According to a new report released by the Mastercard Economics Institute, global flight bookings show that the demand for leisure travel across domestic, short-haul and medium-haul trips was higher in April than at the same time in 2019, and long-haul flights were just shy of 2019 levels globally.
Coinciding with travel’s return, travel retail has significantly recovered across the globe since before the pandemic. Tourism spending on “experiences” is roughly 34 percent above 2019 levels and has outpaced spending on “things” since July 2021, according to the payment firm’s third-annual travel report, ‘Travel 2022: Trends & Transitions’.
But it’s not all smooth sailing for international travel and its associated retail spend, as the industry tries to navigate new and ongoing environmental headwinds and the shift in the way that “travel is perceived” in 2022.
Combining data from the Mastercard Economics Institute, along with intel from several travel retail industry experts across Asia, Retail in Asia looks at the current state of travel and spending across Asia-Pacific, with a focus on APAC markets outside of China including Singapore, Australia and South Korea.
If flight booking trends continue at their current pace, an estimated 1.5 billion more passengers globally will fly in 2022 compared to last year, according to an analysis by the Mastercard Economics Institute. In Asia Pacific, about 430 million more flights will take place this year, compared to 2021, making it the second-largest region for flights in the world behind Europe.
Both consumer and business demand for air travel is on the rise, driven by a return to the workforce for people who lost their jobs during the pandemic, and ‘revenge travel, or travel taken by consumers to make up for missed travel opportunities during lockdowns.
Consumers are also in a better financial position to travel in 2022, having paid off debt and other liabilities at a record pace over the last two years, while others saved money working from home, resulting in more discretionary spending capabilities. The extra cash looks to be injected into travel in 2022.
“Many consumers in Asia Pacific countries such as Australia, New Zealand, Philippines, and South Korea have chosen to pay down their credit card debt during the last two years, especially during periods of tight domestic mobility curbs,” said David Mann, Chief Economist, Asia Pacific and Middle East Africa of the Mastercard Economics Institute.
“This behaviour can likely be attributed to the sharp fall in household spending during those periods, which also served to reduce the variety of in-person avenues consumers could spend on. This spending decline, combined with government aid to cushion the income blow on consumers during the pandemic, supported an accumulation of excess savings, particularly for upper-middle-income households, some of which was used to pay off accrued debt.”
Work or play?
In parts of Asia-Pacific, business travel has been on the rise since mid-2021. Domestic travel for business is up 40 percent in April, compared to pre-pandemic 2019, with long-haul business travel up more than 11 percent. In contrast, medium-haul business travel remains 11 percent down in 2019 and short-haul business travel in APAC down 45 percent on pre-pandemic levels.
But the biggest air travel recovery in Asia-Pacific 2022 is being driven by leisure flights. Domestic leisure flights were up a soaring 196 percent in April, compared to the same month in 2019, followed by long-haul and medium-haul leisure international flights, up 19 percent and 17 percent, respectively. Short-haul international holiday flights were almost fully recovered in April this year, down just 3 percent in 2019.
“We are seeing a strong return of travel in the region since Q2 2022 for both domestic and international,” explained Lavinia Rajaram, Asia Head of Public Relations for Expedia Group.
“Intra-Asia is coming back – based on Expedia’s 2022 H1 flight demand data, the majority of inbound travellers visiting Asian destinations are from the region. In fact, 6 out of the top 10 inbound origins to Southeast Asia destinations were within Asia. Bangkok, Singapore and Seoul are top destinations in the region that Asian travellers are searching and booking for travel, based on flight data. Interestingly, while Japan has not fully exempt entry quarantine measures for independent travellers, Asian travellers are already planning for their year-end travel to Japan destinations.”
Where to now?
In March 2021, the top 10 international travel destinations for travellers leaving the APAC region were the United States, followed by the United Arab Emirates, the UK, Canada, Germany, Singapore, Hong Kong, Japan, China and Australia.
However, Australia notably rose close to the top of the leaderboard in early 2022; as did Singapore, with more Southeast Asian countries making their entry into the APAC destination top 10. As of March 2022, the United States remained the most popular destination for APAC travellers, followed by Australia, Singapore, the UK, Canada, UAE, Indonesia, Germany, Malaysia and the Philippines.
In the APAC region, people chose their travel destinations based on their mobility restrictions; a dynamic that is evident in Australia and Singapore, according to the Mastercard Economic Institute. During two years of being shut off to the rest of the world, domestic travel in Australia was the only option, and bookings surged. In 2022, borders opened in Australia, resulting in a sudden ability to travel. Flight bookings from Australia to Indonesia, for example, spiked nearly 200 percent in 2022, and flights to the U.S. more than doubled.
Likewise, Singapore, where border restrictions have dramatically eased, is also seeing an impressive surge in flight booking to popular destinations across South-East Asia, India, Australia and other locations.
Explore and spend
Coinciding with travel’s return, travel retail has significantly recovered across the globe since before the pandemic. Tourism spending on “experiences” is roughly 34 percent above 2019 levels and has outpaced spending on “things” since July 2021, according to the Mastercard Economics Institute.
“There’s been a shift in the way that travel is perceived – vacations are now viewed as a privilege. Travellers value vacations more than ever and are looking for meaningful experiences for their well-being but wanderlust for new sensations and discoveries remains,” said Rajaram.
“More than 1/3 of Asian travellers would consider accommodation where they can do a retreat and relax. Many are also looking to travel to their bucket-list destination, according to the #TravelForReal study. Prices are already indicating a huge demand for travel, and planning is going to be key in finding that sweet spot for a good deal.”
However, this “experience economy” has been met with a mixed response in the Asia-Pacific. For example, South Korea, where borders opened in April 2022, has seen virtually no inbound tourism, with spending on experiences down 50 percent on 2019 and spending on things down 68 percent. However, the number of travellers using Seoul’s Incheon International Airport has been on the rise since June 8, when the requirement for incoming-passenger quarantine ended. The total was about 20,000 to 30,000 a day in April and May, but in June, about 41,000 people a day were using the airport, according to the airport figures.
Likewise, Indonesia has seen less tourism for similar reasons, with spending on experiences down 21 percent in 2019, and spending on things down 23 percent for the month of April. Singapore, by contrast, has enjoyed robust tourism demand for experiences and things through April 2022, up 59 percent on experiences and 39 percent on things for the month compared to 2019. In Singapore’s Changi Airport, international passenger movements hit 1.9 million for the month of April, from just 179,000 in April 2021, an increase of 1,020 percent, according to Changi Airport statistics.
“Our study also found close to 1 in 2 Asian travellers are now feeling more confident about outbound travel compared to the same time last year, thanks to higher vaccination rate, more stable travel supply such as flights and accommodation, and more manageable testing/entry requirements,” concludes Rajaram.
“Expedia believes international travel demand will continue to grow in the rest of the year as more destinations are expected to reopen to international travellers again later in the year, including Japan and Taiwan which are traditionally popular destinations in Asia.”
While the tailwinds of Covid-related pent-up demand are pushing the travel recovery forward, the headwinds of inflation, supply chain constraints, geopolitical uncertainties and Covid infection rates are also shaping 2022, making the rest of the year still a turbulent time for travelers wanting to take off and those retailers that rely on international tourism for business.