11th Feb 2022
*[Greatest Of All Trips]
After the terrible year that the travel industry had in 2020, there was widespread hope that 2021 would be different. In the end, it was a year that saw big steps towards recovery but ended short of a bounceback, yet while Omicron casts a shadow over the nascent positivity, the outlook is nonetheless optimistic for 2022 and beyond.
2021 heralded a return to travel
2021 saw an overall rise in activity and revenue for the travel industry, even if the improvement wasn’t steady. The rollout of vaccines in much of the developed world throughout the early months of 2021 raised hopes that soon, travel would be able to return to something like “normal.”
And indeed, air travel did rise over the summer, with over 2 million people flying daily in the US in June and July1, and European airlines seeing international air traffic rates begin to lurch upwards after 18 months of gloom2. Hotel booking mirrored air travel, helping hotel stocks start to recover3. By October, the director general of the International Air Transport Association (IATA), Willie Walsh, felt able to say “We are past the deepest point of the crisis. While serious issues remain, the path to recovery is coming into view.”4
On the back of increasing travel confidence, many analysts made positive forecasts:
- IATA predicted that total passenger numbers would rise from 2.3 billion in 2021 to 3.4 billion in 2022, and airlines would return to profitability in 2023.5
- The World Tourism Council (WTC) forecast that by end 2021, the travel sector in the US will have risen 35.6% from 2020 and 2022 would see it grow by another 28.4%, while travel will contribute almost $2 trillion to the US economy and add about 2.9 million jobs.6
- The International Travel and Health Insurance Journal (ITIJ) expects that international travel spending will rise 94% in 2022.7
However, this was before the arrival of Omicron.
The recovery might be delayed
Travel confidence and numbers fell again when Omicron was identified in December. In response, Fitch Ratings adjusted its outlook for global air traffic in 2021 from a drop of 35% on 2019’s levels to a drop of 50%, while also cutting its forecasts for 2022 and 2023. But its analysts still predict “an accelerating pace of recovery through 2022 and into 2023, with a return to pre-pandemic levels in 2024,” showing that the impact isn’t expected to be long-term.8
Even before omicron, it was clear that recovery wouldn’t be linear. After a strong showing in June and July in the US, late August and September saw passenger volumes drop again9, and the Airports Council International (ACI) admitted that their expectations that Q2 2021 would be the inflection point for air travel recovery did not materialize10.
Business travel, always expected to lag behind tourist travel, is predicted to rise only 14% by the end of 2021 over 2020, less than the previous prediction of 21%, but 2022 is forecast to bring a 38% surge, with full recovery by 2024. Suzanne Neufang, CEO of the Global Business Travel Association (GBTA), said, “there is optimism overall as the industry, companies and travelers worldwide lean into recovery and the much-needed return to business travel.11”
The travel bug hasn’t weakened (and it might have grown)
With vaccination rates rising, more people feel safe enough to vacation again. Countries like the US, Australia, and New Zealand relaxed their travel bans. A WTC survey reported that 85% of people who haven’t flown since 2019 intend to travel internationally next year.12
Expedia’s research found that after 2 years of frustrated travel longings, people are ready to travel big, referring to 2022 as the year of the GOAT — Greatest Of All Trips. 68% of Americans say their next trip will be a big one, and 37% intend to travel both domestically and internationally13. Christie Hudson, travel expert at Expedia, said “I think 2022 will be the year of going big and having some of those bucket-list moments.”14
Global coordination could be key to travel recovery
As observed by a number of analysts, the lack of harmonized regulations around travel restrictions, and the global unevenness in vaccine rollout, have seriously handicapped the return to travel.15
So far, there’s been little synchronization of issues like the length of quarantine, which tests are required before travel, and even how to define “fully vaccinated.” 57% of travelers agree that the biggest obstacle to travel isn’t the pandemic itself, but the unpredictable changes to travel rules16. Much depends on how well governments and health authorities coordinate from now on.
New travel trends are emerging
In the “new normal,” we’re seeing new trends that will shape the future of travel.
1. Sustainable travel
Sustainable travel stretches from eating locally-produced food on vacation to preferring carbon neutral airlines and “off the beaten track” destinations. 60% of travelers say they’ll select airlines that have committed to carbon neutrality17, and 83% say that sustainable travel is a priority18.
