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Travelers are increasingly choosing international destinations over domestic trips, resulting in higher international airfares and room rates. This trend is causing a challenge for airlines, theme parks, and hotels that focus primarily on the U.S. market. International airfare prices have risen by 10% compared to last year and 26% compared to 2019, with an average price of $962. On the other hand, domestic airfare prices have fallen by 11% from last year and 12% from 2019, with an average price of $249.
The shift towards international travel is also impacting hotel rates. European hotel room rates have increased by nearly 14% from last year, averaging $148.88 in the first half of the year. In contrast, U.S. hotel rates only rose by 6% during the same period, averaging $154.45. Luxury hotel rates in Paris have risen by more than 22% in the first half of the year, while rates in Orlando have only increased by 0.2%.
Marriott International reported a 6% year-over-year increase in revenue per available room in the U.S. and Canada for the second quarter, compared to over 39% growth in international markets. This shift in travel patterns has been ongoing for more than a year, according to Marriott’s finance chief, Kathleen Oberg.
Travelers like Jesse Inman are opting for trips abroad, with Inman spending $1,839 on flights between the U.S. and Europe. However, the higher costs of international trips are causing some travelers to cut back on domestic travel plans.
Amusement park operators, such as Cedar Fair and Six Flags Entertainment, are also feeling the impact. Cedar Fair reported a decline in attendance for the second quarter, while Six Flags Entertainment will report its results next week. Comcast, however, experienced a 22% increase in theme park revenue compared to last year, although it noted a slowdown at its Universal parks in Orlando.
Airlines with a heavy focus on the U.S. market, like JetBlue Airways and Frontier, are facing challenges due to the surge in international long-haul travel. JetBlue lowered its guidance for the current quarter and 2023, while Frontier expects a 3-point decrease in margins due to the return of international travel.
On the other hand, airlines like Delta Air Lines and United Airlines are expanding their international services to take advantage of the strong demand for trips abroad. They expect this demand to continue into the fall, with international revenue growth outpacing domestic revenue growth.
The shift in traveler preferences has impacted airline stocks, with the NYSE Arca Airline index down about 10% this quarter, while the S&P 500 has risen by about 1.5%.
In conclusion, travelers are increasingly choosing international destinations over domestic trips, leading to higher international airfares and room rates. This trend poses a challenge for airlines and other travel-related businesses that primarily serve the domestic market. However, it presents an opportunity for companies with a global presence.
