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Recovery Insights: Ready for Takeoff?

The pandemic accelerated many trends that were already underway, with the shift to digital catapulted years into the future. The same cannot be said for travel. Global airline spending took a $352 billion hit in 20201, taking the industry back to levels not seen in over 15 years.

As we look ahead, pent-up savings, pent-up demand to spend and venture farther from home and the green light from governments could provide significant tailwinds for travel. But it is unlikely to be a straight-line recovery as many countries and travel corridors continue to face significant challenges, including slow vaccination rates, new Covid-19 variants and the destruction of businesses and jobs left behind from the pandemic.

While travelers around the globe can't yet take off for most international destinations, some are increasingly packing their bags and boarding planes for flights within their own countries. When looking at the volume of domestic airline bookings, we are seeing the domestic travel recovery start in the Americas and then broaden out to Europe and beyond. Demand for leisure travel is reflected around the world, including the swift recovery in domestic travel in the US, the uptick in travel to parts of the UK such as Devon and Cornwall, growing interest in safari trips in South Africa, and growing in demand within the Australia-New Zealand travel corridor.

On top of the evident demand for travel, people around the world have saved an extra US$5 trillion2 during the pandemic. As most borders remain closed or are only open to essential travel, there is a wake of unmet international shopping demand. In the meantime, we see clear evidence that consumers are quickly increasing their spending on product categories like luggage and beauty products as they eagerly prepare for in-person experiences.

At the same time, while there is pent-up consumer demand for travel, there's also a real potential for a supply shortage - of long-haul planes and pilots. The recovery of travel worldwide is likely to be imbalanced, drawn out and non-linear.

This report, developed by the Mastercard Economics Institute and the fourth in Mastercard's Recovery Insights series, draws on aggregated and anonymized sales activity within the Mastercard network, along with third-party data sets and proprietary analysis by the Mastercard Economics Institute. It also covers the next wave of travel and its drivers-including the balance between leisure and business, local and long-distance, and the spending categories seeing an uptick and what they signal for travel recovery.

Key takeaways include:

  • 20% of countries have returned to at least 90% of pre-pandemic levels for domestic flight activity.
  • Global business travel lags global leisure travel by only about four months in the locations where travel has been recovering.
  • Gasoline spending around the world has exceeded its 2019 peak as road trips continue to dominate.
  • Border reopenings and pent-up travel demand have created a spotlight on 10 interesting travel corridors.
  • With their excess personal savings, some consumers are buying everything from wigs and toupees to bikes and boats.
People travel but passports collect dust

Source: Mastercard Economics Institute
As of May 21, 2021
Some countries only include international numbers

Nearly one in five of countries have returned to at least 90% of pre-pandemic levels for domestic flight activity.International travel has a long way to go before reaching pre-pandemic levels. And global business travel lags even farther. But there are bright spots with a continued interest in leisure travel and a surge in domestic air travel. Based on our analysis of flight bookings, the recovery in domestic air travel has started in Western countries and is moving Eastward.

In fact, domestic flight bookings in the US were above pre-pandemic levels in May, though international bookings remain down 22% from Q4 2019. Moving east, France and Italy are also seeing a similar pattern, with domestic bookings above pre-pandemic levels while international bookings are far lower. And, further East, air travel remains largely challenged, though Australia is seeing its domestic bookings at or near pre-pandemic levels since March.

The availability of a vaccine and the spread of the virus remain the top factors affecting people's decision to fly. For the travel industry to fully recover, the pandemic needs to be reined in. In addition to effective vaccine rollouts, this could be helped by a successful, widespread introduction of therapeutics that could dramatically reduce hospitalization chances for people diagnosed with Covid-19.

Expected Timelines for Nations to Reach Theoretical Herd Immunity

Source: Our World in Data, The Economist Intelligence Unit, Mastercard Economics Institute
As of May 21, 2021

Advanced economies are making far more progress in vaccinating their populations, while emerging economies have been left behind. For example, the US, UK and Singapore are on track to perform enough vaccinations to cross the theoretical herd immunity threshold in 2021, according to current expert assumptions about the virus’ basic reproduction numbers (R0). Much of Europe, Australia, Canada and South America may achieve it by mid-2022.

