Few industries were as severely hobbled by the pandemic as tourism. Grounded flights, shuttered hotels, dry-docked ships, and laid-off staff brought travel to a near halt. However, few things are more exhilarating than embarking on a new travel adventure, especially after being stuck at home for over two years. As restrictions ease in many parts of the world, consumers are booking domestic and international travel faster than they can rip open a bag of in-flight pretzels.
Cross-border travel reached pre-pandemic levels as of March for the first time since the start of the pandemic. 1 Global flight bookings show that the demand for leisure travel across domestic, short-haul and medium-haul trips was higher in April than at the same time in 2019. 2 By contrast, long-haul flights were just shy of 2019 levels. 3 While the tailwinds of Covid-related pent-up demand are pushing the travel recovery forward, the headwinds of inflation, supply chain constraints, geopolitical uncertainties and Covid infection rates are also shaping 2022.
The Mastercard Economics Institute's third-annual travel report, Travel 2022: Trends & Transitions, explores the global headwind and tailwind trends pushing and pulling on travel recovery. Drawing on aggregated and anonymized sales activity from the Mastercard network 4 , coupled with proprietary analysis of other data sources, we look at today's travel-related decisions, including top destinations, modes of transportation, accommodations, and spending on the ground. We also drill into the regional nuances impacting these global trends and transitions.
- For the first time since the pandemic, business flight bookings have exceeded 2019 levels, a key milestone in the recovery. 5 A critical share of travel for airlines, business has lagged the consumer travel rebound.
- If flight booking trends continue at their current pace, an estimated 1.5 billion more passengers globally will fly in 2022 compared to last year, according to an analysis by the Mastercard Economics Institute. 6
- The U.S., U.K. and Spain were the top international travel destinations based on flight bookings, as longer-distance travel returned. 7
- Long-haul leisure travel, which saw the steepest declines due to the pandemic, has staged a roaring comeback. Starting the year at -75% below pre-pandemic levels, it tracked roughly -7% below pre-pandemic by the end of April- a nearly 70 percentage points gain in the span of 4 months. 8
- Short- and medium-haul leisure flight bookings are now above 2019 levels, up 25% and 27% at the end of April 2022, respectively, turning positive for the first time since the pandemic around February 2022. 9
Modes of Travel
- Despite incredible challenges in the cruise industry, spending on cruises globally, including bookings, is roughly one-tenth below 2019 levels. This is another turnaround story, having started the year at roughly -75% below pre-pandemic levels. Spending on buses is also now at 2019 levels for the first time since the pandemic. 10
Spending while Traveling
Buckle up: 1.5 billion more flights expected to be taken in 2022 vs. 2021
The love for travel is evident this year. If flight booking trends continue at their current pace, an estimated 1.5 billion more passengers globally will fly in 2022 compared to last year, according to an analysis by the Mastercard Economics Institute. Travel plans are taking shape worldwide, with Europe seeing the biggest increase - about 550 million - versus 2021. 13
- Europe: close to 550 million more flights taken in 2022
- Asia Pacific: about 430 million more
- North America: roughly 365 million more (including Mexico)
- Latin America and the Caribbean: about 120 million more
- Middle East and Africa: roughly 115 million more
With more than two turbulent years behind them, travelers can now take their travel journeys to a new level. While the recovery could still face delays, we have more reasons to be optimistic than pessimistic.
Consumer and business momentum: The desire to travel is strong, and consumer and business demand for air travel, measured by flight bookings, accelerated meaningfully in early 2022. Leisure flight bookings took off by the end of January and have remained above 2019 levels. By the end of April, flight bookings were 25% above pre-pandemic levels.
Business travel has also staged an impressive comeback: At the end of March 2022, business flight bookings exceeded 2019 levels for the first time since the pandemic started, an important milestone. Data through April 2022 points to this trend continuing. In comparison, at their lowest in 2022, business flight bookings were roughly half of pre-pandemic levels. 14
Labor market comeback: Strong recent hiring has meant that many people who faced unemployment in 2020 now have jobs, and the recovery is still underway. This translates to more people who can purchase plane tickets and have the budget for other discretionary spending. More employed people also means greater potential to travel for business for the first time in two years.
