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Could Rising Costs and Protests Spell the End of ‘Revenge Travel’?

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After three years of intense travel demand following the lifting of pandemic-era restrictions, the phenomenon known as “revenge travel” is showing signs of waning. Several factors, including sharply higher fares, protests against tourism, fatigue from extensive time spent in airports, and incomes squeezed by inflation, are contributing to this shift.

The travel demand has not plummeted, but there are clear indications that our collective wanderlust is transitioning from a fervent surge to a more regular pattern. This shift poses a critical challenge for airlines and tour operators in the upcoming months. They will need to fill the remaining seats and hotel rooms to maintain profitability. If demand remains robust, they can sell leftover capacity at higher prices. However, if consumers delay or forego travel, they may be forced to offer discounts, a practice that has been rare in the past three years.

In Europe, many travelers who prioritize their vacations book as early as January to secure their desired destinations, hotels, and even specific rooms. However, some consumers, particularly budget-constrained families, have hesitated, waiting to see how their finances and holiday prices develop. TUI AG, the world’s largest tour operator, has sold about 60% of its available vacations for this summer, which aligns with last year’s figures but still leaves a substantial number of packages to sell in an uncertain market.

European travelers are also exploring more cost-effective options. At Thomas Cook, now operating as an online tour operator, bookings to Spain’s Balearic and Canary Islands have remained flat year-over-year. This stagnation reflects a shift towards more affordable destinations like Turkey, mainland Spain, and Egypt, where bookings are up. Additionally, anti-tourism protests in the Canary and Balearic Islands may be influencing traveler decisions.

While European consumers are still willing to spend on their package holidays—TUI’s summer pricing is up 4% compared to last year’s 5% increase—budget airlines like Ryanair Holdings Plc and EasyJet Plc indicate that consumers are nearing their spending limits on airfares. Ryanair CEO Michael O’Leary recently adjusted his forecast, predicting that summer fares would be flat to 5% higher, down from an earlier prediction of a 5% to 10% increase. This is surprising given capacity constraints caused by delays in Boeing deliveries. Ryanair has already started reducing ticket prices to ensure full flights.

In the US, the travel recovery, now in its third year, is also stabilizing. Marriott International Inc. reported that US leisure revenue per available room—a key hotel performance metric—was flat in the first quarter. Meanwhile, Airbnb Inc. projected its revenue growth for the second quarter to be between 8% and 10%, the lowest rate in three years. Although this could be a temporary blip due to an earlier Easter, Airbnb expects a rebound in the summer months.

The travel market’s complexity is further highlighted by Americans traveling to Europe, taking advantage of a strong dollar. Events like Taylor Swift’s concerts have also boosted travel numbers. Additionally, climate concerns, particularly following last year’s wildfires in Greece, are influencing consumer choices. Some Europeans are opting for long-haul flights to destinations like Mauritius, where summer temperatures are more predictable and cost differences have narrowed compared to traditional Mediterranean resorts.

Travel behavior is polarizing, with wealthier individuals still spending on luxurious trips, while those affected by inflation and higher mortgage costs opt for budget-friendly options. The industry is keenly watching this year’s peak summer season to gauge the future of post-pandemic travel. As the Western travel boom potentially normalizes, the focus is also shifting eastward, anticipating the return of Chinese tourists, especially to Europe.

The coming weeks will be influenced by short-term factors such as elections in the UK and weather conditions. While the pandemic has heightened our desire to travel, changes in travel behavior, like skipping a spring getaway or foregoing a city break, are becoming more common. This summer season is crucial, not only for determining profits for tour operators, hotels, and airlines but also for providing a glimpse into the future of the post-pandemic travel market.

This story was originally featured on Business Standards

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