Resilient tourists help US travel firms absorb Middle East shock
By Anshuman Tripathy
US Travel Industry Performance Amid Middle East Conflict
July 28 (Reuters) - Early earnings reports show travel companies, from hotel chains to cruise operators, have relied on resilient U.S. business and leisure demand, coupled with a short-term boost from the World Cup, to offset the drag from the war in the Middle East.
The conflict has raised fuel costs and disrupted international travel. But earnings reports on Tuesday suggest many consumers, particularly higher-income travelers, are undaunted by the economic uncertainty and higher travel costs.
Trends Among US Travelers
"JetBlue, Hilton, and Royal Caribbean all highlighted continued strength in higher-value products, suggesting that many travelers are still prioritizing experiences even as they become more selective with discretionary spending," said Brian Rooney, founder of travel advisory firm GetCruiseInfo.com.
"These results reinforce that we're still seeing a K-shaped travel economy. Higher-income travelers continue booking premium experiences, while value-conscious travelers are adjusting when and how they travel rather than giving up vacations altogether."
Hotel Sector Resilience
Hilton Worldwide Holdings raised its forecast for full-year room revenue growth, fueled by robust demand from its luxury properties and expected third-quarter benefits from the World Cup, even as the U.S. hotel operator's room revenue from its Middle East and Africa region plummeted 29.5% from the year-ago period.
The World Cup boosted earnings in the quarter, but the biggest turnaround was from mid-scale hotels that benefited from business and group travel demand, Hilton CEO Christopher Nassetta said in an earnings call.
The soccer event contributed about 1.7% growth in RevPAR (room revenue) in the second quarter for Hilton.
Impact of the World Cup on Spending
Visa, the world's largest payment processor, also noted a boost from the event.
"Total card-present spend in the U.S. accelerated, with card-present transactions rising as much as 20% in select host cities on match days during the FIFA World Cup," Chief Financial Officer Chris Suh said on a post-earnings call.
"By spend categories in host cities, entertainment and restaurants saw the highest growth in cross-border spend."
Cruise and Airline Industry Responses
Cruise operator Royal Caribbean raised its annual profit forecast, but trimmed its revenue growth outlook as it factored in a modest hit to bookings from prolonged geopolitical tensions.
The Miami, Florida-based company reported a 27% rise in quarterly fuel expenses to $355 million from a year earlier, but slightly reduced its full-year fuel expense forecast to about $1.34 billion from $1.35 billion.
"Consumer demand for our vacation experiences is strong, and guests continue to demonstrate a desire to spend on memorable experiences with us," said Naftali Holtz, Royal Caribbean's finance chief.
Airline Sector Challenges
Airlines have borne the brunt of the war in Iran. Although most U.S. carriers recouped nearly half of the additional fuel costs triggered by the conflict in the second quarter, their profit outlook remains uncertain.
Airfares, meanwhile, are expected to stay high.
JetBlue Airways said stronger demand and higher fares helped it recover more of its fuel costs than expected, even as the New York-based airline's quarterly fuel bill ballooned nearly 81%, or roughly $407 million.
"Nobody loves fare increases, but at the end of the day, it's the business where we have to cover our costs," JetBlue President Marty St. George said during an earnings call.
The airline said its visibility into the back half of the year has improved as volatile fuel prices stemming from the war have moderated.
Luxury Travel Remains Strong
"Luxury has always been the most resilient sector and travel is the most resilient sector of luxury. It's hard to tell your household that you're cutting or skipping the family holiday," said Adam Sebba, CEO of London-based luxury travel company The Luminaire.
(Reporting by Anshuman Tripathy and Aishwarya Jain in Bengaluru, Editing by Arpan Varghese, Sahal Muhammed and Sherry Jacob-Phillips)