Desire to travel is evident in both sentiment and actions: Roughly 21% of consumers expect to spend their money on domestic travel and 12% on international travel over the next three months, according to a Mastercard Proprietary Study, Global Insights, which surveyed 2,250 consumers across 15 markets. The survey also found that 54% of respondents look forward to big "make-up" trips after two years of little to no travel. 15 In markets that were tightly locked down, flight booking demand is kind of like a pressure cooker releasing steam. In the U.K., for example, the moment quarantine restrictions were progressively loosened for inbound travelers, flight bookings rallied from -59% below 2019 levels to +40% above 2019 levels in roughly six weeks. 16
Financially better off: People have paid off debt and other liabilities at a record pace over the last two years. Higher-income consumers - those likelier to be traveling for leisure - are in a solid financial position driven by pandemic-fueled excess savings and the rise in asset prices such as housing. However, this is not universal; lower-income people benefit less from asset price increases, especially those living paycheck to paycheck. Higher prices for essentials, such as rent and fuel, cut into most people's spending on leisure travel.
Less commuting, more discretionary: In markets where working from home is more prevalent, people spend less on commuting costs, which frees up some money for travel and other discretionary spending. For example, the average American commuter saves roughly $450 each year in commuting costs by working from home. In addition, the increased return to the office brings with it a return to business travel. 17
While there are many reasons to be optimistic about the rest of the year, high inflation is a meaningful headwind to the travel recovery and adds to stock market uncertainty.
Incomes in most countries this year are expected to increase slower than consumer prices. While incomes are expected to continue growing beyond 2022, the rising cost of goods and services puts a damper on people's purchasing power, especially for large-ticket goods and services and discretionary purchases like travel. This dynamic is likely to persist for the remainder of 2022 for most markets. For example, in the U.S. and U.K., inflation is expected to remain three percentage points higher than incomes until Q4 2022, according to Mastercard Economics Institute estimates.
This trend won't last as long in some advanced economies relative to developing economies. For example, while we expect income growth to outpace consumer price growth in Germany and the U.S. by mid-2023, this likely won't happen until 2024 and 2025 in Mexico and South Africa, respectively.
Consumer spending on travel is among the most sensitive industries to energy and food price shocks. However, given massive levels of pent-up demand in a post-pandemic world, this time could be different. The impact is likely more nuanced and uneven. Specifically, more price-sensitive travelers may stick closer to home, while less price-sensitive travelers, who are more likely to have more excess savings, may be less concerned with higher prices and eager to travel.
Reaching new heights: Short- and medium-haul leisure flight bookings are 25% and 27% above pre-pandemic levels
Since the onset of the pandemic, domestic travel has been the itinerary of choice for consumers. People navigated local restrictions and testing procedures but hesitated with more complex and confusing entry and quarantine requirements in other countries. Now we are seeing an unprecedented surge in international flight bookings. Notably, long-haul leisure flight bookings started 2022 roughly -75% below pre-pandemic levels, impaired by the spread of the omicron variant and fewer open borders. However, in less than three months, flight bookings approached where they were in 2019. Meanwhile, domestic travel remains robust, exceeding pre-pandemic levels. 18
This is a positive sign. With border restrictions at their lowest level since the shutdowns and easier entry requirements, leisure and business travelers are ready to venture farther from home.
Latin America and the Caribbean
Middle-East and Africa
So now that travelers are venturing farther from home, what are the preferred destinations? At the end of 2020, the U.S. accounted for an outsized share of all inbound flight bookings for a few reasons: the delta variant began to emerge in India, Europe's borders were tightening in the winter, and optimism was growing with the vaccine rollout in the U.S. Meanwhile, Canada and the U.K., where protective measures were among the strictest, lost ground for most of 2021. The U.K. notably sprung back to the top of the leaderboard in 2022. Destinations that were lower on the list in 2019 - such as Mexico and Spain - are now higher in 2022. 19
Not surprisingly, people chose their travel destinations based on their mobility restrictions. This was clear in popular destinations for U.S. travelers, such as the Dominican Republic, Jamaica and other Caribbean markets, where restrictions were less stringent. The result? These markets saw an influx of travel from Americans - in some cases, 75% over 2019 levels for sustained periods. By contrast, flights booked to Canada and the U.K. lagged prior levels; quarantine restrictions and border closures made entry cumbersome in these markets.
This dynamic is shockingly evident in Australia and Singapore, as well. During two years of being shut off to the rest of the world, domestic travel was the only option - and bookings surged.
In 2022, borders opened in Australia, resulting in a sudden ability to travel. Flight bookings from Australia to Indonesia, for example, spiked nearly 200% in 2022, and flights to the U.S. more than doubled.
