Growth Forecast for the Travel Industry

02 July 2021

Visit our Travel Industry ETF fund page to learn more about the fund. 


Growth forecast

The post-pandemic recovery of the airline, hotel, and cruise line sectors will be gradual, with only the cruise line sector regaining and surpassing its 2019 level by 2024.

Projected Growth of the Airline, Hotel and Cruise Line Sectors, 2019-2024 (Billion USD) 

Source: See text below



Total airline sector revenues are not expected to regain their pre-pandemic levels until 2025.  However, in May 2021 Moody’s Investors Service upgraded its outlook for the global airline sector to positive from negative, in anticipation that its fundamentals will significantly improve over the next 12 – 18 months.[1] 

Domestic leisure travel is expected to drive increased passenger traffic in the near term, led by the Chinese, US and Australian markets. Increased business and long-haul international travel should emerge as major growth drivers in the middle term.

Moody's expects the airline sector to sustain operating losses and negative operating margins for all of 2021, although to a lesser degree than in 2020. Meanwhile, steps the airlines took in 2020 to reduce costs, especially labor costs, have paved the way for improved operating margins going forward.

On the negative side, airlines will have to start whittling away at the more than $220 billion of debt they have amassed since the start of the pandemic. Absent a major equity injection, airline’ debt burden could significantly weaken their ability to finance crucial investments, particularly in more fuel-efficient aircraft.


It is expected it will take more than five years for the hotel sector to recover from the effects of the pandemic. In 2022, revenues are projected to reach $553 billion, or $257 billion less than in 2019.  In 2024, hotels around the world are forecast to generate $622 billion in revenue.[2] 

Like airlines and cruise lines, the pandemic has forced many hotels to adopt a leaner business model, lowering the occupancy rate at which they can still make money.  Earlier we saw how hotel operators in the U.S. and major Asia-Pacific markets managed to maintain a positive gross operating profit per room  for all of 2020, although unfortunately their European counterparts did not do as well.

Of course, hotels’ greater levels of operating efficiency do not tell the entire story; the ability to generate an “operating profit” is of limited benefit to hotel owners, lenders, and investors that depend on EBITDA profits.  Although the average break-even occupancy dropped from 47% to 30% in 2020 for the full-service hotels and from 43% to 36% for limited-service hotels, it is difficult to generate an EBITDA profit at an occupancy rate much less than 43%, according to the hotel research firm CBRE[3]. 

Average occupancy rates have been improving in 2021.  Although worldwide occupancy data are unavailable, the U.S. weekly room occupancy rate reached 57% in the first week of May 2021.  Other recent occupancy figures according to STR include 58% in Beijing, 57% in Sydney, Australia, 60% in Dubai and 29% in London.[4]  London’s low occupancy rate underscores the challenge faced by European hotels as they seek to return to profitability. 

Hotel occupancy rates are expected to continue to improve, presaging a return to pre-pandemic profitability levels.  For example, STR predicts U.S. hotel demand will fully recover by 2023.[5] 


Cruise lines

The final theme of our Travel Industry ETF is the cruise line industry. Although cruise lines took the biggest hit from COVID-19, they appear on track to erase their pandemic-related losses by 2023, or somewhat sooner than airlines or hotels.  Following the global pause in cruise operations in March 2020, cruises resumed sailing in parts of Europe, Asia and the South Pacific beginning in July 2020. From early July through mid-December 2020, there were more than 200 sailings.[6] 

The success of these initial sailings put the sector on a path toward resumption of cruises in the United States, Canada, Mexico, the Caribbean and elsewhere by the end of 2021. Several cruise lines have reported they are seeing strong bookings for 2021 and 2022. A Cruise Lines International Association (CLIA) study survey found that 74% of past cruise passengers are likely to cruise again in the next few years, and 58% of international travelers who have never cruised are likely to cruise in the next few years.[7]  By 2024, total cruise line revenues are expected to exceed $29 billion, or 5.8% above the 2019 level.[8] 

Although a number of smaller cruise operators have been forced out of business by the pandemic, big publicly-traded operators like Carnival, Royal Caribbean and Norwegian are financially solid, as a result of cash conservation efforts and liquidity measures.  On May 11, 2012, Carnival shares were trading at $26 per share, compared with $12 a year earlier.[9]  Royal Caribbean and Norwegian Cruise Lines share prices have likewise trended upwards, i.e., from $35 to $81 and $10 to $28 respectively.[10] 

Meanwhile, hotel managers have demonstrated their ability to adapt to a challenging situation and control variable costs.



Travel is reaching a turning point in the Spring of 2021, as illustrated by the following two charts. The charts also emphasize that the recovery has been uneven among different sectors and geographical markets.

Source: UNWTO,


These lessons have not been lost on investors.  Increased investor confidence in the outlook for airlines, hotels, and cruise lines is reflected in stock prices.  The Solactive Airlines, Hotels, Cruise Lines Index has risen from $56.66 on May 12, 2020 to $102.64 one year later.[11]  There an abundance of attractive investment opportunities in these industries, companies that have achieved impressive operating efficiencies in order to survive the pandemic and now can anticipate rapid growth in their markets. 

The post-COVID economy will differ from the economy that existed up to early 2020, in ways that are only gradually becoming clear.  Significant risks also remain,  such as the possibility of a vaccine-resistant coronavirus emerging to plunge the world back into lockdown.  Nevertheless, the opportunities are there for investors who carefully consider business fundamentals as well as the new market realities. For more information on this opportunity, please view our Travel Industry ETF fund page here.


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