How the travel industry explains the weird 2023 post-covid economy

The economy may be uncertain, but that hasn’t stopped Americans from traveling.

Across the industry — from airlines to hotels to home sharing to online travel businesses — corporate executives seem optimistic. In calls with analysts to discuss their quarterly earnings, companies are seeing their businesses returning to pre-covid levels.

The travel industry can provide something of a microcosm of some of the most dynamic and uncertain parts of the economy: consumer demand for things beyond the bare essentials, labor supply for highly-paid professionals like pilots, labor supply for lower-income earners like hotel clerks and maids and how much covid-19 has — or hasn’t — changed the economy

“I’ve never seen a more constructive backdrop for the industry,” Ed Bastian, the chief executive of Delta Air Lines, told analysts on the company’s earning call last month. “Demand remains strong as passengers return to the skies,” Bastian said, projecting that the airline industry’s portion of economic output was returning to normal even though there were still constraints on its business, namely hiring and training workers.


“I believe our industry will see tens of billions of dollars of incremental demand in the next few years coming out of the pandemic,” Bastian continued.

Airbnb reported better-than-expected earnings and posted its first-ever annual profit since forming in 2008. “Guest demand remained strong throughout 2022. All regions saw significant growth in 2022 as guests increasingly crossed borders and returned to cities on Airbnb,” the company said in a letter to shareholders.

TripAdvisor, the online travel agency, saw almost 50 percent revenue growth in its fourth quarter from a year ago, which it credited to “increased consumer demand for travel industry related services as travel activity restrictions eased and the travel industry continued to recover.”

While flying hasn’t quite recovered to its pre-covid levels — the Transportation Safety Administration reported 2 million air travelers on Dec. 23 versus 1.7 million in 2021 and 2.4 million in 2019 — leisure travel has seemed to have fully recovered and then some.

Marriott reported that it had seen 7 percent growth from the fourth quarter of 2019 in nights stayed in its properties for leisure travel. “It is abundantly clear that people love to travel. Globally, leisure demand has remained robust,” Tony Capuano, the hotel company’s chief executive, said on a call with analysts.


Business travel has not returned the same way as leisure travel has. Marriott said that in the United States and Canada, business travel has reached about 90 percent of 2019 levels, while Delta reported that its corporate travel bookings were 80 percent of 2019 levels. But companies seem to be optimistic that the trends are going in the right direction. “As companies return and employees return to office, you are going to see another step up, in my opinion, of return to more normal trends, including improved business travel,” Bastian said. “But I do think as we progress over the course of the year, you are going to see more and more of business being done like it used to be done than ever before.”

But profits have not necessarily returned in the same way. Delta’s fourth-quarter profits, for instance, were down about 25 percent from 2019, even as its revenue grew about 17 percent. Much of this can be attributed to higher expenses. While airlines had been able to charge higher ticket prices, they’ve had to deal with higher costs of jet fuel and, going forward, the expense of retraining and rehiring pilots that retired in 2020. “We are still bearing the cost to fully restore our network to the peak summer levels, with a continued emphasis on operational reliability during this ramp-up. We expect to complete our rebuild by the second half, with the majority of our flex fleet reactivated and training levels for our pilots reverting to historical levels,” Dan Janki, Delta’s chief financial officer, said on the call.

Going forward, the airline said that it would incur higher expenses if pilots ratify a contract that would raise their pay by over a third over a four-year period. Delta is one of many airlines that’s either in the process of or has recently signed a new contract with its pilots, which typically include double digit salary hikes.

The airline industry is not the only one that has had to face restive employees who are demanding more than they received before covid. According to the Bureau of Labor Statistics, the number of desk clerks at hotels is still short of its pre-covid level by about 18 percent, while the median wage they receive has increased by over 20 percent.

For travelers, this can translate to a combination of higher room rates and a seeming decline in quality of service, as hotels have fewer workers and have experienced even higher turnover than what is typical.

But wages for some hotel workers may have peaked — in this case desk clerks — even declining slightly from 2021 to 2022.

For corporate executives in the hotel business, this means good news going forward. “The labor market situation has eased a lot,” Chris Nassetta, Hilton’s chief executive, told analysts on the company’s most recent earnings call.

Things have gotten easier for Hilton, Nassetta explained. He said there are more people looking for work and that while the wages they were getting were still higher than they were before the pandemic, the rate of wage growth has significantly slowed.

“There are a lot of people who are getting pushed back out into the job market, and that’s affording us the opportunity to get the labor that we need,” Nasetta said.

“The wage pressures have moderated,” Leeny Oberg, Marriott’s chief financial officer, said on its call.


The travel industry, of which hotels and air travel are a part, is a subset of the services industry that makes up the greatest portion of economic output and employment.

For the Federal Reserve, wage growth in this sector has been particularly worrisome because in many service businesses, employee pay makes up a large portion of a business’s overall costs. If these earnings calls are any indication, things may be getting back to normal — for better or worse — faster than the Fed anticipates.

Thanks to Brett Zach for copy editing this article.