Women are captured in a delightful photograph, holding ice cream as they bask in the scorching heat at the Trevi Fountain in Rome, Italy. This image serves as a reminder that Europe is in the midst of a sweltering heat wave that has prompted a surge in bookings for international travel. As a result, airlines, hotels, and theme parks are witnessing a boost in business, particularly those with a global reach. However, this trend is posing a challenge for entities that primarily cater to domestic tourists within the United States.
The cost of international airfare has skyrocketed, with an average price of $962, a 10% increase from last year and a staggering 26% increase from 2019. Conversely, domestic airfare has experienced a decline, with roundtrips within the US falling by 11% from the previous year and 12% from 2019, at an average price of $249. This shift is also evident in the hotel industry, as room rates for European hotels have risen by nearly 14% from last year, reaching an average of $148.88 in the first half of the year. Meanwhile, US hotel rates saw a more modest increase of 6% to $154.45 during the same period, according to data from CoStar. The disparity is even more pronounced in luxury hotels, with a 22% rise in rates for Parisian establishments compared to a mere 0.2% increase for luxury hotels in Orlando, Florida.
Marriott International, a prominent player in the hospitality industry, reported a 6% year-over-year increase in revenue per available room in the US and Canada for the second quarter, while experiencing a staggering 39% growth in international markets. This trend has prompted the company’s finance chief, Kathleen Oberg, to acknowledge a significant exodus of Americans traveling to Europe and other global destinations. She attributes this shift in travel patterns to the abundance of options available to customers.
Jesse Inman, a 29-year-old traveler, exemplifies this growing trend of Americans opting for international trips. Despite the higher costs involved, Inman is currently on a multi-country excursion to Israel, the U.K., Austria, and France. He highlights the fact that his month-long European adventure will deter him from taking domestic trips in the near future, including visits to friends in Atlanta, Denver, Austin, and San Antonio. Inman also mentions the possibility of reducing winter skiing activities.
In terms of amusement parks, operators are already expressing their outlook for the industry. Cedar Fair reported a decline in attendance for the second quarter but an increase in profit, while Six Flags Entertainment is set to release their report next week. Comcast, the parent company of Universal parks in Orlando, experienced a 22% year-over-year rise in theme park revenue, surpassing $2.2 billion. Nevertheless, Universal parks in Orlando registered a slowdown, which Comcast attributes to the challenging comparison against pre-pandemic performance. Despite this, the company remains optimistic about attendance levels and per capita spending.
The rise in international travel poses a disadvantage for US-focused airlines with limited international schedules. JetBlue Airways, for instance, recently slashed its guidance for the current quarter and 2023 due to increased demand for long international flights at the expense of shorter-haul travel. Budget airline Frontier also expressed concerns about the impact of international long-haul travel on its margins, though they anticipate a moderation in this trend. Similarly, Southwest Airlines and Alaska Airlines noted a shift from domestic to international destinations this year, potentially affecting their domestic revenue.
On the other hand, airlines like Delta Air Lines and United Airlines are capitalizing on the strong demand for international travel by expanding their international services. Executives of these airlines expect this trend to persist throughout the fall, with international revenue growth outpacing domestic revenue growth. However, the preference for international travel has already led to a decline in airline stock values.
In summary, the competition for travel dollars is intensifying, with the United States experiencing a decline in tourist spending due to the growing popularity of international trips. This trend has led to a surge in international airfare prices and a decline in domestic airfare. The hotel industry has also seen room rates rise more significantly in Europe compared to the US. Companies with a global presence, such as Marriott International, have recorded substantial growth in revenue from international markets. However, US-centric airlines and amusement parks are facing challenges adjusting to the shift in consumer preferences. Despite this, airlines like Delta Air Lines and United Airlines see it as an opportunity to expand their international services. As the travel landscape continues to evolve, companies will need to adapt their strategies to cater to changing customer demands.
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