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Skift Take
How do recession fears impact the travel industry? We break it down on this week’s episode of the Skift Travel Podcast.
Rashaad Jorden
The disappointing U.S. jobs report released earlier month — as well as the seemingly softening domestic travel demand in the U.S. — has raised concerns about an economic slowdown impacting the travel industry. Travel has been the worst-performing group of stocks over the past year, making it one of the sectors most vulnerable to a recession.
Editor-in-Chief Sarah Kopit and Head of Research Seth Borko discussed how a possible recession — and other economic challenges — could impact the travel industry with Managing Editor Lex Haris in this episode of the Skift Travel Podcast.
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Key Points
Travel Market Volatility: The travel sector, despite some resilience, is experiencing significant volatility, with recent sell-offs affecting stocks, particularly in the airline industry due to oversupply and weakening demand.
Economic Concerns: There are growing concerns about a potential economic slowdown, driven by factors like rising unemployment, interest rates, and the unwinding of risky financial trades, such as the Yen carry trade.
Fed Rate Cuts Anticipation: There’s speculation that the Federal Reserve might cut interest rates soon to stimulate the economy, which could have mixed effects, including lower borrowing costs but potentially reduced returns on savings.
Travel Demand Plateau: While travel demand surged post-pandemic, driven by a renewed passion for experiences, experts suggest this may plateau, with consumers prioritizing spending differently, particularly in the face of economic uncertainty.
Supply-Side Challenges: The travel industry’s supply side, including hotel and airline capacity, plays a crucial role in how the market adjusts to changes in demand, with potential oversupply in certain areas leading to weaker earnings and more competition.
Episode Summary
Sarah, Seth and Lex discuss recent market fluctuations and their impact on travel stocks. Seth notes that despite a significant market sell-off, travel stocks have performed relatively well, down only 1-2% compared to the broader market’s 3% drop. However, over the past week, travel stocks are down 8%, indicating a broader concern about economic slowdown. The jobs report has heightened anxieties about potential recessions, influencing market sentiment. Lex explains the concept of the “carry trade,” where investors borrow in low-interest currencies to invest elsewhere, contributing to recent market volatility. This situation has complicated personal travel plans due to currency fluctuations.
The three of them explore how different travel sectors might be affected by economic changes, with airlines experiencing oversupply issues and weak demand. They discuss the possibility of a recession impacting consumer spending on travel and how that might manifest in specific sectors like airlines or hotels. The conversation also touches on the resilience of the luxury and cruise sectors, which are performing well despite broader market concerns.
Finally, they speculate on potential rebounds in travel, emphasizing that while the growth may slow, strong demand for travel persists, influenced by changing consumer priorities and economic conditions.
