International travel is increasing, domestic air tickets and hotel prices are lagging behind

Rome, Italy, July 19, 2022 Women pose for a photo holding ice cream at the Trevi Fountain as hot weather hits Europe.

Guglielmo Mangiapane | Reuters

The competition for travel dollars is heating up, and the U.S. is losing.

Airlines and hotel chains have reported increased bookings for international travel in recent weeks, along with rising prices.

That’s a boon for companies with global offerings, but a new challenge for airlines, theme parks and hotels, which are more focused within the U.S., as travelers increasingly choose overseas destinations over domestic destinations.

According to fare tracking company Hopper, the price of international airfare is $962, up 10% from last year and 26% from 2019. Meanwhile, domestic air tickets are getting cheaper. Roundtrips within the US averaged $249, down 11% from last year and 12% from 2019.

The change is felt in hotels, too: European hotel room rates averaged $148.88 in the first half of the year, up nearly 14% year-over-year, while U.S. hotel rates rose just 6% year-over-year. It was $154.45. According to data from CoStar, the parent company of hotel industry analysis firm STR.

Nightly rates at luxury hotels in Paris, for example, rose more than 22% from a year ago in the first half of the year, while luxury hotels in Orlando, Fla., rose just 0.2%, according to CoStar data.

Marriott International on Tuesday, it said second-quarter revenue per available room rose 6% year-over-year in the U.S. and Canada. The increase in international markets was more than 39%.

Nightly rates for luxury Marriott properties such as JW Marriott, The Ritz-Carlton and Edition in the US and Canada were down 1% year over year.

Marriott chief financial officer Kathleen Oberg said the trend started more than a year ago, noting that customers have more options for places to go.

“When you look at travel patterns this year, it’s clear that there’s been a huge migration of Americans to Europe and other parts of the world,” he said on the company’s second-quarter earnings call on Tuesday.

Jesse Inman is one of those travelers who prefers to travel abroad. Israel, 29, who quit his software sales job earlier this year to start a farm with his father in North Carolina, is in the middle of a week-long trip to the UK, Austria and France.

Inman said he spent $1,839 on two flights between the United States and Europe. He said he expects such a trip to cost about a third of the total, based on what he paid before the pandemic.

“Spending a month in Europe will prevent some of my domestic travel for the foreseeable future,” Inman said. Some of the trips he’s considered but may turn down include visiting friends in Atlanta, the Denver area, and Austin and San Antonio in Texas. He also said he may cut back on skiing this winter.

Investors are starting to hear from theme park operators about their business prospects. Cider fair On Thursday, it reported a drop in attendance for the second quarter, but an increase in profit. Six Flags Fun reports next week.

Last week, Comcast While Universal parks in Orlando reported a slowdown, theme park revenue rose 22% from a year ago to more than $2.2 billion in the most recent quarter. The company blamed it on tougher comparisons.

“In Orlando, it really compares very well to pre-pandemic. Obviously, we’re down from the unprecedented (…) attendance from Covid,” Comcast president Michael Cavanagh said on an earnings call last week. “So this softening is not surprising. I mean, we’re at participation levels and we’re getting better each time, so overall we feel good about what we’re seeing in Orlando.”

Lack of home turf

The increase in international travel is good news for passengers looking for deals closer to home, but bad news for airlines with heavy schedules in the US.

JetBlue Airways On Tuesday, it cut its guidance for the current quarter and 2023, citing growth in international long-haul travel that hurt the carrier, whose network is mainly focused on the US market, the Caribbean and parts of Latin America (though London, Paris and Amsterdam).

“We’ve seen a larger-than-expected geographic shift in Covid demand this summer, as the strength of demand for long-haul international travel has kept demand for shorter-haul travel under pressure,” JetBlue CEO Robin Hayes said on the company’s earnings call. earlier this week.

Budget airline Border While CEO Barry Biffle said the trend may soon moderate, he said the return on international long-haul travel would take a 3-point bite. The carrier’s second-quarter fare revenue per passenger fell 26% year over year to $47.59.

Southwest Airlines He also disappointed investors with his forecast last week. And Alaska AirlinesPaying attention to the US market, this year marked the transition from domestic directions to international directions.

“We believe that increased international demand has impacted a larger pool of domestic travelers than has historically been the case,” Alaska Chief Commercial Officer Andrew Harrison said on an earnings call last week.

Meanwhile, like the airlines Delta Airlines and United Airlines is ramping up its international services to capitalize on strong demand for overseas travel, which executives expect will continue into the fall, with international revenue growth far outpacing domestic revenue growth.

“Our international system is just doing great,” United’s chief commercial officer Andrew Nocella said on an earnings call last month. “There is no part of the world where the network does not work.”

Airline stocks fell from recent highs this earnings season as executives detailed shifting consumer preferences.

The NYSE Arca Airline Index is down about 12% so far this quarter, S&P 500 increased by about 1.5%.

CNBC’s Gabriel Cortes contributed to this report.

Disclosure: Comcast is owned by NBCUniversal, the parent company of CNBC.

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