Travel Trends of 2022

Although the COVID-19 pandemic devastated the travel and tourism industry, causing losses of almost USD 4.5 trillion, increasing vaccination levels and easing government restrictions are prompting the expectation of a strong return for the industry. ETF Managers Group recently published the travel trends for 2022. According to the report, the travel industry still has ample expansion opportunities.

Increasing vaccination levels are beginning to ease travelers’ concerns, and as the travel industry recovers from the pandemic-related blow, travel technology companies are naturally poised to reap the benefits.

The flexibility by the “Work from Wherever” Movement presents a unique opportunity for workers to pack up their laptops and mix leisure travel with remote work. With more companies allowing flexible remote work opportunities, we expect to see the travel industry continue to capture this growth as a result of the “Work from Wherever” trend.

In order to promote passenger and driver trust around safety and sanitation, ridesharing companies like Uber and Lyft have implemented safety measures aimed at easing the concerns of both riders and drivers. Ridesharing companies have implemented safety protocols to alleviate this concern, introducing physical partitions between drivers and riders, and requiring masks to be worn throughout the duration of the ride. Second, the increasing cost in private vehicle ownership due to rising fuel costs, maintenance, and insurance has led car ownership levels among individuals aged 18-35 to decline over the past several years. Millennials ‘and Gen Xers’ preference for ridesharing over outright car ownership has been linked to the perceived time and cost benefits of shared mobility, as well as their desire towards technology and on-demand services.

2022 may also see a surge in luxury travel as pent-up international travel demand is unleashed amid the stabilizing health situation and loosening border restrictions.

So, now, make sure your passport hasn’t expired!

 

Travel Trends of 2022

By Devin Ryder, CFA

The Travel & Tourism sector was ravaged by COVID-19 concerns, mandated lockdowns, and international mobility restrictions. In 2020, the global Travel & Tourism industry lost USD 4.5 trillion. Hit particularly hard, the sector’s overall contribution to GDP declined by 49.1% from 10.4% in 2019 to 5.5% in 2020, compared to a global GDP decline of 3.7%. International visitor spending plummeted by 69.4%, while domestic visitor spending dropped by 45%.

2021 has given us a glimpse into the growth potential that reduced restrictions and greater consumer confidence could provide. The US DOT reported that the volume of flights operated in 2021 was approximately 6.2 million. While this is certainly greater than 2020 levels, this value represents only 78% of the volume of flights operated pre-pandemic in 2019 (7.9 million). Thus, the industry still has ample expansion opportunities.

Increasing vaccination levels are beginning to ease travelers’ concerns, and as the travel industry recovers from the pandemic-related blow, travel technology companies are naturally poised to reap the benefits. Consumers increasingly rely on online travel agencies (OTAs) and ridesharing technologies to access travel-related services in a far more convenient and cost-effective fashion compared to traditional offline services. The online travel booking platform market alone is projected to grow at a CAGR of 4.91% over the period 2022-2026 to reach $ 204.81 billion. As for the global ridesharing market, it is expected to reach USD 61.24 billion by 2026, increasing at a CAGR of 17.32% from 2021 to 2026.

The “Work from Wherever” (WFW) Movement

The COVID-19 pandemic brought rise to the work from home (WFH) era, a trend that is predicted to continue into the foreseeable future. Among 127 company leaders surveyed by Gartner, Inc., 82% plan to allow at least some remote work, and nearly half (47%) said they intend to allow employees to work remotely full time going forward. This flexibility presents a unique opportunity for workers to pack up their laptops and mix leisure travel with remote work; we are already seeing these employees take advantage.

Travelers intending to work while away have a unique set of characteristics that are defining the new wave of WFW. They have above-average spending power, saving an average of $ 4,000 annually on spending, often associated with office work – commuting, business attire, eating out, etc. Additionally, they have greater flexibility around travel dates. To serve this preference, short-term rental companies like Airbnb (ABNB) and Vrbo (EXPE) have added optionality for flexible dates.

