The myth of “Revenge tourism”
Although such spending and the “revenge tourism” social media trend seem to reflect a thriving industry, the reality is quite different. High inflation and the climate crisis will obstruct growth, preventing returns to pre-pandemic levels.
As worries about the Covid-19 pandemic fade, a new trend has surfaced on our social media feeds: “revenge tourism”. The term refers to post-pandemic tourism, connoting the pursuit of vengeance against a pandemic that trapped us at home for almost 2 years. As borders have started to open back up, people have taken to social media to share their reunions with distant family members or their splurges on trips to idyllic tropical locations. While this may urge us to take the leap and plan our dream holiday this year, persisting economic strains on the travel industry and growing concerns about sustainability may push us to think again
2022 was a year of preliminary relief for the industry, as tourism levels reached 63% of 2019, pre-pandemic levels. This growth is projected to continue in 2023, but still fall short of 2019 levels, reaching approximately 80% to 95% of pre-pandemic levels, according to the United Nations World Tourism Organisation (UNWTO). Global tourist expenditures are expected to exceed $1.4 trillion dollars this year. Although such spending and the “revenge tourism” social media trend seem to reflect a thriving industry, the reality is quite different. High inflation and the climate crisis will obstruct growth, preventing returns to pre-pandemic levels.
First, the surge in prices, due, amongst others, to high inflation rates, will undermine consumer plans and all parts of the travel industry.
On the supplier side, providers will continue to struggle with labour shortages and operational difficulties resulting from the pandemic’s disruptions. Supply chain challenges induced by the war in Ukraine will cause high food and energy prices, pushing up market prices for tourist goods. In addition, flight prices will reflect high fuel bills and increasing wage pressures amidst labour shortages. Many airline companies have struggled to rehire after laying off staff during the pandemic, leading to operational anxieties. We all have in mind the long airport queues and caps on passenger numbers, as well as flight cancellations and lost luggage, which made us more reluctant to plan trips last summer. Moreover, as a labour-intensive industry, disruptive strikes are probable in 2023, as workers request higher wages to manage rising living costs.
On the consumer side, if the surge in cost-of-living hasn’t entirely cancelled holiday plans, it has drastically reduced the amount of money tourists are willing to pay while on vacation. In an October 2022 poll, 86% of Britons aged 25 to 34 stated that they believed the cost-of-living crisis may impact their vacation plans. Meanwhile, a third of surveyed Americans mentioned that high prices had made them pick less expensive destinations and spend less on vacation-related expenses . Thus, the increase in the overall cost of living, paired with losses in tourists' purchasing power, will push down travel demand.
This is consistent with rudimentary economic mechanisms. Indeed, travel can be considered a luxury good that has highly elastic demand. This means that consumer demand is highly negatively impacted as prices of goods linked to travel (hotels, restaurants, flights…) increase. In addition, looking at intertemporal choice models is helpful in evaluating changes in consumer behaviour. As costs of living grow with inflation, real income decreases, making leisure more expensive relative to consumption (labour). In other words, this means that consumers will likely choose to work more and make travelling and other non-labour activities less of a priority. This is coherent with the theory behind the Phillips curve, which holds that high inflation leads to low unemployment. With households needing to ensure stable employment to combat rising prices, the focus on travel and other leisurely goods is feeble.
Not only do tourism companies have to face inflation and supply chain issues, they also need to shift their supply to better meet the latest client expectations. What appealed to tourists in 2019 differs from today, with new concerns at the forefront of their priorities. One of the primary considerations is sustainability. According to a 2023 Booking.com survey 53% of travellers globally say they are more determined to travel sustainably than they were a year ago. Therefore, sustainable travel is no longer a niche market but an unavoidable component of a successful product strategy in 2023. As providers struggle to develop eco-friendly solutions, this will drive some clients away from travelling altogether. Developing sustainable supply will come at a cost for producers, increasing market prices. This phenomenon, known as "greenflation" will drive demand down even further.
In light of keeping budget-friendly offers in the current stagflation climate, certain companies may opt out of developing sustainable products. Yet, with governments’ energy concerns more pronounced than ever after the end of the 2022 energy crisis, companies may find themselves compelled by new government regulations and taxes to adapt to climate change. For instance, in December 2022, the European Union announced new measures to better include the aviation industry in its Emission Trading System (ETS). All flights within the EEA (European Economic Area) will have to pay for their emissions on the carbon market. Free allowances, which enable airlines to avoid paying for carbon emissions, will be entirely phased out by 2026. This will increase variable costs for airlines, a burden which will in turn be reflected by growing market prices.
Although "revenge tourism" will boost the tourism industry, the extent of this will be limited. With inflation driving overall living costs and the price of the tourism industry's supply higher and higher, the considerable loss of households' purchasing power will continue to push down demand in 2023. Add to that the “greenflation” necessary to comply with new consumer and governmental expectations relating to sustainability, and you may find yourself waiting another year before planning that trip you’ve dreamt of while scrolling on your For You page.
Written by Victoria Sabran