International travel has rebounded strongly in the face of growing economic pressures, including inflation, rising interest rates and tighter household budgets.
Despite these headwinds, international travel in 2023 was 1.26 billion, or 86% of demand in 2019. With a few exceptions, this figure exceeds historical demand volumes in all pre-pandemic years.
The recovery in leisure travel has been stronger than in business or other travel, and currently accounts for around 60% of all tourism travel. The number of leisure trips made in 2023 was only 10% below the previous peak in 2019, and the recovery is evident in most regions of the world, with the exception of Asia-Pacific.
What's encouraging for the near-term outlook is that travel is a priority in consumer spending.
The proportion of consumer spending devoted to travel has generally fallen during previous economic downturns or periods of uncertainty, as priority is given to more essential expenditure.
At present, however, we are seeing savings on other discretionary spending items, with travel's share of the portfolio back to 2019 levels among advanced economies.
The increase in travel spending is partly driven by some rising costs, due to a combination of broader inflationary pressures and supply-side factors.
These rising costs, combined with a potential downturn in consumer outlook, pose a threat to the industry, but there are currently no clear signs that costs are a deterrent to travel volumes.
Income growth in several major developed countries will lead to an increase in the number of households with the means to travel over the next ten years. This is particularly the case in the USA, where an additional 8 million households will be able to afford to travel. In this total, incomes are higher and demand for more luxurious travel is set to continue.
The key, however, will be China. Chinese tourists will indeed play a crucial role in the tourism recovery. China has relaxed its international travel rules to meet the growing demand from outbound tourism.
In early 2024, China introduced a visa-free policy for nationals of 11 countries, including Switzerland, attracting more tourists from these nations.
China's growth is set to outstrip that of other major markets and, in so doing, increase its importance for most destinations due to the significant increase in the number of households with the means to travel. China could become a source market twice the size of the USA in terms of spending as early as 2033, with more than 400 billion U.S. dollars by 2033.
In short, with the easing of restrictions and the growing interest of Chinese travellers, the tourism sector is well positioned for a dynamic recovery in the years ahead.
