How a Global Recession Might Impact Travelers and the Travel Industry

With interest rates in the U.S. continuing to climb and the impact of inflation hitting wallets far and wide, there's been a great deal of chatter about the potential for a global recession.

Some of the world's leading economic organizations have said the economy is weakening. The Conference Board, a global non-profit think tank, recently projected that the US and Europe in particular may experience a recession in the near term, while China may see "significantly weaker growth in 2023."

The question then is how a downturn might impact the travel industry-which has been busy roaring back to life. What would the ramifications be for the hotel industry, airlines, tour operators, and destinations? Not to mention travelers themselves and their plans.

The answer to these questions varies depending on who you speak with. But the good news overall is that the industry appears well-poised thus far to navigate what may be some uncertain months ahead-and travelers remain eager to continue globetrotting come what may.

Economy Aside, Travel Remains a Priority

After years of not being able to explore the world and being isolated at home for much of that time, consumers far and wide are not willing to relinquish the ability to travel at the moment, even amid economic uncertainty.

"More than half of Americans report that travel is now a priority and see their holiday as a sacred, worthwhile investment," James Thornton, CEO of Intrepid Travel, told TravelPulse. "Having a period without travel has made people appreciate their holidays even more."

The most recent American Travel Sentiment Study underscores Thornton's point. According to November 2022 data from the study, 92% of Americans have travel plans in the next six months, which is a tie for the highest level of travel seen since the beginning of the pandemic.

Travel advisors across the country say they too are witnessing a reluctance to give up vacation plans no matter what the economy brings.

"I do believe that Covid taught so many that life is precious and it's important to spend time with loved ones and how much travel is valued when the freedom to travel is taken away," said Jennifer Doncsecz, president of Pennsylvania-based VIP Vacations Inc. and a certified travel industry executive. "This may mean that consumers take a shorter vacation or look for other ways to save on a vacation, but I do think people want to travel and will travel despite a recession."

Opting for Value Destinations, Shorter Stays, and Off-Season Travel

While globetrotting may indeed remain a top priority, even amid a cooling economy, consumers may hedge their bets by revising their plans slightly.

A recent survey conducted by Seven Corners Travel Insurance found that most travelers (57%) preferred to alter their vacation plans rather than cancel them. The most common adjustments to plans were staying with family or friends rather than renting or booking a hotel (36%), choosing a less expensive option for transportation (31%), and taking a micro-cation rather than a longer trip (25%).

Revised travel plans may also include opting for destinations known to be more budget-friendly, experts say.

"People will be looking for good value destinations and places where their money will go further," continued Intrepid's Thornton. "In Europe, for example, the dollar is especially strong at the moment, making it a great time for Americans to travel there."

Other historically budget-friendly destinations such as Mexico and South America, may also see increased traffic and popularity.

Axel Hefer, CEO of Trivago, told TravelPulse that consumers are likely to make a few specific adjustments to accommodate for economic concerns.

"With a recession looming, consumers will likely adapt their travel in three ways: shorten the length of their trips, select cheaper destinations and use more price comparison platforms," said Hefer. "We saw these shifts in consumer behavior in Western Europe as the recession is expected to hit harder there than in the U.S."

A global recession may also mean an increased tendency to travel during times of the year when costs are historically lower. "We might see people traveling more in the off season, traveling for less time or going short haul instead of long, but they are still going to have their holiday," said Thornton.

Where the Industry Impacts May be Most Noticeable

One thing is for certain, few travelers are thrilled about the skyrocketing cost of airline tickets. As Doncsecz pointed out, ticket prices have been increasing at levels beyond inflation. And that has meant consumers have the biggest service complaints for airlines, she says.

As a result, she predicts "more consumers will look to cruise from a port nearby or drive if they can't afford to fly."

Indeed, cruise operators, which have been struggling in some cases to fill cabins, might use this economic moment to shine.

"If they can keep their pricing reasonable, I think [cruise operators] have the most to gain because flights are extremely high and hometown ports provide a fabulous option," continued Doncsecz.

Tour operators may also stand to benefit amid the changing economic climate. "This is where they can shine because costs are high, so expectations for service are going to be at an all-time high," Doncsecz explained. "Tour operators can be the liaison to provide amazing service and step in if there are any issues. I also think all-inclusive brands will do well because there is a great savings in going all-inclusive."

For destinations, meanwhile, highlighting experiences will be key to attracting visitors in spite of the costs to get there.

Thinking Outside the Box Will be Key for Travelers and Travel Brands

The bottom line, at least for now, is that people want to travel. Despite inflationary pressures, enthusiasm remains strong. Still, industry insiders are closely monitoring developments such as inflation, a probable recession, and even high energy prices, all of which could slow the rebound of travel during the first half of 2023.

And many of these same industry leaders are already using a few creative tactics to help ensure momentum remains strong.

"Companies like us are trying to promote the notion that you can travel outside of peak times and peak cities, trying to disperse tourism dollars to other parts of the world. Instead of focusing on top 10 destinations, we're focusing on top 10 alternative destinations," said Thornton. "If you have the means, don't cancel any trips in 2023. A recession might drive down rates and and provide much-needed income for small business owners in local communities."

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