Women holding ice cream pose for a photo at Trevi fountain in Rome, Italy during a heat wave in Europe on July 19, 2022.
The competition for travel dollars is intensifying, and the United States is losing out. In recent weeks, airlines and hotel chains have reported a surge in bookings for international trips, along with increasing prices. While this is a boon for companies with global offerings, it presents a challenge for airlines, theme parks, and hotels that focus more on domestic destinations, as travelers are increasingly choosing locations abroad.
According to Hopper, international airfare is averaging $962, up 10% from last year and 26% from 2019. In contrast, domestic airfare is declining, with roundtrips within the U.S. down 11% from last year and 12% from 2019, at an average price of $249.
This shift is also being felt in the hotel industry. Data from CoStar reveals that room rates for European hotels averaged $148.88 in the first half of the year, a nearly 14% increase from last year. In comparison, U.S. hotel rates only rose 6% from the same period the previous year, to $154.45.
Luxury hotels in Paris experienced a more significant increase in rates, rising over 22% in the first half of the year compared to the previous year. In contrast, luxury hotel rates in Orlando, Florida only rose by 0.2%, according to CoStar data.
Marriott International reported a 6% year-over-year increase in revenue per available room in the U.S. and Canada for the second quarter. However, the growth in international markets was more than 39%. Marriott luxury properties’ nightly rates experienced a 1% decline year over year.
Marriott’s finance chief, Kathleen Oberg, noted that this trend started over a year ago and emphasizes that customers now have more options for travel destinations. She mentioned on the company’s second-quarter earnings call that there is a significant exodus of Americans traveling to Europe and other parts of the world.
Travelers like Jesse Inman are opting for trips abroad, despite the increased costs. Inman, who left his sales job to build a farm, is currently on a month-long trip to Israel, the U.K., Austria, and France. He spent $1,839 on his flights between the U.S. and Europe, which he believes is higher than pre-pandemic prices. As a result, he plans to cut back on domestic trips and other activities like skiing.
Amusement park operators are also feeling the impact of the shift in travel preferences. Cedar Fair reported a decline in attendance for the second quarter but increased profit. Six Flags Entertainment is expected to report next week. Despite a 22% increase in theme park revenue from a year ago for Comcast, the company experienced a slowdown at its Universal parks in Orlando. The company attributes this to tougher comparisons and the unprecedented impact of COVID-19.
The rise in international travel is beneficial for passengers seeking deals closer to home but poses a disadvantage for airlines with a heavy focus on the U.S. market. JetBlue Airways, for example, has cut its guidance for the current quarter and 2023 due to the increased demand for long international travel, which puts pressure on shorter-haul travel. Frontier Airlines expects a 3-point decline in margins due to the return of international long-haul travel. However, this trend is expected to moderate soon.
Southwest Airlines and Alaska Airlines, both focused on the U.S. market, have also experienced challenges due to the shift towards international destinations. Delta Air Lines and United Airlines have capitalized on strong demand for trips abroad by increasing their international service. Executives anticipate this demand to continue into the fall, with international revenue growth surpassing domestic revenue growth.
This shift in consumer preferences has led to a decline in airline stocks this earnings season. The NYSE Arca Airline index is down approximately 10% while the S&P 500 is up about 1.5%.
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