Continued improvement in travel business performance in the final quarter of 2022 has set an optimistic tone for the new year, with most industry players expecting strong travel intentions to hold firm despite recession concerns.
In Expedia Group’s 3Q2022 earnings call on November 3, vice chairman and CEO Peter Maxwell Kern said the company has put in “another record quarter of results”, where revenue hit US$3.6 billion, adjusted EBITDA exceeded US$1 billion for the first time in the company’s history; the number of active loyalty members rose to an all-time high; app usage peaked, with quarterly numbers rising nearly 40 per cent against 2019’s figures; and a host of new product features, such as price tracking, trip boards and smart shopping, were pushed out.
A month later, Michael Dykes, vice president of market management, Asia-Pacific, told TTG Asia that travel demand has continued to remain strong and ADR stayed substantially elevated relative to pre-pandemic levels.
“Looking ahead, we’re cautiously optimistic that the travel sector will continue its upwards trajectory as travellers look towards returning to the skies,” remarked Dykes.
Greg Webb, CEO, Travelport is similarly upbeat about 2023. “We started 2022 at about 50 per cent recovered and I expect we will exit this year on a strong pace, at about 70 per cent or so compared to 2019,” he told TTG Asia in an interview at end-November.
Webb saw demand outstripping supply in 2022, inverting the demand and supply curve “for the first time in a very long time”. Shopping data as of November 2022 was “well over 100 per cent of 2019’s”, he shared.
Accor expects continued momentum moving into 2023 for South-east Asia, Japan, South Korea and the Pacific. Strong pent-up demand has resulted in healthy forward bookings throughout 2022 and abundant interest in popular destinations across the regions.
Garth Simmons, CEO for Accor Southeast Asia, Japan and South Korea, said: “We have always anticipated strong pent-up demand and this has certainly been released as gathering restrictions were eased across the region.”
Globally, Accor’s RevPAR was up 14 per cent overall in 3Q2022 versus 3Q2019. Although RevPAR for South-east Asia was down 21 per cent in 3Q2022 versus 3Q2019, it was an improvement on 2Q2022’s performance when RevPAR was down 31 per cent versus 2Q2019.
Simmons expects RevPAR to show continued improvement as flight capacities and connectivity continues to ramp up across the region.
Simmons said: “This is a resilient industry and we have always been confident that demand would not only return to pre-pandemic levels, but exceed what we have ever witnessed before.”
Accor Pacific CEO, Sarah Derry, is optimistic too, her faith fuelled by healthy leisure and corporate business.
On the aviation front, IATA expects a return to profitability for the global airline industry this year, with a small net profit of US$4.7 billion – a 0.6 per cent net profit margin as compared to US$26.4 billion (3.1 per cent net profit margin) in 2019. IATA also projects passenger demand to reach 85.5 per cent of 2019 levels over the course of 2023, and passenger numbers to surpass the four billion mark for the first time since 2019, with 4.2 billion travellers expected to fly.
This outlook takes into account a gradual reopening of China to international traffic and the easing of domestic Covid-19 restrictions progressively from the second half of 2023. With China’s move to scrap quarantine for arriving foreign travellers from January 8, 2023 amid spikes in local infections in major Chinese cities, it remains to be seen how IATA’s projection will pan out.
Travellers’ wish-list
Results from Expedia Group’s Traveler Value Index 2023 study backs Dykes’ optimism. Nearly half (46 per cent) of consumers surveyed said travel is more important to them now than it was pre-pandemic. And nearly as many (43 per cent) are setting aside a fatter travel budget for the year ahead.
These consumer insights “reveal the highest levels of travel optimism since 2020”, said Dykes.
“In fact, most professionals are expecting leisure (71 per cent) and business (70 per cent) travel to return to pre-2020 levels within two years, according to our Traveler Value Index 2023,” he added.