International travel bookings growing 4.5 times faster now but uncertainty looms

International leisure travel appears to be showing signs of recovery. In May 2021, global international leisure flight bookings grew 4.5 times faster, than prior months; the number of bookings was nearly double that of January. But we also believe the recovery of travel worldwide is imbalanced, drawn out and non-linear. New virus strains create added uncertainty as airlines face significant short-term and long-term logistical challenges. There is a continuously evolving set of rules for domestic and international travel.3 Even when travel corridors reopen, supply constraints in the airline industry could also slow the pace of recovery.

For example, one study estimates a shortage of 27,000 pilots by the end of 2021, even accounting for the re-hiring of those who lost their jobs in 2020.4 Bottlenecks in maintenance facilities are also likely as equipment that was left idle since 2020 gets brought back into service.

The demand for travel is clear, even as the recovery is not. In a sign of pent-up consumer demand, nearly one in five countries around the world has reached 90% of pre-pandemic domestic flight bookings, as of May. This is despite travel restrictions still in place.

Global business travel showing recovery signs, with Australia corporate travel bookings matching the recovery in consumer, and US now 60+% of pre-Covid levels

Source: Mastercard Economics Institute
As of May 21, 2021

While much has been discussed about the challenges to business air travel, estimates from the Mastercard Economics Institute show it is currently lagging the global trend in leisure by about four months. For now, global business travel is dominated by Australia and the Americas. In Australia, domestic corporate flight bookings are running at 80% of their pre-Covid levels.

In addition, US domestic corporate travel is back up to just over half of its average level from 2019. According to a recent limited survey of US business travelers, 45% expect their company's travel to resume to 2019 levels by the second half of this year.5

Small- and medium-sized enterprise (SME) travel has come back more quickly than bigger corporate travel. This is important as SMEs typically spend less on flights, hotels and restaurants than bigger corporations.

Ready to reemerge and spend

What people are buying post-lockdowns in 2021 could reflect their plans to emerge from their homes and restart in-person interactions. Countries like the US, UK, Brazil and Australia are seeing growth in product categories like wigs, toupees, barber and beauty shops, shoes and luggage, compared to 2019.6

Americans socked away the most money, saving nearly one-fifth of their personal consumption expenses, while consumers in Australia, Brazil and South Africa helped drive a 75% increase for wig and toupee shopsToupee and wig store sales increased 75% when comparing similar pre-pandemic and pandemic timeframes. Many people wanting companionship during the pandemic adopted pets, boosting spending at stores that sell pet food and supplies by 31%. Others are venturing to the outdoors with boat dealers seeing 30% sales growth, bike store sales up 62% and pools and supplies up 47%.

Several factors could impact travel recovery, including growing pocketbooks, pent-up travel needs and borders reopening.

As a result of fiscal stimulus and forced savings mostly from mobility restrictions, we estimate consumers around the world have saved an "extra" US$5 trillion since the pandemic began. Typically, we see a drop in consumer debt after a crisis, but this is usually driven by writing off debt versus an increase in deposits or debt paydowns.

This time around, consumer finances are better positioned and could help travel's recovery. In particular, we estimate that US, which had significant stimulus measures, has the most 'excess' savings to spend as a percent of annual personal consumption expenditures. Canada, Belgium and Australia follow close behind. In China, the trend to save more began after 2018, before the crisis.

Source: Oxford Economics, CEIC, Mastercard Economics Institute
As of May 21, 2021

Global gas spending up 13% over 2019 peak shows road tripping is only growing in favor

Source: Bloomberg, Mastercard Economics Institute
As of May 21, 2021

↑13% - global gasoline spending has already exceeded its prior peak (in August 2019)The 2020 habit of opting for land over air travel continues unabated, for now. The road trip is as big a trend for 2021 as it was in 2020. In the US, more people are traveling across the country by car, with 25% of all vehicle rentals being used for interstate travel, according to Mastercard Economics Institute analysis.

In addition, smaller locations near beaches, mountains, lakes and parks have been destinations of choice compared to their big city counterparts all over the world. For example, in the UK, Chester and Devon have been leading destinations. In the US, small beach towns along the East coast, as well as areas like Pigeon Forge, Tenn., Sedona, Ariz., Lake Tahoe and Yellowstone have seen more visitors since the pandemic. Road tripping and off-the-beaten-path destinations are two trends contributing to the rise in global gasoline spending, which as of May was 13% above the prior peak in August 2019.

