Travel ETFs Outperform S&P 500 What’s Fueling the Surge Across Europe, Asia-Pacific, and the USA as Global Travel Nears Full Post-Pandemic Recovery by December 2024? – Travel And Tour World

The global travel industry is set to achieve a landmark recovery by the end of 2024, signaling a full return to pre-pandemic levels of international tourism. According to the United Nations World Tourism Organization (UNWTO), international arrivals in the first nine months of 2024 reached 98% of the levels recorded in 2019, with the remaining 2% gap expected to close by the year’s end. This recovery is significant as it marks the full resurgence of travel patterns that were disrupted by the COVID-19 pandemic, which had a profound impact on global tourism.

Regional Variations in Recovery Rates

The recovery varies significantly across different regions, with some areas already surpassing pre-pandemic levels in terms of tourist arrivals. The Middle East, for example, has witnessed a remarkable 29% increase in international arrivals during the first nine months of 2024 compared to 2019. Africa and Europe have fully recovered, while the Americas are operating at 97% of pre-pandemic levels. However, Asia-Pacific is still facing challenges, with arrivals reaching only 85% of 2019 levels. The slower return of Chinese travelers is identified as a major factor contributing to this lag in recovery in the Asia-Pacific region.

Key Regional Growth:

• Middle East: 29% increase in arrivals
• Africa and Europe: Fully recovered
• Americas: 97% recovery
• Asia-Pacific: 85% recovery, primarily due to the slow return of Chinese tourists

U.S. Travel Trends

Travel trends in the United States reflect the broader recovery of global tourism, with strong growth in domestic travel. For the 2024 holiday season, approximately 46% of U.S. consumers are planning to travel, a trend that mirrors the previous year. Domestic travel remains the preferred choice, with 43% of travelers planning trips within the United States. International travel, while still less popular, is also on the rise, with 8% of Americans planning overseas trips in 2024, compared to 7% in 2023.

American travelers are expected to take an average of 2.14 trips in 2024, marking a noticeable increase from 1.88 trips in 2023. This uptick in travel frequency is the highest since the pandemic, signaling growing confidence in travel. On average, U.S. travelers plan to spend $3,294 on their longest trip, a 4% increase from 2023, reflecting both the desire to travel and the inflationary pressure on travel costs.

Hospitality Boom in Asia-Pacific

In the Asia-Pacific region, the hospitality sector is experiencing rapid growth, driven by the increasing number of middle-class travelers. Leading hotel chains like Hilton and Marriott are expanding rapidly to meet the demand for luxury and mid-range accommodations. Hilton, for example, now operates over 1,000 hotels in the region, exceeding its 2025 target, with an additional 915 properties planned in the pipeline. Marriott International has also made strides by opening the first Four Points Flex by Sheraton in Japan, with more openings expected before the year’s end.

The growing demand for travel and accommodations in Asia-Pacific is part of a broader trend in the tourism sector, with an increasing number of global travelers seeking immersive experiences in diverse regions. As the middle class in countries like China, India, and Southeast Asia continues to grow, hospitality companies are gearing up to meet the increasing demand for quality, accessible accommodations.

Hospitality Growth Highlights:

• Hilton: Over 1,000 hotels in Asia-Pacific, 915 more in the pipeline
• Marriott: Opening new Four Points Flex properties in Japan

The Surge in Leisure Travel and Restaurant Visits

As global tourism rebounds, more people are also planning to indulge in leisure activities, particularly dining. According to a report by Hilton, nearly 20% of leisure travelers seek out new restaurants or culinary experiences during their trips. This growing interest in food and culture is expected to drive increased restaurant visits during the year-end holidays. Additionally, many consumers plan to enjoy meals through delivery or takeout, particularly for special events like New Year’s Eve.

The National Retail Federation (NRF) forecasts that holiday season sales in the U.S. will rise by 2.5-3.5% in 2024, which although a slower pace than last year, aligns with the average growth rate observed in previous years. This increase in consumer spending is likely to support a strong holiday travel and hospitality market.

Remote Work Integration into Travel

Remote work continues to reshape travel trends, with an increasing number of travelers blending work and leisure. Nearly half (49%) of employed travelers plan to work during their longest leisure trip in 2024, an increase from 34% in the previous year. This trend, particularly popular among younger and higher-income individuals, indicates that travel is becoming more flexible and integrated with professional obligations.

Among Generation Z and Millennial travelers, the trend is even more pronounced, with 58% of Gen Z and 54% of Millennials planning to combine work and leisure during their trips. This shift is likely to have long-term implications for the hospitality industry, as travelers seek accommodations that cater to both work and leisure needs, such as hotels with business centers, high-speed internet, and comfortable workspaces.

Impact on the Leisure and Travel Industry

Investors are closely monitoring the performance of leisure and travel-related exchange-traded funds (ETFs) amid the ongoing recovery. Several leisure and travel ETFs, such as the Defiance Hotel Airline and Cruise ETF and the Themes Airlines ETF, have outperformed the broader market in recent weeks, with notable increases in their value. These funds, which include companies involved in hotels, airlines, and cruises, reflect the growth in the tourism sector as more travelers return to the skies and embark on vacations.

Key Takeaways:

• Leisure and travel ETFs are seeing strong performance
• Increased demand for travel and accommodations
• Remote work is influencing travel trends, especially among younger travelers

The global travel industry’s recovery in 2024 marks a pivotal moment for the tourism sector, with international arrivals and domestic travel both on the rise. The ongoing expansion of hospitality services in key regions, particularly in Asia-Pacific, the U.S., and Europe, reflects the industry’s commitment to meeting growing demand. As travelers continue to seek new experiences and blend work with leisure, the travel industry must adapt to these changing dynamics. The surge in leisure travel and restaurant visits, along with the growing trend of remote work, is reshaping the travel landscape and presents significant opportunities for the industry in the years to come.