Second-quarter performance results from publicly traded hotel brand companies and real estate investment trusts indicate that cross-border travel is ticking up, and Europe is benefiting the most.

During her company's earnings call with analysts and investors, Marriott International Executive Vice President of Development and Chief Financial Officer Leeny Oberg said demand in Europe has dramatically outperformed expectations.

The company is also experiencing strengthening demand at its hotels in the Caribbean and Latin America as well as Middle East and Africa.

Mark Brugger, president and CEO of DiamondRock Hospitality, said leisure travel by Americans is on pace to hit a record this year, but access to more international destinations and cruise lines is redistributing that demand.

He told analysts and investors that the number of Americans traveling out of the country is expected to be up nearly 20% compared to last summer.

A hurdle for the industry, however, concerns the wait times required for visas in the U.S., which could drag down international inbound travel.

U.S. arrivals from Greater China are also absent from the demand picture, in large part because of the closure of Russian air space that complicates flight routes.

Considering these and other factors, hotel industry executives said they have confidence that there is room to continue to grow international travel demand.

“In Europe, [revenue per available room] grew 26% year-over-year. Performance benefited from continued strength in leisure demand and recovery in international inbound travel, particularly from the U.S.”

“As the second quarter progressed, we started to see a moderation in volume at our hotels in San Francisco and Seattle, which were already affected by softer demand. At the same time, many high-end leisure travelers took the opportunity to travel internationally and we did not see a corresponding level of international inbound demand, which impacted volume at our resorts.

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“As evidenced by the airline and TSA data, we expect international demand to be a tailwind going forward. In June, U.S. International outbound air travel was 110% of pre-pandemic levels, while international inbound was only 80%. This aligns with U.S. outbound summer flight bookings which are up 27% year over year, while corresponding inbound bookings were up only 3%. ... It is the first summer since 2019 that U.S. travelers had enough lead time to plan an unrestricted international vacation, and we expect these trends will revert over time. …

“Hopefully we can sort out the visa wait times in the U.S., which are 400 days now on average and it's a real drag on international inbound. As an example in Canada, you can get a visa from a country that they require a visa for travel to Canada in 55 days. So that is the big issue that we as an industry are dealing with through U.S. Travel and through AHLA as well. The other impediment at this point in time with respect to international inbound in our West Coast markets in particular is the problem from China. Pre-pandemic, we had 350 direct flights a week between the U.S. and China, and as it is today we have 24. We're optimistic that over time things are going to normalize and that we're going to see the return of the international travel, which will further bolster our performance. …

“I don't know if people were going to go to Europe every quarter or if they're going to go to Europe in the second quarter of next year. But clearly, this was a phenomenon that I think everyone missed. And you know, we're just very comfortable with how the resorts have performed in general, certainly from a rate perspective. The issue was really a slowdown in volume.”

“Demand growth and recovery overseas was especially strong. Occupancy improved 16% year-over-year and RevPAR grew 34%. China is now at 99% of 2019 RevPAR levels driven by strong leisure bookings over the May Labor Day and Dragon Boat Festival holidays. …

Recent economic data continues to build our confidence for future demand and booking trends. June's consumer confidence index increased 7 points, showing positive movements in both the present and future expectation components, while at the same time, U.S. unemployment remains at its lowest levels since the 1960s.

“Our middle-class guests with average household incomes of over $90,000, nearly 30% above the U.S. median, have seen wage and savings growth of approximately 20% and nearly 30%, respectively, since 2019. And with their wage growth outpacing the rate of inflation since the start of 2019, they continue to allocate a higher share of their wallets to travel.

“July month-to-date, Google search volume for affordable travel is running 8% ahead of last year. When combining these strong leisure travel trends with double-digit increases versus 2019 that we continue to generate from the infrastructure accounts, who drive over 20% of our franchisees' revenues, we remain bullish about our growth prospects in the quarters and years ahead.”

“While leisure travel for Americans is likely to hit a record this year, unfettered access to international destinations and cruise lines in a post-pandemic world is redistributing some of that demand. As evidence of that trend, the number of Americans traveling outbound from the U.S. to international destinations is projected to be up nearly 20% over last summer, and cruise lines are seeing big year-over-year bookings.  

“We began experiencing the impact of this redistribution late last year, and we expect leisure patterns to approach their new normal comparisons later this year. We are already seeing signs this summer of stabilization at our resorts in Sonoma, Sausalito and Vail. In fact, the booked RevPAR of Vail Resort for this coming December is up 24% versus the same time last year.  

“And while the impact from this year's redistribution of leisure is leading to some near-term pullback, destination resorts remain a clear winner since the start of the pandemic, and we remain confident that resorts will enjoy the strongest new normal secular travel patterns and lodging due to a number of powerful factors.”  

“When you look at outbound [travel], it's fully recovered, and in fact, over the historical norm, particularly to Europe. And again, we think that normalizes. There's a lot of people who had trips canceled … but I have a lot of friends and others who had trips canceled because of the pandemic who took them this year.  

“I do think on an outbound basis, we'll see that normalize next year. I think it's rational to think that. And I think it's also gotten a lot more expensive to travel abroad. As we know, the international ticket prices are way up from where they were.  

“And on the other side of it, we're starting to see a decline in the domestic ticket prices here in the U.S. Some of that will have an impact, and I think we feel pretty comfortable that that's likely to happen.  

“And by the way, I think capacity growth is important because inbound travel to the U.S. still has a long way to go to recover. It's not like global international travel is necessarily going to decline. It's just going to go in different directions.”  

“Overall, cross-border travel demand also rose again in the quarter, primarily driven by an increase in international visitors to the Asia-Pacific region. The percent of total room nights from cross-border guests is now roughly one percentage point below 2019 levels of approximately 20%.  

“Prior to the pandemic, international visitors accounted for nearly one-quarter of room nights in Greater China. With the region's international airlift still only around 40% of 2019 capacity at the end of the second quarter, we believe there is still meaningful growth opportunity in and from Greater China.”  

“It's a little bit hard to predict exactly how airlift is going to go and how cross-border travel and how a country is going to emerge from the pandemic. The reality is that the recovery in China has come faster than we expected. And cross-border, while it is still meaningfully lower in China than it was pre-COVID, we've got international airlift only at 40% of pre-COVID levels. There's clearly more room to go.  

“There's no doubt that as that country has rebounded, and as the rest of Asia-Pacific has also really opened its borders completely, we've seen that all of the travel there has picked up very fast. ...

“Obviously, Europe this summer has dramatically outperformed expectations, and we continue to see really strong demand in Caribbean and Latin America and Middle East/Africa. International [demand] is really benefiting from all the cross-border travel, and frankly, from a global economy that has probably been a bit stronger than everyone anticipated at the beginning of the year.”  
 
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