skift research global travel outlook 2023

The magazine of Glion Institute of Higher Education

• The State of Travel 2023: Skift’s industry report paints a positive picture

Skift Research has produced its major annual report into the state of travel, along with commentary on the trends it believes will shape the industry’s future. We’ve sifted through all 278 pages to bring you the travel, tourism and hospitality highlights.

Travel is back. That’s the conclusion the authors of Skift Research’s The State of Travel 2023 come to in the up-front executive summary of their bumper report into the travel, tourism and hospitality industry.

Using a combination of its own proprietary research methods and third-party data sources, Skift Research has analyzed the industry’s current performance and charted travel’s path forward, claiming 2023 was the year travel truly recovered.

Back to the status quo

Skift Research’s Travel Health Index, which tracks 84 travel indicators across 22 countries with data from 22 partners, shows global travel surpassed 2019 levels in April 2023, exactly three years after its lowest point in April 2020.

Out of those 22 countries, 17 are part of the ‘100 Club’, recording an index score of 100 or higher as at June 2023. According to the report’s authors, this indicates a complete recovery to pre-pandemic performance levels, though the figures do not mean everything is back to ‘normal’.

According to the report, international travel still lags behind 2019 levels, with only the Middle East region witnessing a complete recovery of international travel in the first quarter of 2023. Looking at the overall situation, the outlook for the global economy is weaker than last year and, along with inflation, the signs are that the economic situation will have an impact on travel spending.

Regionally, travel volumes in the US now mirror those of 2019, while restored connectivity, convenient travel requirements and the closure of Asia Pacific for travel all helped Europe gain market share and extend its lead as the most popular destination region. In terms of visitor numbers, none of the Asia Pacific nations studied had recovered to pre-2019 levels, with China seeing the biggest decline – down 81% vs pre-Covid times.

Hotels on a high

There is good news for the hotel industry too. Skift’s report estimates hotel revenues will be just 1% below the level they were at in 2019, recovering from the 8% lower they were just last year. RevPAR (Revenue per Available Room) recovery is being led by ADR (Average Daily Rate) but demand is still below pre-Covid levels, meaning there is scope for even more demand growth in 2023.

This recovery has been fueled by pent-up demand and strong pricing in 2022. Further demand is likely in 2023, especially due to the return of international travelers. The luxury end of the market, already performing particularly well, is likely to benefit from this. Demand is strong, while pricing growth in this sector has resulted in margins more than double those in 2019.

Mixed messaging

According to the report, a key recent trend that represents one the greatest opportunities for hotels is the use of them as de facto offices. While better utilization of space in hotels is not a new concept, more and more hotels have started offering services such as coworking spaces for locals and guests during the day.

This hybrid hospitality model offers the flexibility to switch inventory around and reuse the available space at hotels at different times of the day to boost profitability. According to research conducted by Colliers International, hotels that offer co-working spaces have the potential to increase their turnover by up to 20%.

Technology to the rescue

As in previous years, technology is playing a significant role in travel’s recovery. Most hotel companies have deployed it as an enabler of efficient operations and seamless guest experiences, but there is scope for much further use of technology in the sector.

While the main technologies hotel groups invest in are property and revenue management systems, many are now investing in guest-facing technology too. The report’s authors believe this and the further adoption of artificial intelligence (AI) will offer much potential for future growth.

In particular, they say generative AI will have a significant impact on the travel industry. It is already helping programmers write better code quicker, leading to more new technology coming to the market. The authors believe AI will also significantly improve the customer experience through better chatbots and travel planning, while also helping hotel groups manage their online reputation more effectively.

The report estimates such technology will generate an additional $8.5 billion for the industry, but the real impact could be much greater. If adoption of AI helps all employees become 1% more efficient in their roles, it could create an additional $15 billion for the travel industry.

Promising outlook for the future

So what does the longer-term future hold for the travel industry? According to Skift Research, the outlook has never been stronger, pointing out the industry has survived terrorism, disease and economic declines in the past and has always emerged in a better state.

Among the main reasons for the authors’ faith in travel are the unprecedented rise in global mobility – the average passport holder can now travel visa-free to more than 90 countries – and developing countries’ increasing share of international travel.

Developing countries have grown as a share of total international trips, while over the same time total travel volumes have doubled. This trend is likely to continue as trip shares equalize with population share over the long term. According to the report, the center of gravity in travel will shift eastward and southward in the coming years.

Another cause for optimism has been the increase in flexible working and the resulting opportunities. Thanks to greater work flexibility, more people are blending leisure and business travel – Euromonitor forecasts the global spending by travelers combining business and leisure will more than double by 2027 as compared to 2021.

But it’s not all good news. While remote work gives people more freedom to travel for leisure purposes, business travel needs have declined as a result. According to a Mastercard study, from 2021 through March 2023, countries where more people returned to their offices outperformed commercial flight bookings by a wide margin compared to their more remote-minded counterparts.

• Click here to download the report

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Skift Research Global Travel Outlook 2021

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Report Overview

This year, Skift Research has taken a different approach to its travel outlook. Rather than a written report, we have decided to present key themes for the year ahead along with backing charts, data, and quotes.

Our themes progress from a broad economic outlook and get progressively more specific. We cover why we believe leisure travel will return faster than business, but also why business travel is far from dead in the long-run.

We discuss how the pandemic has driven changes in capital, investment, and consolidation across the travel industry. And what these changes mean in the face of a fragmented regional recovery.

All across the globe, people appreciate the value that travel brings to their lives. When people earn more money, they choose to spend it on travel. This holds true across a vast range of human differences — cultural, geographical, religious, historical, generational, and more.

