June 10, 2020

Looking to the Recovery of Leisure Travel Demand

The road ahead is uncertain, but early demand signals create some room for optimism

What do consumer’s evolving safety and economic concerns, future travel intentions, current travel spending, and online travel shopping behavior tell us about the recovery of leisure travel demand? Our global survey findings offer some insights.

The travel industry has operated through its share of pandemics. Cyclical downturns—often tied to broader economic recession—are an industry norm. But it’s been more than a century since these two forces were so powerfully intertwined. With consumers facing a dual-front crisis—concerning both health and finances—gaining insight into when vacation spending might return to some semblance of normal is difficult. Past pandemics and downturns offer some helpful perspective, but are largely unfit comparisons.

As travel providers continue to reposition their companies to adapt to current business conditions and shift some focus toward recovery, tracking vacation spending intentions and their underlying drivers is important. This is because operating an airline or hotel in an environment where demand is being weakened by a spike in safety concern will likely require a specific strategic response compared to a market where consumers are increasingly eager to travel but struggling to afford it. While concerns around both health and finances will shape vacation decisions for the foreseeable future, the extent of their influence may ebb and flow as the COVID-19 crisis evolves.

In this article, we explore findings from our Global State of the Consumer Tracker and InsightIQ business intelligence platform for insights into the trajectory of leisure travel in the United States.

Health concerns show signs of subsiding while financial concerns still loom

Offering an early signal of optimism, health concerns are gradually subsiding from their early-April peak. While still elevated, the number of US consumers concerned about their own health and the health of others is forming an observable downtrend (figure 1). Should reopening activities not alter COVID-19’s downward trajectory, it’s likely that the downward trend will continue—forming a foundation that supports more confidence to travel.

But the story unfolding around the financial impact to potential leisure travelers is a bit murky. The percentage of US consumers concerned about making upcoming payments (27%) and delaying large purchases (43%) have yet to show signs of falling (figure 1). While the economic fallout from COVID-19 will naturally have a latent effect, a potential scenario of falling health concerns and prolonged financial stress brings important implications to the travel industry.

As the pandemic’s sudden and powerful shock drives travel providers to focus on alleviating safety concerns to surface demand, recovery strategies could increasingly shift to levers designed to pull demand from a market with weak consumer confidence. These levers, often working in concert, range from how providers bundle offerings and build promotions to how they approach revenue management. In our article, Planning for an uncertain future: How airlines and hotels can prepare for an economic downturn, we’ve discussed these levers in detail. As in-bound international travel will likely take time to gain momentum, US travel providers should rely on the strength of the domestic market for a lifeline. This makes the financial health of the US consumer more critical than ever. For example, US consumers, unlike their European counterparts, are quick to cut vacations from their budgets when times get tough. For perspective, in the year following the 2008 financial crisis, with no pandemic in sight, nearly 40% of US consumers went the entire year without spending on a vacation—a trend that lasted for three years.

Percentage of US consumers with immediate financial concerns and delaying large purchases remains elevated


Travel safety concerns remain elevated, but there are early signs of easing

Travel providers remain mindful of travelers’ long-term financial uncertainty, but in the short term, travel safety will likely continue to be the more powerful driver of vacation decisions. Safety concerns around flying and staying in hotels remain elevated (figure 2). But optimistic signals are emerging—particularly on the hotel side. As of mid-May, nearly a third of US consumers said they would feel safe staying in a hotel—up from roughly 1 in 5 in early-April. During the same time period, feelings of safety around more everyday activities, such as going to the store, improved from 30% to 42%. Signs of consumers warming up to more everyday activities could be a good sign for travel.

Despite some positivity, however, most consumers don’t feel safe traveling right now—particularly flying. For travel providers, this makes efforts to build trust with consumers critical—with high potential of reward. Case in point: In other markets where safety concerns have fallen, intentions to travel are relatively high. China, for example, a country ahead of the COVID-19 curve, has some of the lowest safety concerns around flying (figure 2). And even though financial concerns remain somewhat high there, roughly one-third of the respondents intend to fly domestic for leisure this summer.

Intentions to fly this summer rising


Has leisure travel demand bottomed? Three signals suggest it might have.

With some positive signals trickling in, travel providers search in anticipation of a demand bottom—a signal the industry may be entering its recovery phase. We explored a mix of data sources, including consumer leisure travel spending intentions, credit card data, and traffic volume to travel websites for clues.

The trends from each of these sources offer some reasons to be optimistic.

  • Consumers with summer travel plans are growing in number: As of mid-May, almost one-third of US consumers (31%) were planning to stay in a hotel for leisure during the summer months—slowly improving from a mid-April low of 24% (figure 3). While intentions remain relatively low, the direction is positive.

    Summer travel intentions also reveal other important insights. For one, millennials will likely offer the industry a lifeline during the recovery. Summer travel plans are stronger among 18–34 year olds, hitting 36% for hotel and 34% for domestic air travel in mid-May.6 Millennials are also more likely to be actively searching for travel deals, signaling stronger evidence of a price bottom for the age group (figure 4).

    The recovery window, however, will likely vary across different segments of the travel industry. While leisure spending intentions show signs of growth for both hotel and domestic flights, other segments, such as car rental, cruise, and international air travel, have yet to show a material increase just yet.

  • Travel spending sees a slight uptick: A look at credit card data suggests the humble beginnings of a recovery could be forming. Hotel, airline, and car rental spending has now sustained four weeks of positive year-over-year growth (figure 5: “Travel segment YoY spend”). A potential bottom looks to have formed in mid-April, when spending was down 80%–90% across travel segments compared to the prior year.

  • Consumers are returning to travel websites: Daily traffic to online travel agency websites and travel metasearch engines is slowly improving. It was down roughly 80% year-over-year in early-April, but somewhat improved in the third week of May, when it was down only 73% year-over-year.


Leisure spending intentions vary across travel segments


Travel deal-hunting strongest among the young


Humble beginnings of travel recovery may be forming


Toward a recovery

While the road ahead is uncertain, early growth signals create some room for optimism. Amidst the rising narrative around a “new normal,” it’s also important to remember the industry as it existed in pre-COVID-19 days. Prior to the crisis, the global travel industry experienced one of the strongest expansion cycles in its history. In the long run, many of the fundamentals behind that growth—global middle-class formation and a strong demand for travel experiences—are difficult to throw off course. For travel providers, success ahead will likely be determined by the ability to respond to the health and financial uncertainty ahead.

Copyright 2020 Deloitte. All rights reserved. From https://www2.deloitte.com. By Marcello Gasdia and Anthony J. Jackson.

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