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Leisure Travel: Q4 2023 Results Point to a Strong 2024, And Better Spending at Home

Thomas Paulson
Jan 26, 2024
Leisure Travel: Q4 2023 Results Point to a Strong 2024, And Better Spending at Home

Consumers preferencing spending more on in-person experiences over spending on discretionary goods was one of the more distinctive trends in 2023. In our 2024 outlook, we noted that the trend was likely to become less pronounced. Last week, the U.S. Travel Association published their forecast for 2024. Domestic leisure is expected to increase +2% year-over-year to $783B, which is consistent with our outlook. International-inbound volume is forecasted to reach 98% of 2019, up from 84% in 2023. International-inbound leisure travel spending is expected to increase +19% year-over-year to $137B. UN Tourism produces a dashboard for observing international-inbound travel, which we show below. where you can clearly see the gap to 2019. Their outlook read, “Europe is expected to drive results again in 2024. …Paris will host the Summer Olympics in July and August.”

Source: UN Tourism

This week, to have a more robust view on international-outbound from the U.S. we reviewed the earnings call from the airlines.

United Airlines is expecting another good year for international travel. The company has made significant updates to its Houston, Denver, and Newark hubs, and has made large expansions to its international winter and summer 2024 schedules. United CFO Andrew Nocella said, “Bookings and yields for cross-Atlantic fly in early 2024 are also strong and we expect these trends to continue into the second and third quarters.”  However, the tourism strength is outbound, not inbound. Foreigners vacationing in the U.S. is still lagging which means more consumer expenditure abroad and less foreign visitor expenditure in the U.S. Inbound from Europe is expected to be stronger than inbound from Asia and Latin America, which will influence where tourism spend lands across the U.S. (a lift to NYC and an absence in Miami and San Francisco). Revenue-miles for its cross-Atlantic business were up +17% for 2023, +0.1% for Q4, and analyst expectations are for +2% in 2024. By way of contrast, for Delta these figures are +34%, +16%, and +10%.

American Airlines CEO Robert Isom said, “Demand remains strong and we have seen robust bookings to start the year as travel trends have begun to normalize across entities. We're also very encouraged by the trends we're seeing in business travel. Domestic revenues from business travel ended the fourth quarter at approximately 90% of 2019 levels. And CFO Devon May said, “We plan to grow capacity mid-single digits year-over-year in 2024. This growth will be enabled by improved asset utilization and new aircraft deliveries.” Revenue-miles for its cross-Atlantic business were up +18% for 2023, +8% for Q4, and analyst expectations are for +3% in 2024.

These expectations support our view that tourism spending from U.S. households overall is going to take less wallet share in 2024 than it did in 2023. Moreover, the increase in consumer expenditure outside the U.S. by U.S. residents (+$6.8B) will be $25.7B less than the increase in spending by international tourists visiting the U.S. (+$32.5B). Last year, outbound was 40% larger than inbound. That is very positive for retailers and leisure & hospitality in tourist gateway cities like New York.

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Thomas Paulson

Director of Research and Business Development,

Thomas Paulson spent 20 years as a Wall Street analyst and a member of asset management teams at AllianceBernstein and Cornerstone Capital, representing top-50 ownership positions including Target, Home Depot, Nike, Amazon, Google, and many more. He brings consumer related expertise and knowledge of enterprises in retail, CPG, financial services, telecom, and entertainment.

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