The travel industry has experienced a prosperous summer season, with airlines and hotels reporting strong performance. However, as the industry heads into winter, there are concerns about its ability to sustain high demand amidst inflation and economic stagnation. Some executives are confident that consumer spending on travel will remain resilient despite rising living costs, while others have observed signs of weakening demand, particularly in the domestic market in the US.

Low-cost airline Spirit issued a profit warning and implemented “steep discounting,” while JetBlue reported a shift away from domestic travel. Despite this, optimistic executives suggest that travelers are opting for foreign holidays instead of domestic trips. The influx of US tourists has notably benefited Europe’s tourism industry. However, there are fears that the slowdown in domestic travel could indicate a waning desire for travel overall.

In Europe, Ryanair’s CEO Michael O’Leary remains cautious, citing concerns about consumer confidence given higher interest rates, mortgage payments, and energy prices. He anticipates the need to cut prices during quieter periods and expects overall fares to decrease by a small margin in the coming winter. Sébastien Bazin, the CEO of hotel giant Accor, agrees that the industry may experience a diminishing pricing power. Despite a 4% decrease in occupancy levels compared to pre-pandemic levels, Accor has compensated by raising prices by 10%.

The industry acknowledges the impact of inflation and higher interest rates on consumer discretionary income. Sébastien Bazin of Accor expects more modest revenue growth due to pressure on the middle class population. Despite these concerns, as of mid-September, hotel bookings for the fourth quarter are 11% higher than the same period last year, and revenue per available room has surpassed 2022 levels.

Dana Dunne, CEO of eDreams ODIGEO, refutes the idea of a post-pandemic travel “bubble” ready to burst. He believes the industry has returned to normal travel patterns, including seasonality and quieter winters, without any signs of a collapse in demand. The return of Chinese tourists to overseas destinations is expected to further support the travel sector, although the recovery of the international market is subject to improved flight capacity.

Corporate travel’s recovery remains uncertain, highlighting the significance of leisure travel. Virgin Atlantic anticipates a strong final quarter with increased passenger numbers. London-listed tour operator On The Beach Group and P&O Ferries have also seen positive winter bookings. However, rising fuel costs necessitate strong demand to pass on the costs through higher ticket prices.

Though shares in the sector have declined, industry experts argue against tying the industry’s fortune solely to the global economy. They emphasize the industry’s resilience and its demonstrated ability to adapt to changing circumstances throughout the pandemic.