Singapore, where border restrictions have dramatically eased, is also seeing an impressive surge in flight booking to popular destinations across South-East Asia, India, Australia and other locations. 20
Beyond border closures, the work-from-home culture also influenced flight bookings to different markets. Our analysis found that business flight bookings underperformed in markets with the most work-from-home labor forces. For example, the index below shows flight bookings grouped by countries based on their work-from-home status:
For example, Canada, where roughly 15% fewer workers were going into their offices through April 2022, has -17% fewer business flight bookings relative to the same time in 2019. By comparison, Mexico, Peru, Bahrain and the Philippines, where the number of in-office workers is above pre-pandemic levels, also had higher flight bookings relative to 2019 levels by the end of April 2022. 21
Why is this? Markets with tighter border and mobility restrictions usually mean more people are working from home. Without being able to travel, people made alternatives like video conferencing work. But the work-from-home dynamic is also linked to the economy's structure, which makes comparisons across markets multi-faceted for these reasons:
Internet access: Countries with robust internet access are significantly more likely to have a work-from-home labor force. For example, Kuwait, South Korea and Norway, where virtually every person has internet access, have fewer people in offices than before the pandemic. By contrast, in Nigeria, Bangladesh and India, where less than 25% of the population has internet access, more people are back in the office at typical pre-pandemic levels.
Composition of the labor force: Economies with a large penetration of services companies tend to have more employees working from home.
Urban vs. rural: A larger urban population means more people working from home, while a larger rural population means more people returning to the office.
High vs. low income: Higher-income economies tend to have more work-from-home workforces.
Bon Voyage: Global spending on cruises rebounded 62 percentage points in just the last four months, while spending on buses has returned to pre-pandemic levels
Throughout most of the pandemic, people's preferred (and at times only) mode of transport was by car. As a result, spending on auto rentals and tolls has consistently exceeded 2019 since Q1 2021. And while cars outperformed, other modes of transportation-particularly group travel-suffered, including buses, cruises and railways. But now, they're showing strong signs of recovering, with cruise lines and public transportation showing impressive momentum. 22
Cruises: Despite incredible challenges in the cruise industry, spending on bookings globally was just roughly one-tenth below 2019 levels at the end of April. This is a swift rebound, as cruise bookings started the year -75% below pre-pandemic levels.
Cars: Global spending on tolls and auto rentals in 2022 has outperformed, up nearly 19% and 12% relative to 2019 levels by the end of April, respectively. Besides being a more accessible mode of transportation during the pandemic, supply chain bottlenecks drove the price of vehicle rentals to record highs. In addition, spending on parking lot fees also passed the pre-pandemic threshold, suggesting a continued return of commuters.
Buses: For the first time since the pandemic, global spending on bus lines, including bus ticket sales, is back to pre-pandemic 2019 levels.
Railways: Passenger rail spending remains shy of pre-pandemic levels (-7%), about 28 percentage points higher since the start of 2022.
The momentum is undeniably strong across the broad transportation services industry - and like the airline industry, the recovery is strongest domestically. For example, domestic spending on auto rentals was roughly 30% above the same time in 2019 throughout April 2022, while tourist spending on auto rentals surpassed 2019 levels.
If there's one thing that we learned from 2020, reality can change course quickly. A new virus strain, geopolitical instability or another unanticipated event could quickly halt the recovery.
Another headwind would be the operating expense burden facing transportation companies, given the pandemic travel deficits. For example, at its peak in 2021, for every $1 earned by airlines, about US$8.60 was spent on operating expenses. Wages and salaries as a percent of sales were roughly 18% pre-pandemic and have grown to 22%. Landing fees and other operating expenses, such as maintenance and repairs, as a percent of sales, remain two and three percentage points higher than pre-pandemic levels, respectively.
Higher costs for airlines have contributed to higher fares for travelers. Through April 2022, the average airfare that travelers paid adjusted for the distance flown increased roughly 18% since the start of the year. But this is not consistent across all markets.
In Australia, for example, average airfares have been roughly 11% above 2019 levels since Q4 2020. In Singapore, prices have also been elevated, recently pushing 27% of 2019 levels through April 2022. This partly has to do with supply-side constraints. For example, air transportation employment in Singapore ended 2021 roughly -28% below pre-pandemic levels. In the U.S., about 5% more people were working in the air transportation services industry than before the pandemic, according to April 2022 payroll employment data. In the U.S., airfares were roughly in-line with 2019 levels as of April 2022 when adjusted for the distance flown. 23
Making memories: Tourism spending on "experiences" is roughly 34% above 2019 levels and has outpaced spending on "things" since July 2021.