9/11 certainly changed the way we travel — we still queue at airport security after all — but it didn’t stop it. So too, we expect coronavirus to transform, but not stop, the travel industry.

Please use the link below to download your copy of this year’s report.

Skift Global Forum 2023

September 26-28, 2023

New York City

Wednesday, September 27th

Conference welcome.

How AI Can Unlock The Promise of Travel

Fighting for Every Customer

Looking Ahead to Long-Term Trends

The Future of Saudi Tourism Investments: Pioneering Change

Enhancing the Travel Experience

Travel Loyalty’s Next Evolution

Turbo-Charging Human Connection in Travel

Enabling the Connected Trip of the Future

Driving Rapid Change: Is The Industry Ready?

How Airlines Need To Evolve

Innovating for the New Power Traveler

Enabling Purpose and an Antidote to Loneliness

A New Era of Tourism

Using Data to Deepen Customer Relationships

How Digital is Reshaping Borders Globally

Skift Research: The State of Travel

What Travel Can Learn From Tech Disrupters

Making Good on Our Sustainability Goals

The Power of Local on the Path to Sustainability

Turning AI Ideas Into Actions

An Inflection Point for Unlocking the Experience Market

Travel’s Future as AI Reshapes The World

Thursday, September 28th

What’s next for airbnb.

A Big Picture View on Travel’s Growth

Disrupting the Industry

The Power of Dedication and Growing a Brand

Investing in Travel’s Future

Thinking Big and Bold About Marketing to Today’s Travelers

Redefining Luxury in a Modern World

Closing Discussion: A Fireside Chat with Uber’s CEO

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Must Read Research

Also featuring commentary from  global economic weekly, june 9, 2024.

Candace Browning, Head of BofA Global Research

It’s all about context. This week we discuss what’s driving the auto industry in uncertain times, why AI may be inflating but doesn’t look like a bubble yet and why our views on Mexican equities have turned South after a landslide election.

The auto team’s Car Wars, an annual look at the auto product pipeline based on primary and secondary sources, comes at a particularly uncertain time for automakers as some planned EV (electric vehicle) launches are doing a U-turn.

Core ICE (internal combustion engine) portfolios will be key to generating capital. Replacement rates are just below the historical average of 15% in model year 2025-26, but should accelerate in 2027-28. Crossover vehicles comprise over 50% of the refresh. Autos analyst John Murphy believes that replacement rate drives market share and profits.

Long-term growth trends were a key focus during last week’s BofA Tech Conference.

The optimism around AI is reflected in stock prices, but Head of Global Equity Derivatives Research Ben Bowler doesn’t think AI is a bubble yet. The tell-tale sign of an asset bubble is volatility rising with prices, but tech volatility has not risen materially since ChatGPT’s launch in November 2022. Compared to the internet bubble that popped in 2000, today looks closer to 1995 than 1999 as stocks are still tethered to fundamentals. While no analog is perfect, the internet bubble lasted 5 years, endured 100bps (basis point) of Fed hikes, and delivered 80%+ Nasdaq returns in each of its final two years. That said, Ben notes the sheer size of big-cap tech today may limit valuation expansion from here.

Dr. Claudia Sheinbaum is set to become Mexico’s first female president after a landslide election.

Sheinbaum’s Morena party coalition will have a qualified majority (>2/3 rd ) in the lower house and close to 64% in the Senate. Mexico economist Carlos Capistran expects Morena to move forward with 20 proposals to change the Mexican constitution that AMLO (Andrés Manuel López Obrador), the current president, presented in February. Electoral, judicial, and pension reforms are on the table along with the elimination of autonomous institutions and granting CFE, Mexico’s state-owned electric utility, regulatory power over the electricity sector. Given high political uncertainty, Mexico Equity Strategist Carlos Peyrelongue has turned more defensive in Mexican equities. Carlos recently added real estate companies to the Mexico Core Portfolio for exposure to nearshoring trends and historically high occupancy levels. He also reduced financials exposure further.

Please visit our Must Read Research webpage weekly for our latest insights.

Featuring Commentary from Global Economics Weekly

Claudio Irigoyen, Head of Global Economics, BofA Global Research

2027 risks come early: French snap elections in June/July

French President Macron dissolved parliament in a surprise move following the European election results at the French national level. The first round of the French parliamentary election will be held on June 30, the second on July 7. Opinion polls at this stage are not available, limiting visibility. Snap elections well ahead of the initial 2027 presidential and parliamentary election timeline increase political, public finance and economic policy uncertainty in France, with ramifications for French debt markets.

2024/25 budget uncertainty up

Our benign European Economics team’s macro outlook for France was based on the assumption that political uncertainty, in particular, would remain relatively contained until the 2027 elections. At this stage, firm conclusions on the outlook are tough, but uncertainty is up and that is usually not a good ingredient for growth and investor sentiment. That includes, but goes beyond, budget planning. The French 2024 budget was voted in December. Following the 2023 slippage, targets for this year and next were adjusted to 5.1% and 4.1% of GDP (gross domestic product) respectively. A new majority government could opt to revisit the whole trajectory. An Excessive Deficit Procedure at EU level is likely – snap elections are unlikely to alter that.

Economic policy uncertainty up

Composition of parliament can matter beyond that. In our macro base case, we assumed that the current parliament composition would not allow meaningful reform. New elections could help President Macron restore a working coalition majority in government. But it could also result in amplified fragmentation and make it even harder to find majorities, that could limit even the capacity to respond to new unforeseen economic shocks. Or new elections could deliver a majority for right wing populists Rassemblement National, which could have much deeper ramifications for the economic policy agenda including taxation, migration, or even European matters. At the current juncture, it is difficult to assess.

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