How the travel industry is defying the economy.

Travel demand is high despite predictions of an economic slowdown.

Experts have predicted a financial downturn since the pandemic and the aftershock of inflation upended economies across the globe. Today, leading economies like China and the United States are experiencing slower economic growth as consumers face higher prices.

Despite a challenging global economy, the tourism industry is defying the odds this summer as the demand for travel grows. Industry giants like International Airlines Group, which owns British Airways, reported record profits this year. And corporations such as Marriott International and Hilton are raising prices as they experience higher than estimated earnings thanks to the travel boom.

Let’s take a look at what is driving industry growth and whether we can expect it to continue.

International travel is back.

After years of restrictions, social distancing, and closed borders, travelers are eager to vacation abroad once again. While the travel industry saw growth last year as tourists embarked on “revenge travel” to make up for canceled plans, 2023’s travel season is inching even closer to pre-pandemic numbers–largely due to the growing demand for international travel.

According to the International Air Transport Association, international traffic increased by 68.9 percent compared to last year. That’s 81.6 percent of what it was in 2019. In the United States, travelers booked 40 percent more international flights than they did in 2022. They’ve also applied for passports and Global Entry at record levels.

Demand for international travel has been a boost for airlines after struggling during the pandemic. Delta Airlines saw record quarterly earnings this year, and demand for Asia-Pacific carriers nearly tripled on the heels of popular tourist destinations like China reopening their borders to travelers.

What consumers want.

Higher-priced airline tickets, accommodations, and meals aren’t slowing down travelers. Even as fears of recessions and inflation loom, earnings and demands show consumers are still willing to pay for what they want–and they want to travel internationally. This, however, isn’t great news for the entire tourism industry, specifically those catering to domestic tourists.

For example, American carriers JetBlue and Alaska suffered financial losses although travel volume is close to pre-pandemic levels. Conversely, airlines with more robust international travel routes (like the aforementioned Delta, as well as American and United Airlines) have all increased their stocks this year.

“As a primarily domestic leisure carrier, this summer presents a unique situation with the unprecedented surge in international demand,” Alaska Airlines CEO Ben Minicucci said.

Meanwhile, the CEO of Delta Airlines Ed Bastian is optimistic the international travel boom will sustain. Marriott International’s CEO is also banking on persistent hotel bookings amid high profits.

I also anticipate this travel trend continuing throughout the year. Although peak travel season is waning as we near the end of summer in much of the world, I predict tourists will take advantage of the milder weather, smaller crowds, and lower fares of the off-season. I’m also optimistic that winter travel will see tourists flock to warm international locations.

However, I am eager to see whether the international tourism demand holds strong as “revenge travel” becomes a relic of the pandemic era and consumers possibly cut back on leisure spending. The industry should also keep a keen eye on consumer reactions to companies raising airfare and lodging prices.

It might be too early to tell if this trend continues in the coming years, but for now, it is a welcomed relief to see the travel industry prevail through economic challenges after years of historic setbacks.

Danilo Diazgranados is an independent investor in the global food and wine, financial services, real estate, and the hospitality sectors.