In 2020 and 2021, spending made a sudden, but not surprising, shift from services to goods. However, spending is now shifting back as travelers seek out experiences on vacation instead of souvenirs. We analyzed this trend by looking at discretionary tourism spending on experiences versus things.
For example, through April 2022, our analysis shows that tourism spending at bars and nightclubs is 72% above 2019 levels, while spending at restaurants is 31% above. Tourists are also spending 35% more on amusement parks, museums, concerts and other recreational activities. By comparison, tourist spending on apparel, department stores, cosmetics and other retail categories is down compared to 2019.
The return of the Experience Economy is a global trend. From the U.K. and Germany to France and Italy, tourism spending on experiences has measurably outperformed tourism spending on things since the summer of 2021. By comparison, markets across Asia are a little more mixed. For example, South Korea, where borders opened in April 2022, has seen virtually no inbound tourism, and Indonesia has seen less tourism for similar reasons - both are showing signs of an upturn through April 2022. Singapore, by contrast, has enjoyed robust tourism demand for experiences and things through April 2022. 24
Typically, global tourism spending at restaurants is strongest at the end of August when travelers worldwide enjoy the end of summer in the Northern Hemisphere and spring in the Southern Hemisphere. During this peak in 2019, international tourism spending at restaurants as a percent of total in-person spending, excluding transportation and lodging, was roughly 22%. That peak was bested spring of 2022, with the share of restaurant spending 24% at the end of April. 25
Higher food prices likely contributed to higher restaurant spending by travelers. But industries that are more impacted by mobility restrictions - restaurants, events, nightclubs and other in-person experiences - are undeniably gaining momentum faster than tourist spending on retail goods.
Beyond the shift from goods to services, a new dynamic may influence where certain travelers visit. In response to higher inflation, many central banks are increasing interest rates. Higher rates act as a brake pedal - increasing the cost of borrowing money cools off consumer demand for goods and services, which subsequently translates into lower prices. With central banks responding to inflation by increasing rates, foreign exchange dynamics result in shifts in tourists' purchasing power.
One example is between the U.S. and Japan, where the U.S. Federal Reserve is hiking interest rates, but the Bank of Japan hasn't yet-leading to the depreciation of the Yen compared to the dollar. As a result, US$100 before the pandemic now has roughly US$17 more purchasing power in Japan, a boon and potential motivator for international tourists to visit.
Notable appreciation of the Aussie dollar has bolstered the purchasing power of Australians traveling outside of the country. This is a tailwind to some and a headwind to others, detailed in the table below. Virtually anywhere Australian tourists travel, their currency will go further than it did pre-pandemic, yet inbound tourists to Australia may get less for their money.
|Currency appreciates relative to destination||Money goes a longer way when exchanged for the destination’s local currency.||Potentially hurts domestic tourism when tourists can splurge for less elsewhere.||Capital outflow; impacts GDP by money leaving the country|
|Currency depreciates relative to travel destination||Money doesn’t go as far when exchanged for the destination’s local currency.||Inflow of tourists spending their money benefits the local economy||Net inflow, boost to GDP.|
Travel is embedded in our lives we make cultural connections with the people, places and experiences we value most. For many, travel is more than a personal passion, earned vacation or Instagram opportunity; travel is often the lifeblood of businesses that make the soul of every city and small town around the world come to life.
From the moment the first airplane took flight in 1903 to the democratization of air travel over the next 100 years, the airline industry has played a pivotal role in globalization, enabling economies to reach new heights. Understandably, it was unthinkable pre-pandemic that travel of any kind – domestic, international, business, leisure, bus, cruise, train, plane or automobile – could come to a halt. Nevertheless, the unthinkable happened, and ever since, there has been much speculation as to whether travel would, or even could, return to 2019 peaks.
Despite numerous risks in 2022, such as inflation impacting discretionary spending, another virulent mutation of the coronavirus, and heightened geopolitical risk, our findings show there is evidence for optimism. Just as the travel rollback of 2020 was monumental in its regression, 2022 is slated to come full circle with another unthinkable travel transition: triumph.
1:Source: Mastercard Incorporated First Quarter financial results conference call presentation (4/28/2022).
2:Corresponds with the number of flight bookings made during reference period relative to the same time in 2019. Based on aggregated & anonymized flight booking data provided by third party partners, sourced by Mastercard Economics Institute.
