In the face of a changing economic landscape, post-pandemic consumer preferences favour experiences over things according to Mastercard. Its Travel Industry Trends 2023 report features insight from the Mastercard Economics Institute.
Initially lagging leisure travel, business travel found its footing in the latter half of 2022. According to the report, this is especially the case in cultures prioritising a return to office. The uncertain economy is providing some cross-market turbulence. But mainland China’s reopening is expected to bolster growth globally with concentrated impact in Asia Pacific.
“In the first full year of unfettered travel since Covid, consumers are acting on pent-up desire to explore new locales. They are connecting with friends and family and accumulating experiences to make up for lost time,” said Bricklin Dwyer, Mastercard chief economist and head of the Mastercard Economics Institute.
” Despite evolving economic landscapes, resilient consumers continue to prioritise travel. And with new corridors emerging and China reopening, the 2023 outlook indicates good reason to be optimistic.”
Mastercard Travel Industry Trends 2023 key findings
Leisure and business travel are growing at the same pace.
Global leisure travel remains robust. Flight bookings are up roughly 31% in March 2023 compared to the same month in 2019. In the second half of 2022 into early 2023, corporate flight bookings caught up to leisure flight bookings. This is driven by regions with a strong return to office culture.
Global leisure and business travel are now growing at similar rates. Mastercard reports demand for in-person meetings. The most significant growth in commercial travel and entertainment expenses is led by Asia Pacific and Europe up 64% and 42%, respectively, between January-March 2023.
Mainland China’s reopening benefits global and Asia Pacific tourism. China’s reopening following tight Covid regulations comes at a time when it will likely have a positive impact on the experience economy. Pent-up demand for travel is expected to drive strong tailwinds. By March 2023, spending on experiences was notably 93% of where it was in 2019 despite minimal travel last year.
Economies in the Asia Pacific region could be obvious beneficiaries of China’s opening. This is due to their strong ties to international trade, tourism, and geographical proximity. Other countries expected to benefit include northern Europe, Germany and France. Brazil could also see a boost in its exports to China as the economy recovers.
Travellers establish new corridors
As consumers are enjoying higher incomes and returning to some level of pre-pandemic comfort, they’re also starting to venture further from home to new locations. Germany and Spain are becoming more popular for Latin American travellers. Saudi Arabia and Egypt have become popular destinations for travellers from Eastern Europe, the Middle East and Africa.
The US previously ranked as number 5 in the top destinations for European travellers in 2022. This now ranks number 4, signalling a building desire to explore across the pond. Traditionally tourism-driven European countries like France, Italy, Spain, Portugal and Greece could disproportionately benefit from resilient global tourists.
Tourists continue to prioritise experiences
Preference for experiences over things persists and travellers are demonstrating new demand for the unique. Potentially influenced by social media and entertainment, travellers are landing in lesser-known destinations in search of cultural immersion. As of March 2023, global spending on experiences was up 65% while spending on things is up 12% compared to 2019.
Experience-oriented spending is surging in certain corridors where pandemic lockdowns have expired, but Chinese tourists who traditionally over-index on luxury retail compared to other tourists could provide a boost to goods spending across markets.