The post-pandemic travel recovery is well underway in 2022 despite disruption related to the war in Ukraine as well as continued travel restrictions in some countries and most notably in China which is still pursuing a zero-covid policy. We will describe our latest forecast update, including the effect of recent events and will explore the potential impacts of related price increases on travel recovery, including the impact on average tourism spending patterns.

1. WHERE IS THE TRAVEL
RECOVERY HEADED –
GLOBAL TOURISM
OUTLOOK UPDATE
David Goodger Helen McDermott
dgoodger@oxfordeconomics.com hmcdermott@oxfordeconomics.com
Managing Director, EMEA Director of Global Forecasting
Tourism Economics Tourism Economics
14th June 2022

2. Overview
• Current travel trends and baseline outlook
• Inflation is a major risk to the outlook
• Some shifts in tourism spending patterns are underway

3. 0.0
5.0
10.0
15.0
20.0
25.0
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
International
Domestic
2019 peak
2019 peak
Source: Tourism Economics
Inbound & domestic nights, World, baseline
Billions
Travel recovery is underway in our baseline outlook
2022
2025

4. In aggregate travel should come close to recovery this year
North
America
Latin America Europe Asia Pacific Middle East Africa
-60%
-40%
-20%
0%
20%
40% 2020 2021 2022 2023 2024
Source: Tourism Economics
Global total travel by destination region (inbound and domestic)
% difference from 2019 levels

5. High frequency online data highlight positive trend
Source: Oxford Economics/Haver Analytics

6. Air travel is improving but some way to go
Africa Asia/Pacific Europe Latin
America
Mid. East N. America World
-100
-90
-80
-70
-60
-50
-40
-30
-20
-10
0
Jan-22 Feb-22 Mar-22 Apr-22
Source: IATA
% change vs. 2019, RPK
Monthly Air Passenger Growth

7. International air travel is lagging but trend is upwards
Africa Asia/Pacific Europe Latin
America
Mid. East N. America World
-100
-90
-80
-70
-60
-50
-40
-30
-20
-10
0
Jan-22 Feb-22 Mar-22 Apr-22
Source: IATA
% change vs. 2019, RPK
Monthly International Air Passenger Growth

8. More divergent near-term outlook for international travel
North
America
Latin America Europe Asia Pacific Middle East Africa
-100%
-80%
-60%
-40%
-20%
0%
20% 2020 2021 2022 2023 2024
Source: Tourism Economics
Global inbound travel by destination region
% difference from 2019 levels

9. Overview
• Current travel trends and baseline outlook
• Inflation is a major risk to the outlook
• Some shifts in tourism spending patterns are underway

10. War in Ukraine adding to supply pressure and stagflation shock
2.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
7.5
3.0
3.2
3.4
3.6
3.8
4.0
4.2
4.4
4.6
4.8
5.0
Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar April
GDP (LHS)
CPI (RHS)
World: GDP and CPI revisions (2022)
Source : Oxford Economics/Haver Analytics
% year % year

11. Inflation shock is temporary in our baseline outlook
Source: Oxford Economics/Haver Analytics/Consensus Economics

12. Travel costs are a significant contributor to services inflation
Source: Oxford Economics/Haver Analytics,

13. Persistent inflation into 2023 and beyond is a key risk
30
40
50
60
70
80
90
100
110
120
40
50
60
70
80
90
100
110
120
130
2006 2009 2011 2013 2015 2017 2019 2021 2023 2025
Air fares index, US$
Average air fares index, real US$
World oil price, Brent crude spot, $pb
Average air fares and oil prices
2010=100 US$
Source: Oxford Economics

14. Overview
• Current travel trends and baseline outlook
• Inflation is a major risk to the outlook
• Some shifts in tourism spending patterns are underway

15. Transport spending remains a large component of spending
$389bn
$714bn
$1,103bn
$257bn
$611bn
$868bn
$364bn
$1,163bn
$1,527bn
$321bn
$759bn
$1,079bn
$168bn
$287bn
$455bn
$171bn
$579bn
$750bn
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Inbound
Domestic
Total
Accommodation F&B Transport
Retail Rec, culture & sport Other
World: inbound vs domestic spend by category, 2019
% share of total spend
Source: Tourism Economics

16. Transport costs have affected spending share over time
20%
21%
22%
23%
24%
25%
26%
27%
28%
29%
30%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
Inbound
Domestic
World: transport spend share of total, 2000-30
US$bn
Source: Tourism Economics
20%
22%
24%
26%
28%
30%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
World: transport spend share of total, 2000-30
US$bn
Source: Tourism Economics

17. Transport costs are boosting recovery in spend - ahead of volumes
22%
30%
31%
35%
31%
29%
0%
5%
10%
15%
20%
25%
30%
35%
40%
Europe Asia Americas Middle East Africa World
Accommodation F&B Transport
Retail Rec, culture & sport Other
Contribution to recovery by spend category, 2019-25
% of total spend growth
Source: Tourism Economics

18. Persistent higher oil price and fares would further defer recovery
2019 2020 2021 2022 2023 2024 2025
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
Persistent high oil price and
air fare pass-through
Baseline
Source: Tourism Economics, IATA
Air passengers, bn
Global air flows: baseline and higher oil price impact
~3 mn fewer air
trips
Air travel recovery
deferred by a year

19. Greater discounting is evident in accommodation – in some places
-1%
6%
-24%
-8%
-80%
-60%
-40%
-20%
0%
20%
40%
60%
80%
2020 2021 2022 2023 2024 2025
Europe
Asia
Americas
Middle East
Africa
World
Accommodation spend recovery by region, 2020-25
% diff from 2019 levels
Source: Tourism Economics

20. Retail remains important especially in APAC & ME
$355bn $346bn $340bn $39bn $23bn $1,103bn
$297bn
$280bn $241bn $31bn
$19bn $868bn
$408bn
$530bn
$490bn $56bn $42bn $1,527bn
$315bn $498bn $208bn
$44bn
$14bn $1,079bn
$126bn $138bn
$169bn
$13bn
$10bn
$455bn
$239bn $226bn $240bn $17bn
$29bn
$750bn
$1,740bn $2,020bn $1,688bn $199bn $136bn $5,784bn
0%
20%
40%
60%
80%
100%
120%
Europe Asia Americas Middle East Africa World
Other Rec, culture & sport Retail Transport F&B Accommodation
Total spend by category regional comparison, 2019
US$bn
Source: Tourism Economics
15%
26%
8%
16%
8%
19%
0% 5% 10% 15% 20% 25% 30%
Europe
Asia
Americas
Middle East
Africa
World
Retail contribution to spend recovery, 2019-25
% of total spend growth
Source: Tourism Economics

21. Key points
• Travel recovery is still underway this year
• Recession is not expected despite risks
• Inflation is currently expected to fall back in 2023
• Persistent increases in travel costs are a risk to medium-term growth
• Transport will take a higher share of spend while other spending may be trimmed
• Demand will still support travel recovery despite some composition shifts