Mastercard Economics Institute Releases Travel Industry Trends 2023

Hong Kong Welcomes Inbound Tourists, Chinese Mainland Re-Opens, Experiences Prevail and Business Travel Bounces Back

New insights from the Mastercard Economics Institute (MEI) reveal that consumers are prioritizing leisure travel and pioneering new corridors around the world. The just released Travel Industry Trends 2023 report delivers key insights about the global state of travel, punctuated by shifting economic landscapes, persistent consumer demands, and a reopening Chinese mainland.

In the face of a changing economic landscape, post-pandemic preferences for experiences over things¹ and a consistent demand for leisure travel shape the 2023 outlook. Initially lagging behind leisure travel, business travel found its footing in the latter half of 2022. With an uncertain economy providing some cross-market turbulence, the Chinese mainland’s reopening is expected to bolster growth globally with concentrated impact in Asia Pacific, according to Mastercard Economics Institute estimates.

Key findings include:

• Hong Kong edged its way into Asia Pacific travelers’ top 10 international travel destinations for the first time since February 2022 in September 2022, the same month when the government lifted compulsory quarantine requirement on arrival at Hong Kong². A continuously upward trend saw the city claim third place in February and March this year, surpassing Singapore and Japan. With travelers from Asia Pacific and the United States influencing the choices of travel destinations, the Chinese mainland and Hong Kong – will continue to remain popular selections. Hong Kong is a predicted hotspot for the rest of this year.
• Chinese mainland’s reopening benefits global and Asia Pacific tourism. The Chinese mainland’s reopening following tight Covid regulations comes at a time when it will likely have a positive impact on the experience economy as pent-up demand for travel is expected to drive strong tailwinds. By March 2023, spending on experiences was notably 93 percent of where it was in 2019 versus minimal travel last year³. Economies in the Asia Pacific region could be obvious beneficiaries of Chinese mainland’s opening, given their strong ties to international trade, tourism, and geographical proximity.
• In particular, the economy in Hong Kong could get a significant boost from affluent travelers from the Chinese mainland, who traditionally over-index on retail (especially apparel) and groceries compared to other tourists, providing a boost to goods spending. In March 2023, Chinese mainland tourism spend in Hong Kong on things, experiences and luxury respectively reached 95 percent, 121 percent and 145 percent of the March 2019 levels. MEI estimates that travelers from the Chinese mainland could help the Asia Pacific region outperform the rest of the world.
• Asia Pacific travelers are eager to explore both regional and international destinations, creating diverse opportunities for the travel industry. Rapid urbanization, technological advancements and a burgeoning middle class contribute to the rise in outbound tourism. Take Hong Kong as an example, leisure flight bookings were up 52 percent in March 2023 compared with the March 2019, up 592 percent in March 2023 versus March 2022, as well as up 698 percent from January to March 2023 compared to the same period in 2022. Growth is further fueled by the proliferation of low-cost carriers, improved visa policies and an increasing emphasis on experiences and adventure travel.
• Tourists continue to prioritize experiences. Preference for experiences over things persists even after mobility restrictions eased, and travelers are demonstrating new demand for the unique and memorable. Global spending on experiences was up 65 percent while spending on things was up 12 percent compared to 2019 as of March 2023⁴. As the economy in the Chinese mainland opens, the demand for essentials will likely shift toward discretionary services, such as tourism, hospitality and experiences, and travel-related goods like luggage. So, despite a love of shopping, MEI expects travelers from Chinese mainland to spend more on experiences rather than things after a zero-covid environment. Luxury travel experiences, including splurging on high-end accommodations and luxury travel in places like France and Italy, will likely entice tourists from the Chinese mainland emerging from a zero-Covid environment to rejoin the experience economy.
• While discretionary spending may show resilience given the state of the labor market and savings, spending on experiences versus things varies by market as inflation and interest rates impact consumers differently. In Macau, for example, tourism spending on experiences returned to pre-pandemic levels almost instantaneously after restrictions loosened, up 17 percent from 2019. By comparison, spending on experiences and things in Hong Kong has recovered nearly on par.
• Leisure and business travel are now growing at the same rate, up 33 percent globally from the same month in 2019 by the end of March 2023, a 42 percent year-over-year-to-date change from 2022 to 2023. Driven by the long-awaited lifting of travel restrictions in Asia, global leisure travel remains robust, with flight bookings up roughly 31 percent in March 2023 compared to the same period in 2019, representing a 25 percent year-over-year-to-date from 2022 to 2023⁵. In the second half of 2022 into early 2023, corporate flight bookings caught up to leisure bookings⁶. As demand for in-person meetings remains robust in Asia Pacific, coupled with a strong return-to-office dynamic, the region led the corporate travel and entertainment (T&E) recovery, with growth in the number of commercial T&E related expenses up 64 percent between January and March 2023⁷.