Another study by Expedia Group unveils new travel motivations and claims that 2023 is The Year of the No-Normal. Findings from The No-Normal; Unexpected Travel Trends in 2023 study point to a preference for culture capitals where local fares and cultural festivities are returning in full swing, with Edinburgh, Scotland; Lisbon, Portugal; and Tokyo, Japan topping the top 10 global hit list.
TV programmes are turning out to be big holiday influencers. Two-thirds of global travellers have considered and 39 per cent have booked trips to destinations after seeing them on streamed shows or movies. Advice from friends and family topped streaming services by only two per cent as the most influential source of travel inspiration.
In a study focusing on Asian travel sentiments, Klook discovered that inflation and rising costs are not stopping travellers from packing their bags. The study, published in December 2022, stated that the majority (81 per cent) are eager to travel internationally in 2023, with one third planning to take at least two to four trips. To cope with inflationary pressures, 35 per cent of respondents intend to travel shorthaul or during off-peak seasons, while 34 per cent are willing to cut back on other expenses to have more for trips. Asian respondents are most likely to take trips of three to five days (45 per cent), followed by six to nine days (34 per cent), then 10 or more days (25 per cent).
Marcus Yong, vice president, global marketing at Klook shared that 2023 is the year of “travelsilience” – travel and resilience, where “travellers pursue travel to create new memorable experiences, despite all struggles and any headwinds”.
Asian DMCs told TTG Asia that the new year also brings new motivations for slow tourism, fuelled by consumers’ growing awareness of sustainability issues.
“Staying longer in locations reduces the amount of regional flights, creates more job opportunities as travellers stay longer in one location and makes for a better travel experience,” said Willem Niemeijer, CEO of YANNA Ventures.
He added that taking the train over flying is another way to see and experience more of a country. And as inter-regional rail connections grow, there is great opportunity.
“This is in particular an opportunity for Laos, where the new high-speed train now makes travel to otherwise remote sites easy and low-cost.”
Guilhem Cavaille, head of travel and experiences at Asia DMC, said the company recently returned from a sales trip to Europe and he believes for DMCs opportunities lie in the will of tour operators to “finally blow some fresh air over a production that remains very traditional”.
He added: “Innovation, proposing something different, will be a key to attract the European market. We also found product and sales managers to be more sensitive to CSR questions, and our new line of engine-free tours found some great echo.”
Watch the potholes
As with all business outlooks, industry players know that challenges are par for course. Manpower woes, flight capacity constraints that have pushed up airfares, rising costs alongside a poor economic outlook, and threat of new Covid strains are in their line of sight.
When asked how pent-up travel demand would hold up against recession in the new year, Webb said: “Even if we were to see some recessionary type of activity in 2023, we doubt it would have a big impact on recovery.
“Signs of recession will show in the prices, be it hotel rates or air fares. You will know when you see prices drop. (Despite warnings of inflation and recession this year,) every sector has been able to hold prices the past year or so because consumers are willing to pay more to get back to travel.”
On the aviation front, airlines have to deal with constricted fuel supply, rising oil prices, strengthening US dollar due to periodic interest hikes by the Federal Reserve, and increasing cost of business operations, detailed Subhas Menon, director general of the Association of Asia Pacific Airlines.
However, the vista is not all bleak, as a strong greenback “also means that we are likely to import more visitors to Asia”, he added.
Further emphasising the conflicting conditions between the macro environment and state of aviation business, Subhas said: “We are going into recession in a ‘job-full’ market, where unemployment rate is at its lowest and job vacancies are very high. So, people are gainfully employed during the coming recession. However, with interest rates going up, people are generally incentivised to save and that could impact travel.”
Her new role also requires her to focus on new resort openings in Asia, including Club Med Kiroro Grand in Hokkaido opening later this year in December, and Club Med Borneo, Kota Kinabalu in 2024.
With over 18 years of experience in the travel and aviation industry, Lau joins Connexus from Travelport where he served as general manager, agency commerce for its Greater China operation since 2018.
He will also spearhead the hotel’s focus on people, community and projects that give back.
