Home Finance Approaching Pre-Pandemic Activity Levels, the Global Travel Industry Spreads Its Wings Once Again

Approaching Pre-Pandemic Activity Levels, the Global Travel Industry Spreads Its Wings Once Again

by internationalbanker

By Cary Springfield, International Banker

 

Among the most severely damaged industries during the coronavirus pandemic, global travel has staged a remarkable rebound, especially over the last year. According to projections delivered in November by the World Travel & Tourism Council (WTTC), the travel and tourism industry was touted to have generated $10 trillion in 2023, with almost half of the 185 countries in which it conducts research expected to have either fully recovered to pre-pandemic levels by the end of 2023 or at least reached 95 percent of full recovery. And with recent figures suggesting that activity will only grow in 2024, global travel is set to thrive once again.

Indeed, November reports revealed that the WTTC’s president and chief executive officer, Julia Simpson, had confirmed higher-than-expected growth rates for travel and tourism observed for Europe, Africa and Western Asia, while China had exceeded estimates as it worked to reopen its travel and visa processes fully. “International arrivals are higher than 2022 in all regions across the world, and we expect this trend to continue in 2024, with many regions surpassing 2019 levels by end of year,” Virginia Messina, senior vice president of advocacy and communications at the WTTC, also confirmed.

This encouraging assessment is supported by the United Nations World Tourism Organization (UNWTO), which similarly concluded that international tourism in 2023 had recovered 87 percent compared to pre-pandemic levels during the first nine months of the year, supported by continued pent-up demand during the third quarter. Around 975 million tourists were recorded to have travelled internationally between January and September, 38 percent higher than during the same period in 2022 but still 13 percent lower than in 2019.

Regarding specific regions, meanwhile, the UNWTO observed the Middle East as being the leader of the recovery, with arrivals at 20 percent above pre-pandemic levels for the January-September period. Europe, the world’s largest destination region, managed to claw back 94 percent of its pre-pandemic levels, thanks largely to intra-regional demand, while Africa and the Americas recovered 92 percent and 88 percent, respectively. Asia and the Pacific (APAC) lagged the other regions considerably, however, reaching just 62 percent of its pre-pandemic levels. As for sub-regions, North Africa (plus 5 percent), Central America (plus 4 percent) and Southern Mediterranean Europe (plus 1 percent) exceeded pre-crisis levels during the nine months.

The UNWTO also forecasted international tourism receipts to reach $1.4 trillion this year, about 93 percent of the $1.5 trillion notched up in 2019. “International arrivals are expected to reach 1.3 billion overall in 2023, up 33 percent over 2022 and almost 90 percent of pre-pandemic levels, in line with UNWTO scenarios published in January,” the agency noted. “Against this backdrop, international tourism is well on track to fully recover pre-pandemic levels in 2024 despite economic challenges and uncertainty derived from certain geopolitical tensions and conflicts.”

A 10-year forecast by the WTTC predicted the travel industry would balloon to $15.5 trillion, representing more than 11.6 percent of the global economy. If such a projection is realised, the figure would be 50 percent greater than its $10-trillion value in 2019, when travel represented 10.4 percent of the world’s gross domestic product (GDP). “Economists are saying that the global GDP is going to grow on an annualized basis about 2.6 percent a year. In travel and tourism, we’re expecting [annual growth of] about 5.1 percent,” the WTTC’s head, Julia Simpson, told Bloomberg in August.

By the end of the forecast period in 2033, moreover, China will lead the world in terms of its travel industry’s total economic output from both the amount spent domestically by incoming international visitors and the amount Chinese citizens spend travelling abroad. It will thus overtake the current leader, the United States. The WTTC has estimated that China’s travel sector will contribute $4 trillion and account for 14.1 percent of the Chinese economy, while the US will represent $3 trillion and 10.1 percent, respectively.

China hopes to see its travel industry’s numbers rebound to pre-pandemic levels, when it was the world’s largest source of outbound tourists, contributing $253 billion to the global economy in 2019. Online travel agency Agoda predicted in June 2023 that this would be achieved by either the end of 2023 or early 2024. If true, this will be welcome news for a country that was still exhibiting considerable apprehension about overseas travel in early 2023 as Beijing wound down its zero-COVID policies.