Remote work may exacerbate the rise of vacation rentals as a preferred means of accommodations. A key characteristic of the working vacationer is the need for a work-friendly space to stay. Their needs include a quiet and comfortable space to work, as well as fast and reliable Wi-Fi. Short-term rental companies are poised to serve this need and capitalize on the remote work trend, as they generally provide more space for work than the typical hotel room. These companies have been working to enhance their features to accommodate the needs of working vacationers. For example, in 2021, Airbnb released a feature that allowed travelers to check the Wi-Fi speed of the listing before they booked.

WFW travelers also possess a greater ability to take extended trips. Not only did working travelers plan twice as many trips as those who planned to fully disconnect, but more than half of employee vacationers added 3 or more days to the duration of their longest leisure trip. In February 2021, 11% of surveyed remote workers said they had taken long trips because of remote work flexibility; by early October 2021, the number has risen to 23%. With more companies allowing flexible remote work opportunities, we expect to see the travel industry continue to capture this growth as a result of the WFW trend.

The Year of the “GOAT”

In addition to those mixing work with leisure, 2022 may see a surge in luxury travel as pent-up international travel demand is unleashed amid the stabilizing health situation and loosening border restrictions. For this reason, Expedia is calling 2022 the year of the “GOAT” (Greatest of All Trips). In a poll of 12,000 travelers across 12 countries, Expedia found that more than two-thirds of Americans (68%) are planning to go big with their next trip, eyeing international destinations like Rome, Bali, London, and Paris.¹⁰ Travelers worldwide are eager to make up for lost time and go big on their next trip after a prolonged period of canceled trips and postponed celebrations. According to a November report compiled by the WTTC and Trip.com, 70% of leisure travelers across the US, the UK, Canada, Japan, and Spain expect and plan to spend more money on travel in 2022 than they have in the past five years. Looking ahead, the future of the travel industry is looking bright as higher-income households have seen their savings increase, coupled with surging travel demand.

Ridesharing

The global ridesharing industry saw a drop of ~ 17% in revenue generation in 2020 from 2019. Lockdowns curtailed the need to travel too far from home, and consumers remained hesitant to use ride-sharing services, even after lockdown mandates were lifted. In order to promote passenger and driver trust around safety and sanitation, ridesharing companies like Uber (UBER) and Lyft (LYFT) have implemented safety measures aimed at easing the concerns of both riders and drivers. Things are beginning to look up for the shared mobility market, with an expected CAGR of 16.7% over the period 2021-2030.

This is being driven by several factors. First, many local travelers are still feeling discomforted by overcrowded public transportation options, driving demand for more comfortable intercity ride models. Ridesharing companies have implemented safety protocols to alleviate this concern, introducing physical partitions between drivers and riders, and requiring masks to be worn throughout the duration of the ride. Second, the increasing cost in private vehicle ownership due to rising fuel costs, maintenance, and insurance has led car ownership levels among individuals aged 18-35 to decline over the past several years. Millennials ‘and Gen Xers’ preference for ridesharing over outright car ownership has been linked to the perceived time and cost benefits of shared mobility, as well as their desire towards technology and on-demand services.

In their Q3 2021 financial results announcement, Uber reported that gross bookings reached an all-time high of $ 23.1 billion, up 57% YoY, with revenue up 72% over the same period. Lyft saw similar results, reporting Q3 2021 revenue growth of 73% YoY. We believe we’ll continue to see similar growth over the coming years as consumers become more comfortable with the state of public health.

Conclusion

Over the past decade, travel technology has grown from a niche concept to a primary means of sourcing and booking travel services. Although the COVID-19 pandemic devastated the travel and tourism industry, causing losses of almost USD 4.5 trillion, increasing vaccination levels and easing government restrictions are prompting the expectation of a strong return for the industry. As we look to the future of a post-COVID-19 world, we believe travel technology companies are poised to not only capture the residual growth but help to propel the industry forward with technological advancements aimed at addressing shifting consumer preferences.

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