Has the pent-up demand that helped fuel a surge in travel as the pandemic ebbed finally run its course?
Analyses from two major financial institutions, Mastercard and Bank of America, posed that question this month.
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And they found that the answer depends on factors still to be determined, such as the labor market, and varies by travel segment.
A Bank of America report published May 17 found that travel spending in April was just 1% higher than April 2022, when travel was up 27% year over year. The report looked at card spending on airlines, lodging, cruises and rental cars.
Travel performed better than spending overall, which dropped 1.2% compared with April 2022, the first negative year-over-year reading since February 2021.
“Against this backdrop of overall consumer moderation, travel remains a bright spot relative to other sectors,” said Anna Zhou, an economist with the Bank of America Institute.
But Zhou added that there were “signs of moderation in the travel space.”
“The question is, has the pent-up demand for travel run out of fuel?” she said. “I think the short answer is: It depends.”
The analysis found that the travel categories that recovered more quickly during the pandemic, such as lodging and domestic travel, are the first to see spending moderate. Cruises and international travel, two areas that recovered much later, are “still running hot,” Zhou said.
In April, hotel spending was the only travel category that had a negative year-over-year growth rate. Spending on cruises, meanwhile, was up 36% compared with the year prior. Airline spending appears to be falling somewhere in between, the report found.
And among travelers themselves, travel spend among older generations remains stronger than for the younger ones, who were faster to resume traveling during the pandemic.
Bank of America predicted that residual pent-up demand from those strong categories could offset weakness elsewhere and support overall travel spending in the coming months.
“Against the macro backdrop of overall consumer spending moderation, travel will likely remain as one of the top sectors that continues to see spending growth, just at a slower pace than what we saw in 2022,” the report said.
Employment and savings are key
Discussing Mastercard’s Travel Industry Trends 2023 report, which was published this month, Bricklin Dwyer, Mastercard’s chief economist, said the term “pent-up demand” is inherently temporary.