That said, it is clear that much industry confidence was restored during the year, with one of China’s biggest travel firms, Trip.com Group, reporting third-quarter (Q3) revenues at almost twice the levels of a year earlier and net profit reaching 4.6 billion yuan (about US$637 million), a mammoth 18 times more than the 245 million yuan it posted in Q3 2022. “We have seen a tremendous recovery in domestic travel. Domestic hotel bookings in the third quarter exceeded 2019 levels for hotels by over 70 percent, which is huge,” Trip.com’s chief executive officer (CEO), Jane Jie Sun, told Forbes in early January, adding that domestic travel will experience a “strong pickup” should China’s economy continue to match analysts’ expectations. Travel within China will also be helped by popular short holidays, such as the Dragon Boat Festival, Labour Day and others, Sun added.

As for international travel, Sun said she expected that visa burdens for overseas travellers would continue to be relaxed; indeed, landing visas were recently approved for visitors from France, Germany, the Netherlands, Spain, Italy and Malaysia for the first time. China has also lowered visa fees for American visitors and boosted flight routes that were shuttered during the pandemic. “The Chinese government is really making very good progress to attract people,” Sun added. “We will put [in] our concerted efforts to make sure we offer unique support when people come from these countries.”

Technology has been a crucial driver of the global travel industry’s defiant resurgence following the pandemic and will continue to be during the coming years, thanks to increasingly adopted innovations such as QR (quick-response) codes, biometric authentication and thermal scanning, alongside the more established tech breakthroughs, including artificial intelligence (AI), virtual and augmented realities (VR and AR) and data analytics. “Much of the operational rethink and technological innovations resulting from the COVID-19 pandemic will change and improve the travel experience, for example, in the area of facilitation, with the use and implementation of biometric identity technologies taking great steps forward,” William Raillant-Clark, communications officer of the Office of the Secretary General of the International Civil Aviation Organization (ICAO), told the International Travel & Health Insurance Journal (ITIJ) in early January.

Regarding significant new industry trends emerging in the post-pandemic world, sustainable travel will only grow over the coming years, with tourists becoming increasingly cognisant of the impacts of their overall travel footprints on the planet’s health. “Travellers and stakeholders increasingly prioritise sustainable and responsible tourism practices,” according to Roi Ariel, general manager of the Global Sustainable Tourism Council (GSTC), who postulated that sustainability would continue to rise up stakeholders’ agendas. “Embracing sustainability is not just a trend; it’s becoming a fundamental factor that will shape the future of the travel industry,” Ariel explained to the ITIJ.

Again, innovation will play a crucial role in this context, with disruptive technologies such as zero-emission aircraft and novel sustainable aviation fuel (SAF) technologies coming to the fore. “Long-term sustainability is a vital element in any medium-term business plan, and aviation is no exception,” the ICAO’s Raillant-Clark added, noting that governments are targeting 2050 to achieve total decarbonisation. “The global air transport sector welcomes these developments as they provide certainty and vision. Sustainability is not seen as a threat but as an opportunity for new and highly dynamic development, and the technological and operational rethink that decarbonisation requires also presents an opportunity to deeply revolutionise operations as we know them today.”

Nonetheless, distinct hurdles persist within the global travel industry, with a shortage of human skills amongst the most pressing as the sector struggles to rebuild its workforce following the pandemic. Despite numerous metrics indicating that the industry is firmly on the road to recovery, a serious lack of labour supply persists following the estimated 62 million travel and tourism jobs slashed in 2020. According to the WTTC’s figures, 11 percent of tourism jobs will likely remain unfilled in the European Union (EU). That figure falls to 7 percent in the United States.

“There has been an exodus of tourism staff, particularly from customer-facing roles, to other sectors, and there is no sign that the industry will be able to bring all these people back,” McKinsey & Company noted in August 2023. “Hotels, restaurants, cruises, airports, and airlines face staff shortages that can translate into operational, reputational, and financial difficulties. If unaddressed, these shortages may constrain the industry’s growth trajectory.”

 

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