Women pose for a photograph while holding an ice cream at Trevi fountain during hot weather as a heat wave hits Europe in Rome, Italy, July 19, 2022.
Guglielmo Mangiapane | Reuters
The competition for travel dollars is heating up, and the U.S. is losing out.
Airlines and hotel chains in recent weeks have reported a surge in bookings for international trips — together with rising prices.
That is a boon to corporations with global offerings, but a recent challenge for airlines, theme parks and hotels which are more focused throughout the U.S. as travelers increasingly go for locations abroad on the expense of domestic destinations.
International airfare is averaging $962, up 10% from last yr and 26% from 2019, in line with fare-tracking company Hopper. Domestic airfare, meanwhile, is falling. Roundtrips throughout the U.S. are down 11% from last yr and 12% from 2019 at a median price of $249.
The shift is being felt at hotels too: Room rates for Europe hotels averaged $148.88 in the primary half of the yr, up nearly 14% from last yr, while U.S. hotel rates rose just 6% from the identical period a yr earlier to $154.45, in line with data from CoStar, the parent company of hotel-industry evaluation firm STR.
Nightly rates at luxury hotels in Paris, for instance, rose greater than 22% in the primary half of the yr from a yr earlier, while luxury hotel rates in Orlando, Florida, rose just 0.2%, CoStar data show.
Marriott International on Tuesday said second-quarter revenue per available room rose 6% yr over yr within the U.S. and Canada. The expansion in international markets was greater than 39%.
Nightly rates for Marriott luxury properties, like JW Marriott, The Ritz-Carlton and Edition within the U.S. and Canada ticked 1% down yr over yr.
Marriott finance chief Kathleen Oberg said the trend began greater than a yr ago, and noted that customers now have more options for places to go.
“That is clear that if you take a look at the travel patterns this yr that there’s a big exodus of Americans going over to Europe and other places on the earth,” she said on the corporate’s second-quarter earnings call on Tuesday.
Jesse Inman is certainly one of those travelers choosing trips abroad. The 29-year-old, who left a software sales job earlier this yr to construct a farm together with his father in North Carolina, is in the midst of a weekslong trip to Israel, the U.K., Austria and France.
Inman said he spent $1,839 on his two flights between the U.S. and Europe. He said he would have expected that form of trip to cost a 3rd of that total based on what he used to pay before the pandemic.
“The proven fact that I’m spending a month in Europe goes to stop me from taking some domestic trips within the near future,” Inman said. Some trips he had been considering — but could forgo — include visiting friends in Atlanta, the Denver area, and Austin and San Antonio in Texas. He also said he might reduce on skiing this winter.
Investors are beginning to hear from amusement park operators on the outlook for his or her businesses. Cedar Fair on Thursday reported a decline in attendance for the second quarter but a rise in profit. Six Flags Entertainment reports next week.
Last week, Comcast said theme park revenue rose 22% from a yr ago to greater than $2.2 billion in essentially the most recent quarter, though it registered a slowdown at its Universal parks in Orlando. The corporate blamed that on tougher comparisons.
“In Orlando, it really compares thoroughly to pre-pandemic. We’re obviously down on attendance, which was form of unprecedented […] coming off of Covid,” Comcast President Michael Cavanagh said on an earnings call last week. “So not surprised by that softening. That said, we’re at levels of attendance and per caps being higher in order that overall, we be ok with what we’re seeing in Orlando.”
Home turf drawback
The rise in international travel is sweet news for passengers who’re in search of deals closer to home — but bad news for airlines which have U.S.-heavy schedules.
JetBlue Airways on Tuesday cut its guidance for the present quarter and 2023, citing a surge in international long-haul travel that is hurting the carrier, whose network is basically focused on the U.S. market, the Caribbean and parts of Latin America (though it has offers service to London, Paris and Amsterdam).
“We have seen a greater-than-expected geographic shift in pent-up Covid demand because the strength in demand for long international travel this summer has pressured demand for shorter-haul travel,” JetBlue CEO Robin Hayes said on the corporate’s earnings call earlier this week.
Budget airline Frontier said the return of international long-haul travel would take a 3-point bite out of its margins, though CEO Barry Biffle said the trend could soon moderate. The carrier’s second-quarter revenue from fares per passenger fell 26% to $47.59 yr over yr.
Southwest Airlines also upset investors with its outlook last week. And Alaska Airlines, which can be focused on the U.S. market, noted a shift toward international destinations from domestic this yr.
“We consider pent-up international demand has had the effect of a bigger pool from can be domestic travelers than has historically been the case,” Alaska’s chief industrial officer Andrew Harrison, said on an earnings call last week.
Meanwhile, airlines like Delta Air Lines and United Airlines have been ramping up their international service to capitalize on strong demand for trips abroad that executives expect to proceed into the autumn, with international revenue growth far outpacing domestic revenue growth.
“Our international system is just performing outstandingly,” Andrew Nocella, United’s chief industrial officer, said on an earnings call last month. “There’s not like a single a part of the globe, a single a part of the network that is not working.”
Airline stocks have declined from recent highs this earnings season as executives detail a shift in consumer preferences.
The NYSE Arca Airline index is down roughly 12% thus far this quarter, while the S&P 500 is up about 1.5%.
— CNBC’s Gabriel Cortes contributed to this report.
Disclosure: Comcast owns NBCUniversal, the parent company of CNBC.