The trend coincides with the rise in the “workation,” with travelers wishing to stay longer to fully experience their destination and contribute more to the local economy.
2. The hotel as a destination
We’re seeing a lot of hotels adding to the value they offer by transforming themselves into a destination in their own right. This includes expanding wellness experiences, enhancing culinary offerings, enabling productive work areas, and creating inspirational spaces such as art galleries.19
3. Travel as self-care
In reaction to the anxiety, stress, and physical impact of COVID-19, there’s a rise in demand for meditation retreats, mindfulness workshops, and other vacation experiences that help heal body and soul. 94% of travelers consider that travel is important for their health, and 53% plan to use vacation time to switch off from social media.20
4. Demand for adventure
As mentioned above, Expedia dubbed 2022 as the year of the GOAT. 41% of consumers say they are seeking excitement or exhilaration21. Bookings for exotic, long-haul destinations rose, as has reunion travel, as people seek to create special memories with a dream vacation.22 After months cooped up at home, people want space, driving an uptick in demand for vacations in the great outdoors and cycling, hiking, or climbing holiday bookings are rising for 202223.
5. Interest in domestic travel
Despite the aforementioned desire for excitement and adventure, domestic travel is still popular. People have been discovering the delights of their home country, and many still prefer to avoid traveling abroad due to infection fears and/or anxiety about last-minute cancellations. The WTC reports that domestic travel has “significantly” outpaced international tourism and is expected to rise further in 202224.
Travel players are keeping up with consumer needs
As travel trends evolve, travel providers are doing their best to keep up. Hygiene tops the list, with airlines, hotels, and tourist destinations prominently advertising their cleaning procedures, and a rise in contactless check in, booking, and even in-flight duty free purchase.
Travel companies read the room and now offer flexible cancellation and rescheduling policies to reassure travelers who might otherwise be nervous about locking in to bookings. Travel insurance companies have likewise had to revise their offerings to include covid insurance and quarantine insurance.
Like in so many sectors, the pandemic also accelerated digital transformation, including digital tickets, digital vaccine passports, and digital tracking and tracing to detect and limit outbreaks. Digital leaders are now applying advanced data analytics to improve their understanding of customer demands and refine their customer experience.
2021 left the travel industry battered, but not beaten
2021 didn’t bring the magic recovery that many people had hoped for, and Omicron was like a cold shower on the hopes of the travel industry. However, the world is eager to travel, so it seems to be a matter of time and, crucially, coordination about travel requirements. “There is a lot of pent-up demand,” summarizes Orkun Altintas, director for aerospace and defense at Frost and Sullivan, adding “Once there is more clarity about the vaccines and also about rules and restrictions, travel will pick up.25“
Some investors used 2021 to invest in airline stocks, cruise stocks, and other travel stocks, hoping to pick up bargains while the market is down and see prices rise in the near future. While they are likely to succeed in the long term, it might take a bit longer than they hoped for their gains to be realized, and there’s still a risk that any given travel company might not be able to hang on until market growth returns.
One alternative for people who want to buy into travel stocks before the recovery is to invest in a travel ETF, like Defiance’s CRUZ ETF, which spreads your investment across a number of top airline, cruise, and hotel stocks to help mitigate exposure to any individual company.