3:Short, medium, and long-haul flights correspond with international flights ranging from roughly 0-2,000km, 2000-4,300 km, and 4,300km+ in one-way distance.
4:In this report, the Mastercard Economics Institute explores a unique database of aggregated & anonymized Mastercard switched volumes (nominal US dollars unadjusted for FX) in addition to aggregated & anonymized flight booking data provided by third party partners.
5:Corresponds with the number of flight bookings made by business travelers in April 2022 relative to the same time in 2019. Based on aggregated & anonymized flight booking data provided by third party partners, sourced by Mastercard Economics Institute.
6:Based on Mastercard Economics Institute estimates of global IATA passenger throughput data.
7:Mastercard Economics Institute analysis of aggregated & anonymized flight booking data, provided by third party partners.
8:Corresponds with the number of flight bookings made by leisure travelers during reference period relative to the same time in 2019. Based on aggregated & anonymized flight booking data provided by third party partners, sourced by Mastercard Economics Institute. Long-haul flights correspond with international flights 4,300km+ in one-way distance.
9:Corresponds with the number of flight bookings made during reference period relative to the same time in 2019. Based on aggregated & anonymized flight booking data provided by third party partners, sourced by Mastercard Economics Institute. Short and medium-haul flights correspond with international flights ranging from roughly 0-2,000km and 2000-4,300 km in one-way distance.
10:Based on aggregated & anonymized Mastercard switched volumes (nominal US dollars unadjusted for FX), sourced by Mastercard Economics Institute.
11:“Experiences” includes tourists spending at restaurants, amusement recreation activities, casinos, nightclubs, bars and other events, while “Things” includes convenience store chains, apparel, cosmetics, sporting goods, jewelry, footwear, bookstores, electronics, toys and department stores. Excludes transportation and lodging spend. Represents analysis of aggregated & anonymized switched volumes (nominal US dollars unadjusted for FX) for leisure travelers while in-destination.
12:Based on aggregated & anonymized Mastercard switched volumes (nominal US dollars unadjusted for FX), sourced by Mastercard Economics Institute. Represents switched volumes (nominal US dollars unadjusted for FX) for leisure travelers while in-destination.
13:Based on Mastercard Economics Institute estimates of global IATA passenger throughput data.
14:Corresponds with the number of flight bookings made by leisure travelers during reference period relative to the same time in 2019. Based on aggregated & anonymized flight booking data provided by third party partners, sourced by Mastercard Economics Institute.
15:Mastercard Proprietary Study, Global Insights, Q1 2022.
16:Corresponds with aggregated & anonymized count of flight bookings made by all travelers leaving the United Kingdom relative to the same time in 2019. Based on aggregated & anonymized flight booking data and Mastercard Economics Institute estimates.
17:Mastercard Economics Institute estimates.
18: Corresponds with the number of flight bookings made during reference period relative to the same time in 2019. Based on aggregated & anonymized flight booking data provided by third party partners sourced by Mastercard Economics Institute. Short and medium-haul flights correspond with international flights ranging from roughly 0-2,000km and 2000-4,300 km in one-way distance.
19:Analysis based on the number of inbound flight bookings made by selected region into destination markets. Based on aggregated & anonymized flight booking data provided by third party partners sourced by Mastercard Economics Institute.
20:Corresponds with the number of flight bookings made during reference period relative to the same time in 2019. Based on aggregated & anonymized flight booking data provided by third party partners sourced by Mastercard Economics Institute.
21:Analysis of aggregated & anonymized flight booking data provided by third party partners sourced by Mastercard Economics Institute.
22:Based on aggregated & anonymized Mastercard switched volumes (nominal US dollars unadjusted for FX), sourced by Mastercard Economics Institute.
23:Based on a sample of aggregated & anonymized Mastercard switched volumes (nominal US dollars unadjusted for FX), aggregated & anonymized flight booking data provided by third party partners, sourced by Mastercard Economics Institute.
24: “Experiences” includes tourists spending at restaurants, amusement recreation activities, casinos, nightclubs, bars and other events, while “Things” includes convenience store chains, apparel, cosmetics, sporting goods, jewelry, footwear, bookstores, electronics, toys and department stores. Excludes transportation and lodging spending. Represents analysis of aggregated & anonymized switched volumes (nominal US dollars unadjusted for FX) for leisure travelers while in-destination.
25:Represents analysis of aggregated & anonymized switched volumes (nominal US dollars unadjusted for FX) for leisure travelers while in-destination.
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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