Most likely, a looming global recession and high inflation in many parts of the world will affect consumer spending and tourism demand and, in turn, delay recovery of international tourism. In Europe, an energy crisis and anticipation of a difficult winter are hitting the wallets of citizens and changing consumption patterns, resulting in a decrease in the number of people who are ready to make reservations for the next summer. In the US, savings accumulated during the pandemic have largely been spent, and further demand growth in 2023 will depend more on the disposable income structure, which is declining due to rising prices. Despite a strong USD, which can become a stimulating factor for travel from the US, most likely we will see the growth of domestic tourism at a more confident pace than international tourism.
Sooner or later, China will ease lockdown restrictions, and tourists from mainland China will boost the tourism sector around the world. This factor may offset the decline in demand from travelers from the US and Europe, as if China opens up, the industry could get a huge boost from pent-up demand from Chinese travelers. In the pre-pandemic years, China was a leader in tourism spending and was also among the top 5 countries in terms of popularity for tourism. As a result, China reopening can fuel industry performance and soften the recession impact.
In an increasingly difficult environment, companies in the sector will look for opportunities to optimize:
- Travel companies can use technologies that increase the effectiveness of operations and reduce costs to fuel revenue and long-term growth. For example, many travel companies today have duplicated booking or accounting systems, it is often required to synchronize them between each other manually. During slowdown, they have to optimize their processes.
- Media and social networks offer travel companies a source of incremental bookings and can "digitalize" the customer experience. Advertisements by customer can take a role of additional recurring revenue, when followers of customers want to experience the same destination.
- Travel companies can expand ways for implementation and promotion using their loyalty programs.
As a result, after an economic recession, we will likely see a transformed and more efficient travel industry as it was after the Global Financial Crisis 2007-2008, with higher margins and more crisis-resistant businesses.
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