well as new limitations on air routes.
IATA reports total air traffic was up 67.7% in August 2022 compared with August last year and is now 73.7% of 2019 levels.
Geneva - The International Air Transport Association (IATA) announced passenger data for August 2022 showing continued momentum in the air travel recovery.
Total traffic in August 2022 (measured in revenue passenger kilometers or RPKs) was up 67.7% compared to August 2021.
Globally, traffic is now at 73.7% of pre-crisis levels.
Domestic traffic for August 2022 was up 26.5% compared to the year-ago period. Total August 2022 domestic traffic was at 85.4% of the August 2019 level.
International traffic rose 115.6% versus August 2021 with airlines in Asia delivering the strongest year-over-year growth rates. August 2022 international RPKs reached 67.4% of August 2019 levels.
“The Northern Hemisphere peak summer travel season finished on a high note. Considering the prevailing economic uncertainties, travel demand is progressing well. And the removal or easing of travel restrictions at some key Asian destinations, including Japan, will certainly accelerate the recovery in Asia. The mainland of China is the last major market retaining severe COVID-19 entry restrictions,” said Willie Walsh, IATA’s Director General.
Air passenger market in detail - August 2022
International Passenger Markets
Asia-Pacific airlines had a 449.2% rise in August traffic compared to August 2021. Capacity rose 167.0% and the load factor was up 40.1 percentage points to 78.0%. While the region experienced the strongest year-over-year growth, remaining travel restrictions in China continue to hamper the overall recovery for the region.
European carriers’ August traffic climbed 78.8% versus August 2021. Capacity rose 48.0%, and load factor increased 14.7 percentage points to 85.5%. The region had the second highest load factor after North America.
Middle Eastern airlines’ traffic rose 144.9% in August compared to August 2021. Capacity rose 72.2% versus the year-ago period, and load factor climbed 23.7 percentage points to 79.8%.
North American carriers saw a 110.4% traffic rise in August versus the 2021 period. Capacity rose 69.7%, and load factor climbed 16.9 percentage points to 87.2%, which was the highest among the regions.
Latin American airlines’ August traffic rose 102.5% compared to the same month in 2021. August capacity rose 80.8% and load factor increased 8.9 percentage points to 83.5%.
African airlines experienced a 69.5% rise in August RPKs versus a year ago. August 2022 capacity was up 45.3% and load factor climbed 10.8 percentage points to 75.9%, the lowest among regions. International traffic between Africa and neighboring regions is close to pre-pandemic levels.
Domestic Passenger Markets
Australia’s domestic traffic posted a 449.0% year-over-year increase and is now 85.8% of 2019 levels.
US domestic traffic was up 7.0% in August, compared to August 2021. Further recovery is limited by supply constraints.
Read the latest Passenger Market Analysis (pdf)
The number of properties on offer, excluding hotels, has increased by 30% across the region, and by 71% in the Dominican Republic, according to data analytics firm Transparent
By Pablo Balcáceres | Bloomberg | October 06, 2022
The vacation rental segment in Central America and the Dominican Republic is recovering steadily from the Covid-19 pandemic and, in its aftermath, is now undergoing profound transformations in terms of growth and greater professionalization of services, according to data analytics agency Transparent.
Specifically, the number of tourist accommodations excluding hotels has grown by 30% from September 2020 to August 2022, according to the analytics firm, rising from 95,000 properties to more than 123,000 establishments.
Vacation rentals include houses, apartments, villas, bed & breakfasts, houseboats and campsites.
Transparent identifies three groups in terms of market size: Dominican Republic and Costa Rica are the largest in absolute terms, with more than 40,000 properties each; Panama and Guatemala are in the intermediate band of 8,000 to 10,000 properties; while Belize, Honduras, Nicaragua and El Salvador have between 3,000 to 6,000 each.
“El Salvador is the smallest market and has had the strongest growth, 78%; the Dominican Republic is a special case because it is the largest in absolute terms, and by grew 71%,” said Emilio Inés Villar, Transparent’s director of destinations, in a presentation to the Central American Tourism Promotion Agency (CATA).
