Rising hotel and flight prices: A new outlook for global tourism

The shock of new prices

Sounds familiar, doesn’t it? You are going to travel to your dream destination and when you look for your hotel or receive the proposal from your travel agency or travel consultant your eyes open as if you were watching a horror scene. It is a reality, the tourism sector has changed in recent years, hotel prices and airfares have risen in some cases to an unattainable peak. If you are wondering why and where we are headed in the coming times, read on. Let’s analyze what is happening and if these changes are going to contribute to a more sustainable and quality tourism.

The increase in numbers

To begin with, let’s start with some concrete data. As reported by the World Tourism Organization (UNWTO), in 2022, global hotel prices increased by 18% compared to 2019, a figure that reached 25% in the United States and 15% in Europe. And serve to illustrate it, here are some examples offered by STR Global Hotel Data: in Paris the increase was 30% from 2019 to 2023, Barcelona recorded increases of 20% in the rates of its four-star hotels. A figure that registered a 45% increase in the prices of luxury hotels in New York.

And if we talk about airfares, the scenario is similar, they increased their price by 20% from 2019 to 2023 worldwide. And they increased, both international (an average of 25%), and domestic (15%), as highlighted by the International Air Transport Association (IATA). Influences, as detailed by IATA, the brutal impact of the increase in the price of aviation fuel by 70% between 2021 and 2023. In such a way that Kayak Travel Trends details increases of 35% in economy fares on flights between Madrid and London, or 40% in those from Frankfurt to Tokyo. Also business class was 50% more expensive on routes from New York to Los Angeles in that period.

“Airlines are doing everything they can to keep costs under control, but the rising price of fuel and other inputs is putting pressure on fares”, said Willie Walsh, IATA’s director general, last June about rising fares.

What’s behind the increase

The facts are on the table. Now, let’s talk about the causes. Global inflation and rising operating costs, post-pandemic recovery and pent-up demand, staff shortages in the travel industry and rising fuel prices are the ones pointed to by the World Travel & Tourism Council (WTTC), the only global body representing the private Travel & Tourism sector and its many industries and comprising the world’s leading travel and tourism companies (hotels, airlines, airports, tour operators, cruise lines, car rentals, travel agencies, railroads, etc.).

While inflation in the Euro zone reached 5.3% in 2023, directly impacting the operating costs of hotels and airlines, according to Eurostat, after the pandemic, the tourism sector lost 20% of its workforce, which has influenced, on the other hand, as stated by the WTTC, an increase in wages to attract new workers, (the new generations and interests).

New travel patterns

The effects are clear: travel styles are changing, with a greater emphasis on shorter, but higher quality stays. The focus is more on domestic and local destinations. Luxury and experience tourism is also growing and, something that seems to me to be very significant and important, there is more planning and anticipation of bookings. These are data offered by the European Travel Commission Research, at least in this part of the world which, as we all know, concentrates a high number of overnight stays.

“We are seeing a trend towards higher quality and longer trips, as consumers adapt their habits to the new market prices,” said Eduardo Santander, executive director of The European Travel Commission (ETC) in October 2023.

Booking also highlights this in its Travel Predictions, noting a 30% increase in luxury accommodation bookings in 2023 compared to 2019. A figure that reaches 25% when we talk about domestic tourism in a tourism powerhouse like Spain, as highlighted by its National Statistics Institute (INE). And if we analyze the anticipation of bookings, those of 6 months or more, increased by 40%, according to data from Expedia Group Research.

Impact on emblematic tourist destinations

About the impact that all this has had on destinations that we all have in our minds, I will tell you that in Maldives there were 20% less tourists in 2023 than in 2019, but revenues increased by 15%. Greece recorded 10% more luxury tourists that year, thereby compensating for the drop in mass tourism. And, significantly, the profile of the tourist is also changing, for example in countries as emblematic as Thailand, where the average expenditure per visitor increased by 25% last year, as reflected by the World Tourism Organization. These specific cases illustrate how rising prices are reshaping the global tourism landscape, affecting both travel patterns and the economic structure of destinations.

Future prospects: What lies ahead?

So much for the situation. Let’s look at what lies ahead, sharing recognized voices who monitor the issue minute by minute and have all the tools to make the assessments they do.

Almost all experts expect prices to remain high in the short term, but they are also optimistic and predict a gradual stabilization as supply adjusts to demand and operations in the global tourism sector normalize. This is the opinion of analysts such as those at the prestigious Phocuswright Travel Research firm, for example.

So says UNWTO Secretary-General Zurab Pololikashvili, for whom “tourism recovery is underway, but challenges remain. Price increases reflect both pent-up demand and necessary adjustments in the industry.”

All assessments put the focus on the complexity of the current tourism situation, which is trying to recover demand, balancing it with operational and economic challenges. As the entire industry adapts to this new reality, we travelers have no choice but to adjust our expectations and plan to cope as much as possible with these increases. These are great challenges, but also enormous opportunities that operators and tourists are taking advantage of.

Opportunities in the new tourism landscape

We are talking about more sustainable tourism, which offers more exclusive, more personalized, more local experiences. It is promoting more sustainable and environmentally friendly practices. A context in which companies are working on differentiation, offering value-added services that justify the increase in their prices. The increase in prices in the most popular destinations is also contributing to the exploration and development of new tourist destinations. Let’s take advantage of this to learn more about the world around us!

Similarly, greater investment in technology, aimed at providing more efficient services, has a decisive influence on a more personalized experience. The same is true of the growing development of proximity tourism, which offers visitors attractive local and regional offers that also have a lower impact on transportation costs.

The role of travel advisors

In this current context, where prices have risen so much and the tourism sector is so different from what it was just a few years ago, travel advisors are playing an increasingly important role compared to digital booking platforms.

According to the American Society of Travel Advisors (ASTA), 76% of travelers who used a travel advisor in 2023 reported an improved travel experience. Also, 82% of millennials who had never used a travel advisor before the pandemic now consider doing so for their next trips.

While digital platforms continue to have a majority use, there are many reasons you should consider when planning your trip. Travel advisors offer personalized services that digital platforms do not, especially when the current situation forces the traveler to maximize the value of their investment.

They are people (not machines), who provide in-depth knowledge of destinations, accommodations and services; and they are at your disposal in times of crisis, helping you when necessary, in case of cancellations, last minute changes, or emergencies. They will support you in a direct and personalized way, something that automated platforms cannot do (and neither can artificial intelligence, for the moment).

Travel advisors have access to fare benefits and upgrades that are not available on digital platforms, offering more value to their clients. And in luxury or multi-destination travel, they are able to create incredibly detailed itineraries and handle logistics, no matter how complicated, in a more agile and efficient way than digital platforms.

Digital platforms still dominate the market, especially for simple, last-minute bookings, but the key for travel advisors is to offer added value that justifies their use in a high-priced market, combining the human touch with advanced technological tools to provide superior service.

A new and more hopeful experience

It seems that we will have to think a little more about how to travel. I personally believe that this is essential in these times. A more sustainable tourism contributes to the conservation of many unique spaces on our planet. We are seeing every day many examples of overcrowding unthinkable years ago and that should change, should improve.

The future of tourism is geared towards a balance between economic recovery and meeting our new expectations as travelers. Planning, flexibility and expert advice will be more crucial than ever for the traveler. Despite rising prices, tourism will be richer in experiences, more sustainable and more tailored to our individual needs as travelers.

We have the tools in hand, let’s take advantage of them!