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How will inflation impact the travel industry?
A discussion about the economy and travel
 
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10 days ago

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Ian
Founder, Travel Massive

There's a lot of unusual signs in the global economy of late, so I thought I'd ask for everyone's thoughts on how inflation might impact travel.

👉 Have you experienced inflation on your travels (or in your travel business) and what do you think the longer term impacts will be?

15 days ago (edited)
Ian
Founder, Travel Massive

I'll go first!

There's a lot to unpack on this topic, so I'll break this down in to a few thought pieces:

Direct influences: These things are going up in price: transport (e.g. airline tickets), energy (e.g. heating hotels), food (e.g. hospitality and restaurants), and skilled labor.

Indirect influences: likelihood of lower consumer sentiment (less spending in general), cost of living (less discretionary spend on travel), and geo-politics (travelers avoiding areas of political unrest, strikes, etc) could reduce demand for travel.

Tourism skills shortage: Inflation is also being driven on the supply side of tourism, because of a skills shortage across the entire sector (e.g. pilots, airports, and hospitality). Many people left the industry in recent years, and other industries such as tech are attracting talent. Tourism has a real challenge here.

The "travel boom" this year was a result of repatriation (visiting family members), and pent up demand (people taking first trips in years), enabled by the lifting of border restrictions. However, travel is not "as easy" as it was pre-2020 and many travelers got a reality-check in recent months at airports around the world.

Investment in tourism will be impacted if investors de-risk due to inflation and/or recession fears. Valuations of startups will fall and it will be harder to raise money. This may see many startups go into hibernation mode or do M&A to survive.

Destination dynamics: Inflation will impact countries in different ways, so I expect to see some surprises in how leisure travel demand is fulfilled based on currency strengths / weaknesses. Cheaper SE Asian countries might see an influx of European visitors, or US inbound travel might decline due to the strength of the USD.

In general, I think the next six months are going to be very interesting for the global economy and the tourism industry. Would love to hear your thoughts if you have any!

15 days ago (edited)
Event Organizer & Traveler, GlobalGaz

These are all spot on. There are so many challenges in the global economy and even more so in the tourism sector. Covid contracted the industry so severely, now there is sizable growth, but the capacity is not there. So we need to get back to equilibrium while hopefully avoiding a painful recession.

14 days ago
Founder, Vaitour

These are great points indeed. COVID-19 shrank the tourism market during the pandemic. However, a few changes brought by the pandemic are here to stay. Do people still care about pricing? Of course. On the other hand, I see them willing to spend more money on experiences now than before.
Inflation might make us go slowly in the near future, but I'm a believer that the spending will increase in the mid/long-term.

14 days ago
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