“In 2023, travel came roaring back in Asia as China re-opened its borders and other markets eased the last of their pandemic-era travel restrictions,” said David Mann, Chief Economist for Asia at the Mastercard Economics Institute. “As people around the world prioritize experiences over things, the strong demand for travel is expected to last far beyond the initial ‘revenge travel’ bump. As we look ahead to the peak summer travel season, the big question is whether flight and accommodation supply can keep up with demand.”

Comprehensive Support to Travelers & Tourism Sector

Travelers want a good experience from the time they book their plane ticket to their first step on new soil, and companies that understand that are better positioned to establish longer and more valuable relationships with their consumers. This key shift in expectations has already started to change not only how companies work with their consumers, but also the way in which we travel. And though consumer behavior will continue to shift alongside the macroeconomic environment, providing more choice in how to pay (like redeeming points for bookings), and tailoring experiences, recommendations, and offers are just two strategies that keep the individual traveler at the center of engagement.

Mastercard is dedicated to helping the global tourism sector recover and welcome travelers through a range of services, from market analysis and high-frequency data insights that help make sense of changing consumer trends to marketing solutions and consumer engagement strategies that drive brand loyalty and maximize bookings.

The full Travel Industry Trends 2023 report can be accessed here. Other reports and insights from the Mastercard Economics Institute can be found here.

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Disclaimer

This presentation and content are intended solely as a research tool for informational purposes and not as investment advice or recommendations for any particular action or investment and should not be relied upon, in whole or in part, as the basis for decision-making or investment purposes. This presentation and content are not guaranteed as to accuracy and are provided on an "as is" basis to authorized users, who review and use this information at their own risk. This presentation and content, including estimated economic forecasts, simulations or scenarios from the Mastercard Economics Institute, do not in any way reflect expectations for (or actual) Mastercard operational or financial performance.

1 "Experiences" includes tourist spending at restaurants, amusement parks, casinos, nightclubs, bars and other events, while "Things" includes tourist spending at convenience store chains, apparel, cosmetics, sporting goods, jewelry, footwear, bookstores, electronics, toys and department stores. Excludes transportation and lodging spend. Represents analysis of aggregated & anonymized switched volumes (nominal US dollars unadjusted for FX) for leisure travelers while in-destination.

2 Source: Government announces lifting of compulsory quarantine requirement on arrival at Hong Kong, Press Releases, The Government of the Hong Kong Special Administrative Region

3 "Experiences" includes tourist spending at restaurants, amusement parks, casinos, nightclubs, bars and other events, while "Things" includes tourist spending at convenience store chains, apparel, cosmetics, sporting goods, jewelry, footwear, bookstores, electronics, toys and department stores. Excludes transportation and lodging spend. Represents analysis of aggregated & anonymized switched volumes (nominal US dollars unadjusted for FX) for leisure travelers while in-destination.

4 "Experiences" includes tourists spending at restaurants, amusement recreation activities, casinos, nightclubs, bars and other events, while "Things" includes convenience store chains, apparel, cosmetics, sporting goods, jewelry, footwear, bookstores, electronics, toys and department stores. Excludes transportation and lodging spending. Represents analysis of aggregated & anonymized switched volumes (nominal US dollars unadjusted for FX) for leisure travelers while in-destination.

5 Corresponds with the number of flight bookings made by leisure travelers during reference period relative to the same time in 2019. Based on aggregated & anonymized Mastercard flight booking data provided by third party partners, sourced by Mastercard Economics Institute.

6 Corresponds with the number of commercial flight bookings made during reference period relative to the same time in 2019. Based on aggregated & anonymized Mastercard flight booking data provided by third party partners sourced by Mastercard Economics Institute.

7 Represents Mastercard Economics Institute analysis of aggregated & anonymized switched volumes (nominal US dollars unadjusted for FX) for corporate travel & entertainment expenses.