What a year. 2022 was a mix of setbacks and recovery, coupled with seemingly contradictory economic and consumer data.
- On one hand, the job market was hot, businesses reported healthy profits and people were largely enjoying a return to a pre-pandemic lifestyle.
- On the other hand, supply constraints and rising energy prices as well as a scarce workforce and persistent elevated inflation deeply slowed the economy, rattled consumer confidence and increased the odds of a potential recession next year.
As a result of elevated inflation, rising interest rates, a volatile stock market and overall economic uncertainty, consumer confidence has been relatively weak.
Yet, despite these concerns, consumers continue to spend and prioritize experiences such as travel.
While the travel industry has been incredibly resilient in 2022—and is expected to remain so in 2023 and beyond—several headwinds have been impacting travel's overall recovery from the pandemic. The good news is that some of those headwinds are now showing signs of improvement.
- Gas prices surged in 2022, reaching north of $5.00 in mid-June. As of early December, gasoline prices declined to their lowest levels since the end of January and an economic downturn will likely keep gasoline prices down. This is a positive for both auto and air travel.
- Inflation reached 40-year highs earlier this year but has recently showed signs of slowing. Travel inflation remains higher than overall inflation but has been slowing considerably since the spring. Despite rising prices, pent-up demand for travel has remained strong, resulting in an extremely resilient leisure travel segment.
- Household savings, while still significant, are expected to continue to dry up just as the full effect of the Fed’s interest rate increases hit economic activity, which could affect travel spending in 2023. This is a threat that requires us to remain vigilant, even though higher income households are less impacted.
- Workforce shortages continue to be a challenge. The number of openings remain significantly higher than the number of available workers. In a positive development, recent employment reports show that the labor market may be starting to ease. Yet, there are simply not enough American workers available to meet demand. This will likely continue to be a challenge for the travel industry.
- Leisure & Hospitality (L&H) remains disproportionally impacted. While nearly all other industries have returned to pre-pandemic levels of employment, L&H remains far behind at nearly one million jobs below pre-pandemic levels in November—despite 1.6 million openings.
- A stronger U.S. dollar—at levels not seen in more than 20 years—made travel to the U.S. more expensive and travel abroad cheaper. Yet, this trend is showing a reversal with the dollar weakening in recent weeks.
- It is worth noting, however, that as Americans have traveled abroad and we have welcomed fewer international travelers, our positive travel trade balance has fractured.
- Excessive visa wait times, averaging a staggering 400+ days for first-time applicants in some of our top markets, have created a de facto travel ban deterring potential visitors for many key markets and that has contributed to the downgraded international inbound forecast.
- Consumer sentiment, while still low, has improved in December and will likely continue to improve if inflation continues to slow.
How we’re ending: There is much uncertainty surrounding the economy and global concerns. But travel is uniquely positioned to weather the next downturn. And one thing is certain: Travel is essential not only for the U.S. economy, but for so many Americans and travelers around the world.
U.S. Travel is looking forward to enhancing and better leveraging our research and insights offerings in the coming year to influence policymakers, opinion leaders and business leaders across international, group, business and leisure segments.