Costa Rica added establishments at a rate of 28% over the past two years, while Guatemala and Panama added 42% and 39%, respectively.
In the rest of the countries, Honduras remained almost stable with a 2% growth rate. Belize and Nicaragua saw the number of vacation properties contract, the former by 9.4% and the latter by 10.7%, with the latter country in the midst of a political crisis.
Occupancy and prices
The average occupancy rate also rose by 29% across the region, with most countries moving into the 30% to 40% occupancy range, up from between 20% and 30%. On average, occupancy has risen from 21% in September 2020 to 36% in August this year.
On the other hand, average daily rates increased by 7%. Villar contextualizes this as a competitive advantage considering that worldwide prices in the segment rose by 24%.
Costa Rica is the country where prices increased the most, by 23%. It is also the most expensive destination in the region, with an average of $130 per night, followed by the Dominican Republic (which has seen a price increase of 14%), Honduras (12%) and Nicaragua (11%), while prices in Panama rose by 5%.
Rates decreased 10.2% in El Salvador, which dropped from an average of over $100 to $90, while Guatemala, in contrast, is positioned as the cheapest destination, with a drop of 4% in average prices for accommodation, with a current price range of between $70-$80.
These figures are in line with the outlook for the tourism industry as a whole.
The World Tourism Organization (UNWTO) says Central American countries are close to recovering to pre-pandemic levels, and while globally international arrivals are at 60% of 2019 levels, in Central America arrivals are around 80% of 2019 rates.
Honduras, the Dominican Republic and El Salvador have already rebounded from the loss of tourists during the pandemic, with increases of 13%, 3% and 1% respectively against 2019 figures, according to the September UNWTO World Tourism Barometer.
The recovery in Latin America and the world
As for vacation rental bookings as of June, according to Transparent, in North America bookings are already fully recovered compared to pre-Covid 19.
Latin America and Europe are still negative, down 14% and 15% respectively, while Oceania and Asia are even further behind, with reductions of 29% and 38% respectively.
Even so, property inventory in the segment advanced by significant steps in Latin America, up by 62% between 2018 and 2022; only behind North America, which saw a 63% rise.
Professionalization is also coming to this line of business, a key factor given the self-regulation of this type of accommodation, which has led to deficiencies in the quality of service offered to tourists.
“The perception is that it is a bit of an amateur sector: ‘I have a second home and when I am not using it I rent it out and make extra money’, but there are more companies that in fact have dozens or hundreds of properties and are professionally dedicated to renting them out,” Villar said.
The professional management of the business advanced from 12% in 2018 to almost 20% in 2022 in Latin America, although the region is lagging behind, as in the United States it is already close to 50%, and in Asia the proportion has risen from 25% to more than 40%.
“It is interesting to begin to understand who are the most important companies managing in each destination, they are part of the tourism ecosystem, and it is important that they are within the structure,” he said in words of advice to the region’s tourism ministries.
In Latin America, 25% of bookings are already agreed directly between the user and the accommodation’s owner, while 75% are made via online platforms such as Airbnb, Booking or Home Away. In 2021, the direct route between customer and owner was only 16%.
Regarding expenditure on lodging, 24.7% of the total goes on vacation rentals, up from 20.8% pre-pandemic, while expenditure on hotels continues to account for 75%.
The segment’s evolution
“There are now new visitor profiles, such as the so-called digital nomads or remote workers,” Villar said.
In the pandemic they played a key role as an option for tourists looking to avoid crowds or remote workers. The profile is shifting toward those seeking better interaction with the local culture and not feeling like a tourist, he added.
“Now they are looking for longer stays, or they think: ‘if I’m going to be two months in a destination working from there remotely I want to feel like a local, I want to feel at home, I need a kitchen, or I’m going to have the family with me and I need more rooms, more privacy’. That is where vacation rentals have been the reason for its current success”, Villar said.
Jim Hepple is an Assistant Professor at the University of Aruba and is Managing Director of Tourism Analytics.