We don't expect road tripping to dominate travel recovery in the next few years as flying attempts its take-off, but it is a trend to watch in the short run. Big cities are more dependent on international visitors compared to the smaller, less urban locations, according to Mastercard Economics Institute analysis. This is not surprising given international airports typically sit near larger cities and lesser-known locations are less likely to be on the radar of a visitor from abroad.

10 travel routes to watch as domestic air travel starts to recover and some borders reopen

Source: Mastercard Economics Institute
As of May 21, 2021

The limited border reopenings have proven to be challenging for travelers and the travel industry alike. But the select open corridors such as between Australia and New Zealand and between the US and Latin America and the Caribbean are meeting and in some cases exceeding pre-pandemic levels.

Flights out of the Middle East and Africa are gradually improving, with intra-regional travel to Egypt and the United Arab Emirates most notable. Intra-Europe travel has been slower to pick up in 2021, although bookings to Greece are rising as weather warms up and restrictions ease. The current momentum suggests this summer could be better than last.

Indeed, matching the vaccination trends with the source of demand and the timing of changes in border restrictions helps anticipate the multi-speeds of the recovery in travel around the world.

'Escapists' could drive travel growth based on spending patterns

We have identified six groups of leisure travelers who will be critical to driving different elements of the recovery. From the domestically-focused escapist to the long-haul traveler, budget deal seeker to luxury aficionado, and rejuvenator/recharger to adventurer, each traveler drives different spending trends that are important to appreciate.

Click on a traveler below to see additional details

Budget deal seekers dominated the travel pie in every region in 2019 and 2020, followed closely by rejuvenators. Luxury aficionados travelled less between 2019 and 2020 across the board, while escapists, not surprisingly, increased their travel between 2019 and 2020.

Tourists from mainland China, US and Germany have dominated travel spending globally, though view is different market to market

It's also essential to understand the more localized and sectoral trends of how tourist segments spend while at their destination. For example, Brits spend relatively more on hotels and tourists from mainland China spend relatively more at department stores. Notably, in 2019, Chinese tourism spending in the rest of the world was worth more than the tourism spending of Germany (#3 in the world) and the UK (#4) combined. The US was #2 in the world for tourism spending.7

Looking deeper at where tourists from mainland China and the US are spending, it's clear that certain markets are dependent on these travelers--and their dollars. According to our analysis, Hong Kong, South Korea, Cambodia, Japan, Thailand and Australia are most dependent on Chinese travelers. US travelers are big spenders for the economies of Jamaica, Mexico, Costa Rica, Dominican Republic and Guatemala.

Even with international tourism in a multi-year recovery, spending by international tourists on restaurants worldwide as of May has picked up from lows seen in April 2020. Knowing where visitors are coming from can help different sectors prepare.

Source: Euromonitor, Mastercard Economics Institute
As of May 21, 2021

A Departing Word

Undoubtedly, the road to travel recovery is a bumpy one, based on regional and country nuances. Vaccine rollouts, treatment options and containment of variants are key dependencies and contribute to an inconsistent global view.

The three indicators--pent-up demand, pent-up savings and border re-openings--can at least provide some measured insights into travel's horizon, helping businesses and governments prepare and create the right experiences for consumers eager to travel once again.

Notes & Disclaimer


1: Compared to where airline spending could have been in 2020 (using the 3-year average growth rate), the loss of spending was closer to US$400 billion; Euromonitor data

2: Based on government sources and Mastercard Economics Institute estimate

3: BringBackTravel, Worldwide Travel Restrictions & Reopening Map

4: Pilot Demand Outlook 2020, CAE

5: Mastercard-BTN Group Travel Pulse Survey: Views on Business Travel. Fielded March-April 2021 in the US

6: Growth occurred between February 2019 and February 2020 compared to May 2020 and May 2021 and based on aggregated data for 15 countries around the world using Mastercard anonymized transaction data.

7:According to the World Bank and the Mastercard Economics Institute.

About the Mastercard Economics Institute

Mastercard Economics Institute launched in 2020 to analyze macroeconomic trends through the lens of the consumer. A team of economists, analysts and data scientists draws on Mastercard insights - including Mastercard SpendingPulse™ - and third-party data to deliver regular reporting on economic issues for key customers, partners and policymakers.


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