EIU: Tourism Outlook 2023

The Economist Intelligence Unit (EIU) recently released a tourism outlook report for 2023, predicting that the number of international tourists worldwide will increase by 30% year-on-year in 2023, but there is still a certain gap with the level before the epidemic.

Factors such as the economic downturn and the conflict between Russia and Ukraine will affect the full recovery of the tourism industry. Hotels, restaurants and airports will still face challenges such as staff shortages, rising wages and rising prices.

However, the report also pointed out that international airlines are still expected to return to profitability due to the growth in travel demand.

The number of international passengers worldwide will increase by 30% by 2023

As most countries lift travel restrictions, the EIU expects the number of international passengers to increase by 60% year-on-year in 2022. The strong recovery momentum will be maintained in 2023, with the number of international passengers increasing by 30% year-on-year to 1.6 billion, but it is still some distance away from the 1.8 billion in 2019.

The EIU said that the recovery of each region is uneven. The rise in oil prices has become a driving factor for the Middle East, where tourism has fully recovered and the number of international passengers will be close to 100 million in 2023. Eastern Europe is not expected to recover until 2025 due to the impact of the Russian-Ukrainian conflict. The other regions are basically expected to see a full recovery in 2024. Western Europe has maintained the highest number of international passengers, with an estimated number of close to 700 million in 2023, and Asia-Pacific is expected to be close to 300 million.

EIU data shows that traveler spending will recover rapidly in 2023. Among them, North America will see traveler spending approaching $1.4 trillion, and Western Europe is expected to recover the fastest at nearly $1.2 trillion. Asia-Pacific will see the lowest tourism spending, estimated at $400 billion.

More than 60% of Chinese tourists will still be absent

Before the pandemic, the number of Chinese tourists accounted for 1/10 of the world's total. Under the pandemic, the number of Chinese tourists has dropped significantly. The EIU expects that China will gradually relax travel restrictions, and the number of outbound tourists in 2023 will double year-on-year to 59 million, but it is only equivalent to 1/3 of 2019.

The EIU said that the "absence" of mainland Chinese tourists also had a great impact on the tourism industry in Hong Kong and Thailand, and the impact would even extend to other parts of the world such as Europe and the United States.

Staff shortages and rising prices will continue to be constraints

Inflation affects not only passengers, but also the entire tourism industry. Hotels and restaurants have to deal with soaring prices. In addition to rising oil prices, airlines also need to solve the problem of staff shortages and face pressure from rising wages. In the early days of the outbreak, airlines had to lay off a large number of employees in order to maintain operations. Now that passenger demand has recovered, they need to increase manpower to solve the problem, but re-recruitment is another problem. The problems that follow are crowded airports, flow restrictions, flight cancellations, lost luggage... The CEO of Heathrow Airport once warned that these problems will continue until the end of 2023.

Due to Brexit, the UK is facing the problem of seasonal mobility of employees from EU countries. The EU and the US are also facing a shortage of staff, with the number of employees in the leisure and entertainment industry decreasing by nearly 1 million compared to 2019. The EIU expects that countries such as New Zealand and the UK may relax visa requirements, which may facilitate recruitment, but it will also take time to fill vacancies. As a labor-intensive industry, the tourism industry will also face larger strikes in 2023 as employees also demand pay increases from companies as prices rise.

Airlines will soon return to profitability

During the pandemic, large U.S. airlines laid off employees, reorganized their fleets, and raised funds in order to cut costs. Airlines in Europe, the United States, and parts of Asia also received government financial assistance. EIU data shows that in 2021, large airlines around the world received loans, salary subsidies, and tax deferrals totaling $243 billion.

The International Air Transport Association (IATA) predicts that global airlines will suffer a net loss of US$9.7 billion in 2022, a significant narrowing from the losses of US$137.7 billion in 2020 and US$42.1 billion in 2021.

The EIU said that although the economic environment is not optimistic, the situation will improve in 2023. IATA expects that if the recovery in tourism demand meets expectations, global airlines may even be profitable. However, oil prices are still a major risk factor. Although the increase in oil prices has slowed down, the strengthening of the US dollar may eventually result in US airlines being profitable in 2023, while airlines in other regions are still facing difficulties.

The Middle East has significant growth potential

The Middle East's tourism industry recovered strongly in 2022, with international tourist arrivals in January-July up 287% year-on-year, close to the same period in 2019. Saudi Arabia's Vision 2030 economic development plan has made tourism a key development area, including the Red Sea project, which includes 50 hotels. The EIU said that although the project will not be completed until 2029, it will attract the first tourists in early 2023.

In addition, Qatar will host the 2023 Asian Cup, and with the continued popularity of the World Cup, it may once again attract a large number of tourists.

References:
Tourism outlook 2023 – Turbulence in the travel industry. (EIU)

From: Travel Weekly