Is the Post-Pandemic Travel Boom Finally Ending?
![Is the Post-Pandemic Travel Boom Finally Ending? Is the Post-Pandemic Travel Boom Finally Ending?](https://i3.wp.com/www.investopedia.com/thmb/Jmy7xcijiPULrSse8cpQpJyO2SU=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/GettyImages-2155787600-24385f32e6e54d08a5b6d38b13ced6b1.jpg?w=780&resize=780,470&ssl=1)
Key Takeaways
- Shares of Airbnb, Disney, and TripAdvisor all declined on Wednesday as investors responded to warnings from each that weakening U.S. travel demand would hamstring near-term growth.
- A post-pandemic travel boom has largely insulated the tourism industry from concerns about consumer finances that have weighed on retail and other leisure industries for years.
- Executives characterized the present slowdown as a return to normal rather than an ominous downturn.
Americans are reining in their travel spending, according to corporate earnings outlooks, raising questions about whether the slowdown reflects a normalization of travel demand or something more worrisome.
Airbnb (ABNB) on Tuesday missed quarterly earnings estimates and warned it was seeing signs of slowing U.S. demand.
“During Q3 2024, we expect a sequential moderation in the year-over-year growth of Nights and Experiences Booked relative to Q2 2024,” the company forecast in its second-quarter earnings report. It added that it was “seeing shorter booking lead times globally.”
“There continues to be very strong growth of the shorter lead times,” said Chief Financial Officer Ellie Mertz on a call with analysts, “but what we’re not seeing the same level of strength [in] is in those longer lead times. So two months from now—what you’re booking for Thanksgiving, what you’re booking for Christmas.” Lead time refers to how far in advance customers book properties or experiences on Airbnb.
Disney (DIS) also said Wednesday its tourism business was facing a slowdown. Demand weakened more than expected at the end of last quarter, it said, a trend that was expected to continue in the near term.
The company forecast operating income at its Experiences segment, which includes domestic and international theme parks, would decline by mid-single digits in the current quarter, driven by soft demand and competition from the Olympics at Disneyland Paris, its largest international park.
TripAdvisor (TRIP) on Tuesday also said that softer demand hurt its hotel and experiences business last quarter, a trend it forecast would persist.
“Given what we’re seeing in the normalization of pricing trends across the hotel category, we are assuming a softening of pricing relative to the last few quarters,” the company said in its earnings report.
Travel Demand ‘s Post-Covid Surge
Investors have been on high alert for signs of consumer weakness, especially after weak labor market data last week raised concerns that the U.S. economy is slipping into recession under the weight of elevated interest rates.
Companies including giants like McDonald’s (MCD), Home Depot (HD), and Target (TGT) have warned that economic uncertainty was weighing on consumer spending and, thus, their sales.
Travel and tourism companies seemed, for a long time after the pandemic, impervious to the economic concerns that rattled other companies. Consumers unleashed pent-up travel demand when Covid-19 restrictions were lifted, boosting sales at airlines, cruise operators, and other travel businesses.
Normalization or Deterioration?
Now, investors and analysts are wondering whether slowing demand reflects a benign normalization of demand or something more ominous.
Airbnb CEO Brian Chesky characterized Airbnb’s lead time trends as “very much [a] return to normal.”
“If we look at where we were, say, in Q2 of 2019, the average lead time across the platform was within one or two days of what it was in Q2 in 2024,” he told analysts. (A recent report from short-term rental intelligence provider AirDNA suggests current lead times lag pre-pandemic trends by more than a couple of days.)
Mertz agreed, saying the trends they had noticed didn’t necessarily point to consumer weakness.
“We haven’t really seen a material move towards trade downs. Much to the contrary,” she said, “people continue to book our larger, more expensive listings.” Though, she conceded, that could have to do with the value proposition of larger listings, which often cost less on a per-person basis.
Spending Up at Disney Parks
Disney executives also played down concerns about consumer finances.
“While results at Domestic Parks decreased modestly in the quarter, attendance was comparable year over year and per capita spending was slightly up,” according to CEO Bob Iger and CFO Hugh Johnston.
Johnston acknowledged on a call with analysts that low-income consumers were feeling pressured. But, he added, he wasn’t overly concerned.
“While we saw a slight moderation in demand, I certainly wouldn’t call it a significant change,” he said.
Disney’s brand, he added, gave it a bit of a buffer against a travel slowdown. “It really does attract a strong audience, and people are reluctant to cancel vacations,” has said.
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