The travel and tourism industry has certainly had a hard time over the past years, but it is finally starting to recover. Slowly but surely, people are starting to travel again, if not abroad, at least in their home countries.
With the war in Ukraine having started almost two months ago and the Omicron variant of the Covid-19 virus circulating around the world at the beginning of the year, the recovery merely stumbled for a moment before getting back on track. The European Travel Commission (ETC) held a webinar discussing the latest travel and tourism trends and prospects, considering 2022 was supposed to be the year of a full rehabilitation of the sector.
David Goodger, Managing Director of Tourism Economics, explained that in 2021 cross border travel remained much lower than in 2019, however domestic travel has shown constant growth since the first months of 2020 and is nearly completely back to pre-pandemic levels.
Regarding the war in Ukraine, he highlighted the two types of impact it has on travel, direct and indirect. The direct effect is represented by the lack of Russian tourists in European destinations, on which he elaborated more on a previous webinar specifically on the subject of the conflict’s impact on European tourism. The indirect effect is represented by the increase in prices caused by the war, with the pressure on supply chains and higher fuel prices affecting the overall costs of a trip. He also mentioned how the conflict affected people’s opinion about travelling, causing them to be more pessimistic now about upcoming trips compared to January.
Mr Goodger also expects a massive impact on household disposable income. With the exception of a small drop after the euro crisis, this has been on a constant rise, but his prediction is that it will suffer a great downfall because of the increased prices. However, he said it will be somewhat soften by people’s savings.
In any case, he is confident that leisure travel will lead the way to recovery and moreover domestic travel will be back on track this year. With international travel only making a full rehabilitation in 2024, the overall industry should exceed pre-pandemic levels next year.
Lastly, while the war affected their previous predictions, the impact is not that great, with the recovery only being pushed back one year.
Thomas Emmanuel, SRT Director, then talked about the hotel industry specifically, explaining how the UK, France and Ireland have been showing the fastest recovery, since they were the first to reduce the Covid-19 travel restrictions. And even though the influence of the virus over people’s decision to travel has reduced significantly, overall travel sentiment is still a little more negative than in November 2021, but he does not believe the desire for leisure travel will ever disappear.
He also highlighted how, until the pandemic, travel demand has always been closely correlated to economic activity, thus, once all travel restrictions are lifted, there is not reason to believe the correlation will not return. Furthermore, even during the pandemic, people travelled for big events, creating noticeable spikes in hotel occupancy rates.
Regarding room rates, Emmanuel explained that, in Europe, there is no correlation between hotel occupancy rates and room prices. There are 3 factors affecting average hotel rates: the domestic leisure demand, the price of luxury hotels increasing more and faster than the rest, thus bringing the average up, and the shift in business mix, from group lower rated travel to transient more expensive travel.
He also showed how, in countries with a very strong domestic market, the hotel industry was not that affected by the war. Russia did not suffer very much, compared to Ukraine where now most hotels only host journalists.
Lastly, his forecast is that, by next year, hotel occupancy rates will only be 8% lower than the 2019 level, while prices should be in line by the end of this year.
During the Q&A session, the guests answered an interesting question about which places could benefit from the conflict. They believe that Russia friendly destinations like, Sochi, Turkey or Cyprus, could have a few good years ahead, however, comparing the situation now with the annexation of Crimea, other European destinations will, one by one, lift some of the sanctions, especially those where Russians represent a high percentage of tourists.