He joined Belmond in 2020 as divisional managing director for Asia-Pacific where he has since led the company’s Asian hotels through the pandemic, developing and implementing plans of ambition as well as playing an active role in multiple steering committees that have led to the rollout of strategic initiatives across the company.
Despite tourism challenges, two Sri Lankan hotel players have remained firm in their efforts to uplift local communities as they rebuild their business.
Homegrown Teardrop Hotels, which has seven hotels across the country, maintains at least nine community projects, according to Manoj Devaraj, group head – sales and marketing.
Each hotel has an adopted charity organisation, while the head office supports two others – Teardrop Care Centre for Children with Disabilities, where the company is the main sponsor for Volunteers to Assist Children with Disabilities’ Welimada centre, scheduled to open this year; and a collaboration with the Tea Leaf Trust, where the company provides employment opportunities for impoverished young people raised on tea estates as well as organises field trips and workshops to expose these youths to personal growth opportunities in the tourism industry.
The team at Fort Bazaar, a hotel set within the historic port city of Galle, supports Sambodiya Home with regular infrastructural refurbishment and maintenance.
Recalling the progress of the hotel’s work with Sambodiya Home, Devaraj said efforts initially were not structured. It took a partnership with Travelife in 2020 to realise that a guided approach was needed for work to be meaningful.
“Travelife also led us to scrutinise our use of resources and cut down on imported items,” added Devaraj. As a result, Teardrop Hotels has improved the conditions of its four fruit and vegetable gardens across the country so that more produce could be harvested for use in hotel kitchens. Today, 30 per cent of its fruit and vegetable supplies are from these gardens.
Seafood, meats and other ingredients are also obtained from local producers “as much as possible”.
Close to 85 per cent of ingredients used in Teardrop Hotels kitchens are now locally sourced – up from about 60 per cent pre-pandemic.
“We have even looked at how suppliers work with us,” he added. To encourage local producers to deliver orders more sustainably, the company supplied reusable, stackable crates.
“The pandemic and import disruptions made us realise that relying on local producers is more reliable, offers greater value, and enables us to support our own people,” Devaraj said.
The slow return of tourism business has not dampened the company’s community commitment. Devaraj said: “Some of them were initiated during the pandemic, and we continue to do whatever we can with the manpower and resources we currently have.”
Over at Shangri-La’s Hambantota Golf Resort & Spa, efforts have been ongoing the past three months to raise the digital literacy of the teachers at a local village school. The effort is a long-term investment to build a more tech-savvy pool of young people that the hotel and other businesses could eventually hire.
General manager Refhan Razeen told TTG Asia: “Tourism will return to Sri Lanka, and we need to be prepared for that. One way is to work on local human resources.”
Next on Razeen’s to-do list is the establishment of a hotel school in Hambantota, “which will give locals a chance for employment at both Shangri-La hotels here and in Colombo”.
He said the “plans are drawn up” and awaiting approval from the top.
Besides investing in education, the hotel will soon launch the Green Passport, a hotel-wide sustainability programme with a goal of 15 Rs – Respect, Rethink, Responsible, Resource, Restore, Reduce, Reuse, Repair, Reclaim, Replace, Refill, Refocus, Recycle, Refuse and Reward.
Fleshing out the objectives of some of the Rs, he said Rethink would involve reviewing daily practices towards a sustainable future, while Restore would mean fixing damaged items so that they could continue to be used and not simply thrown away.
Razeen acknowledged that the Green Passport is “an ambitious project”, but it provides a clear structure for all staff to follow through on their sustainable journey.
A green champion will be appointed to lead topical efforts, such as water conservation, and come up with an action plan to bring ideas to fruition.
Razeen is hopeful that achievements could be used as case studies for other Shangri-La hotels as well as for local university students specialising in sustainability.
To further support the local community, Razeen is looking to engage a village near Yala to produce and supply the hotel with vegetables.
“This community is dependent on wildlife safari, which is seasonal. By having them grow and supply food to our hotel, they can earn income during the off-season,” he explained.