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Originally published March 10, 2022

The travel and tourism sector has been ravaged by COVID-19 concerns, mandatory closures and international mobility restrictions. In 2020, the global travel and tourism industry lost $4.5 trillion. Particularly affected, the sector’s overall contribution to GDP fell by 49.1%, from 10.4% in 2019 to 5.5% in 2020, compared to a drop in global GDP of 3.7%. Spending by international visitors fell 69.4%, while spending by domestic visitors fell 45%.

2021 has given us a glimpse of the potential for growth that could come with reduced restrictions and greater consumer confidence. The US DOT said the volume of flights operated in 2021 was around 6.2 million. While this is certainly above 2020 levels, this value represents only 78% of the volume of flights operated before the pandemic in 2019 (7.9 million). Thus, the industry still has many opportunities for expansion.

Rising vaccination levels are beginning to ease traveler concerns, and as the travel industry recovers from the pandemic-related hit, travel tech companies are understandably poised to reap the benefits. Consumers are increasingly relying on online travel agencies (OTAs) and ride-sharing technologies to access travel-related services in a much more convenient and cost-effective way compared to traditional offline services. The online travel booking platform market alone is expected to grow at a CAGR of 4.91% over the period 2022-2026 to reach $204.81 billion. As for the global ridesharing market, it is expected to reach USD 61.24 billion by 2026, growing at a CAGR of 17.32% from 2021 to 2026.

The Work from Wherever (WFW) Movement

The COVID-19 pandemic has spawned the Work from Home Era (WFH), a trend that is expected to continue for the foreseeable future. Of the 127 business leaders surveyed by Gartner, Inc., 82% plan to allow at least some remote work, and nearly half (47%) said they plan to allow employees to work remotely. full-time remotely in the future. This flexibility gives workers a unique opportunity to store their laptops and combine leisure travel and remote work; we are already seeing these employees take advantage of it.

Travelers intending to work while away exhibit a unique set of characteristics that define the new wave of WFW. They have above-average spending power, saving an average of $4,000 a year on expenses, often associated with office work – commuting, street attire, dining out, etc. In addition, they have greater flexibility with travel dates. To serve this preference, short-term rental companies like Airbnb (ABNB) and Vrbo (EXPE) have added an option for flexible dates.

Remote work may exacerbate the rise of vacation rentals as the preferred form of accommodation. A key characteristic of the working holidaymaker is the need for a work-friendly space. Their needs include a quiet and comfortable workspace, as well as fast and reliable Wi-Fi. Short-term rental companies are poised to meet this need and capitalize on the remote work trend, as they typically offer more office space than the typical hotel room. These companies have worked to improve their features to meet the needs of working vacationers. For example, in 2021, Airbnb released a feature that allowed travelers to check the listing’s Wi-Fi speed before booking.

WFW travelers also possess a greater ability to take extended trips. Not only were working travelers planning twice as many trips as those planning to disconnect completely, but more than half of employed vacationers were adding 3 or more days to the length of their longest leisure trip. In February 2021, 11% of remote workers surveyed said they had taken long commutes due to the flexibility of remote work; in early October 2021, that number rose to 23%. With more companies offering flexible remote work opportunities, we expect the travel industry to continue to capture this growth due to the WFW trend.

The year of the “GOAT”

In addition to those who mix work and leisure, 2022 could see an increase in luxury travel as pent-up demand for international travel is unleashed amid stabilizing health conditions and easing border restrictions. For this reason, Expedia calls 2022 the year of the “GOAT” (the greatest of all trips). In a survey of 12,000 travelers in 12 countries, Expedia found that more than two-thirds of Americans (68%) plan to go far on their next trip, eyeing international destinations like Rome, Bali, London and Paris. .^ten Travelers around the world are eager to make up for lost time and go big on their next trip after a long period of canceled trips and postponed celebrations. According to a November report compiled by WTTC and Trip.com, 70% of leisure travelers in the US, UK, Canada, Japan and Spain expect and plan to spend more money in trips in 2022 than they have in the past five years. years. Looking ahead, the future of the travel industry looks bright, as high-income households have seen their savings increase alongside growing demand for travel.

Carpooling

The global ridesharing industry saw an approximately 17% decline in revenue generation in 2020 compared to 2019. Lockdowns reduced the need to travel too far from home, and consumers remained hesitant to use the ride-sharing services, even after lockdown orders are lifted. To promote passenger and driver confidence in safety and hygiene, ride-sharing companies like Uber (UBER) and Lyft (LYFT) have implemented safety measures to ease the concerns of passengers and drivers. Things are starting to look up for the shared mobility market, with an expected CAGR of 16.7% over the period 2021-2030.

This is motivated by several factors. First, many local travelers still feel uncomfortable with overcrowded public transit options, driving demand for more comfortable intercity travel patterns. Ride-sharing companies have implemented safety protocols to mitigate this issue, introducing physical partitions between drivers and passengers and requiring the wearing of masks for the duration of the ride. Second, the rising cost of owning a private vehicle due to rising fuel, maintenance, and insurance costs has led to a decline in car ownership among 18-year-olds. to 35 in recent years. Millennials’ and Gen X’s preference for carpooling over outright car ownership has been linked to the perceived time and cost benefits of shared mobility, as well as their desire technology and services on demand.

In its third-quarter 2021 financial results announcement, Uber said gross bookings hit a record high of $23.1 billion, up 57% year-on-year, with revenue up 72% year-on-year. same period. Lyft saw similar results, reporting 73% year-over-year revenue growth in Q3 2021. We believe we’ll continue to see similar growth over the next few years as consumers become more comfortable with the state of public health.

Conclusion

Over the past decade, travel technology has evolved from a niche concept to a primary means of sourcing and booking travel services. Although the COVID-19 pandemic has devastated the travel and tourism industry, causing losses of nearly $4.5 trillion, rising vaccination levels and easing government restrictions raise hopes for a strong return for the industry. As we look to the future of a post-COVID-19 world, we believe travel tech companies are poised to not only capture residual growth, but also help propel the industry forward. forward through technological advancements to meet changing consumer preferences.

Capture pent-up demand for global travel and tourism with the ETFMG Travel Tech ETF (AWAY), the first ETF to offer investors access to top tech companies at the forefront of travel bookings, advice, comparisons prices and carpooling.

The companies mentioned in this article may or may not be current holdings in any of the funds managed by ETF Managers Group LLC. Credits are subject to change without notice.

Original post

Editor’s note: The summary bullet points for this article were chosen by the Seeking Alpha editors.