1 Cited by “The airline recovery has been put on hold as Covid-19 strikes again” September 24, 2021 https://edition.cnn.com/2021/09/24/perspectives/airline-recovery-domestic-international-business-travel/index.html, figures taken from TSA checkpoint travel numbers https://www.tsa.gov/coronavirus/passenger-throughput
4 “Global airline industry is expected to cut losses in 2022 by 78% to $12 billion in slow pandemic recovery” October 4, 2021 https://www.cnbc.com/2021/10/04/airlines-covid-recovery-2022-losses-to-fall.html
5“Economic Performance of the Airline Industry” 2021 End-year Report, IATA https://www.iata.org/en/iata-repository/publications/economic-reports/airline-industry-economic-performance—october-2021—report/
6 “Travel in 2022 Will Be Even Busier Than Pre-pandemic Times, According to New Report” November 15, 2021 https://www.travelandleisure.com/travel-news/world-travel-tourism-council-says-2021-travel-may-surpass-pre-pandemic-levels-in-2022
7 “Rise in international travel spending forecast for 2022” December 1, 2021 https://www.itij.com/latest/news/rise-international-travel-spending-forecast-2022
8 “Global Air Traffic Recovery Will Continue in 2022, but Risk Remains” November 30, 2021 https://www.fitchratings.com/research/corporate-finance/global-air-traffic-recovery-will-continue-in-2022-but-risk-remains-30-11-2021
9 Cited by “The airline recovery has been put on hold as Covid-19 strikes again” September 24, 2021 https://edition.cnn.com/2021/09/24/perspectives/airline-recovery-domestic-international-business-travel/index.html, figures taken from TSA checkpoint travel numbers https://www.tsa.gov/coronavirus/passenger-throughput
10“The impact of COVID-19 on the airport business and the path to recovery” July 14, 2021 https://aci.aero/2021/07/14/the-impact-of-covid-19-on-the-airport-business-and-the-path-to-recovery-2/
11 “From Setback To Surge: Business Travel Expected To Fully Recover by 2024” November 17, 2021 https://www.gbta.org/blog/from-setback-to-surge-business-travel-expected-to-fully-recover-by-2024/
12 “Travel trends we should expect in 2022” December 23, 2021 https://www.traveldailymedia.com/travel-trends-we-should-expect-in-2022/
13 “The GOAT mindset: Expedia reveals 2022’s biggest travel trend” November 30, 2021 https://www.prnewswire.com/news-releases/the-goat-mindset-expedia-reveals-2022s-biggest-travel-trend-301433866.html
14 “Travel in 2022: Is it time to plan those big trips abroad?” November 28, 2021 https://www.cnbc.com/2021/11/28/travel-in-2022-is-it-time-to-plan-those-big-trips-abroad.html
15 “The impact of COVID-19 on the airport business and the path to recovery” July 14, 2021 https://aci.aero/2021/07/14/the-impact-of-covid-19-on-the-airport-business-and-the-path-to-recovery-2/ “TRAVEL PREDICTED TO BE 30% DOWN IN 2022, SAYS ECONOMIST INTELLIGENCE UNIT” November 17, 2021 https://www.independent.co.uk/travel/news-and-advice/travel-industry-covid-2022-economist-b1959330.html
16 “Travel trends we should expect in 2022” December 23, 2021 https://www.traveldailymedia.com/travel-trends-we-should-expect-in-2022/
17 “Spend more, stay longer: The consumer trends driving travel in 2021” March 9, 2021 https://www.phocuswire.com/the-consumer-trends-driving-travel-in-2021
18 “Rise in international travel spending forecast for 2022” December 1, 2021 https://www.itij.com/latest/news/rise-international-travel-spending-forecast-2022
19 “Travel in 2022: what trends are the experts seeing?” November 29, 2021 https://www.thetimes.co.uk/travel/holiday-types/advice/travel-in-2022-what-trends-are-the-experts-seeing
20 “Travel in 2022: what trends are the experts seeing?” November 29, 2021 https://www.thetimes.co.uk/travel/holiday-types/advice/travel-in-2022-what-trends-are-the-experts-seeing
21 “The GOAT mindset: Expedia reveals 2022’s biggest travel trend” November 30, 2021 https://www.prnewswire.com/news-releases/the-goat-mindset-expedia-reveals-2022s-biggest-travel-trend-301433866.html
22 “The 2022 Traveler: Emerging Trends and the Redefined Traveler, a Report from Hilton” November 4, 2021 https://view.ceros.com/hilton/hilton-2022-trends-report/p/8
23 “Travel in 2022: what trends are the experts seeing?” November 29, 2021 https://www.thetimes.co.uk/travel/holiday-types/advice/travel-in-2022-what-trends-are-the-experts-seeing
24 “Travel in 2022 Will Be Even Busier Than Pre-pandemic Times, According to New Report” November 15, 2021 https://www.travelandleisure.com/travel-news/world-travel-tourism-council-says-2021-travel-may-surpass-pre-pandemic-levels-in-2022