Phocuswright 2022: Pundits predict pent-up 'sugar rush' but uncertainty in 2023

Phocuswright 2022: Pundits predict pent-up 'sugar rush' but uncertainty in 2023

Experts from Agoda, T2Impact, and Navesink Advisory Group assessed the prospects for travel at the annual conference in Phoenix, Arizona, last week

A year of uncertainty for travel was predicted for 2023, with the first quarter forecast to be a “bloodbath”.

A panel of senior pundits at the Phocuswright conference in Phoenix Arizona last week agreed there remains pent up demand in the sector.

The post-pandemic bounce back has been fuelled by people’s desire to travel again and in some regions like Asia the return is still in full swing.

But there were concerns about prospects going into 2023 as consumer and corporate travel spending is constrained by inflation and the cost of loving crisis.

Timothy O’Neil-Dunne, principal at T2Impact, said: “The challenge is going to be the first quarter [of 2023]. We have a late Easter. I think it’s going to be a bit of a bloodbath.”

O’Neil-Dunne said there is not going to be as much money flowing in 2023 “because we have all spent far too much on ‘revenge travel’” post pandemic. “I think it’s going to be a year of uncertainty,” he added.

Agoda vice president of corporate development Timothy Hughes said Asia was still experiencing the “sugar rush” of the post pandemic bounce back despite China remaining in international lockdown. 

“We can play the speculation game as to when China will come back in to travel," he said. "We would love it to be quarter one or quarter two of next year. If it does that will be crazy. In Asia, at least, we have another six months of pent up demand to enjoy.”

Flo Lugli, principal at Navesink Advisory Group, said there was a realignment going on in travel following the upheaval of the last two years.

“From a travel perspective luxury leisure will continue to lead the market and I think there is still a lot of pent-up demand. Certainly for some suppliers there are still bookings that were cancelled during the pandemic that will continue to flow in to 2023. But there will be a challenge for some markets to create demand to reach 2019 levels.”

Hughes added: “I think we are in a long-term struggle for travel but what COVID proved to us is that the human desire for travel is insatiable. And humans will find a way. 

“We have seen a step change in prices and complexity but people will find ways around it. If long-haul becomes too expensive people will stick to short-haul or switch to rail. People will find different places to travel. They won’t stop, they’ll just find different places to do it.”

Lugli said the lesson from pas downturns have been that people will trade down and more luxurious trips will fall away first but bounce back the quickest as people look to go back to their favourite places once the market recovers. 

But she warned certain segments of the market, like cheaper limited service holidays might see the price value equation “starting to getting a little out of whack, and people will push back on that and will start to figure out something else to do”.

This could see short trips, or sectors like holiday rentals or visiting friends and family benefit as budgets are squeezed. “Travel just manifests itself in a different way,” she said. 

O’Neil-Dunne agreed saying VFR (Visiting Friends and Family) traffic will remain “inelastic” but he said it will be in a different form with “congrecation” travel of larger groups booking Airbnbs and blended leisure and business travel becoming more popular.

“It used to be 45% 55%. It’s going to be more like 30% 70% in favour of leisure,” he said. “I think that trend is going to continue. Business travel is going to be more inelastic than we have seen it before.”

Blended leisure and business travel (known as ‘bleisure’)  will have have a “very interesting impact on the whole travel industry,” O’Neil-Dunne said. “People are taking longer trips, which is great for hospitality. But there won’t be the same number of airline trips for the number of room nights. That proportion will change.”

The mass layoffs currently being seen in at the large US tech giants will make corporate travel “challenging”, said Lugli. “With the recession we are in, corporates are going to be a little concerned about spending that money. Chief finance officers have seen very little expenditure on travel and they are going to want to keep it that low.”