Tourism is recovering from multiple blows:
The global tourism industry has been battered by several shocks in the past few years. The pandemic and ensuing travel restrictions, the outbreak of war in Ukraine and high inflation are among the factors that have redefined many travelers’ plans and priorities.
While global tourist arrivals are expected to remain below 2019 levels by the end of the year, the tourism recovery is well underway; the International Air Transport Association expects 4.35 billion flight passengers in 2023, quickly approaching the 4.54 billion recorded in 2019.
Some regions are recovering sooner:
Tourism levels in Europe reached almost 80% of pre-pandemic figures in 2022. Meanwhile, the Americas and Africa recorded close to 65%. In contrast, in Asia and the Pacific, tourist arrivals were only 23% of 2019’s levels last year, as strict Covid-19 restrictions in the region weighed on mobility.
Tourism may reach 2019 levels this year in the Middle East and Europe, though tourism patterns in Europe are shifting. Given cost-of-living crises at home—compounded by higher costs for transportation, food and beverages, and hotels when traveling—many European tourists are opting for domestic travel or turning towards the Western Balkans and Turkey as affordable vacation options.
Looking eastwards, China’s opening from Covid-19 this year will benefit destinations in ASEAN; China represented the world’s largest sender of travelers in 2019. That same year, Chinese travelers took 155 million trips abroad, spending USD 130 billion. This demand was stifled under Covid-19 restrictions but is now bouncing back; one of China’s biggest travel platforms saw international travel bookings jump by over 250% on the day after border restrictions ended. Favorite destinations for Chinese tourists like Thailand and Hong Kong will particularly benefit. In Hong Kong, retail sales growth has averaged around 20% so far this year thanks to the return of mainland shoppers, and is expected by our panelists to average in double digits over 2023 as a whole.
Climate will determine the sector’s long-term health:
Tourist destinations will need to adapt to increased temperatures, adverse weather events and water shortages. In Europe, weather poses the primary risk to tourism, as heatwaves make summer travel in the region increasingly hostile, and droughts and floods become more common. Additionally, the ongoing El Niño weather pattern increases climate-related risks in many locations, including hurricanes in the Pacific Ocean.
Extreme weather also bodes poorly for the airline industry due to flight cancellations and delays. The sector already faces challenges; while airlines are expected to return to profitability this year, labor shortages, demands for higher wages and high fuel costs remain burdens. The desire to decouple tourism and carbon emissions provides another obstacle, as some consumers avoid flying due to climate change concerns, a tendency that is likely to strengthen in accordance with the fallout from climate events.
Insights From Our Analyst Network
On the European tourism sector, EIU analysts commented:
“The European tourism sector, which was severely disrupted by the covid19 pandemic, looks set to fully rebound this summer season. In many places tourist arrivals are already above 2019 levels, while other countries could reach that mark this year. The sector will play an important part in boosting economic activity in the south and south-east of Europe. Data from Ryanair—Europe’s largest airline in terms of passengers carried, kilometres flown and routes served—show that its passenger numbers are already above pre-pandemic levels, at 16m in April, up from 13.5m in April 2019.”
Meanwhile, analysts at Nomura expect a lukewarm recovery in international Chinese travelers this summer:
“Despite the slow recovery of international flights to date, […] expectations have been rising for a “revenge outbound travel rush” by Chinese tourists over the summer holiday season. Some even wonder whether an influx of Chinese tourists could overwhelm some of the world’s most popular tourism hotspots. We believe such an optimistic view is overblown, as there are still serious obstacles to China’s outbound travel recovery. We think any release of pent-up demand during the summer holiday would instead benefit China’s domestic tourism industry.”