Advertising in the travel industry is booming despite economic uncertainty

  • Economic uncertainty has caused marketers to cut their advertising budgets.
  • But consumers are traveling and companies like Booking Holdings and Carnival are increasing advertising spending.
  • The travel industry increased TV ad spending by 151% in the first half of this year, according to iSpot.

Rising inflation has led to cuts in marketing spending in areas such as crypto, finance and autos, but the travel industry has ramped up TV advertising massively as consumers shut down by the pandemic plan their epic getaways.

The travel industry — including airlines, cruise lines and travel websites — spent $559 million on TV ads from Jan. 1 to June 30, a 151 percent increase from the $223 million those companies spent on TV ads during the same period of time in 2021, according to estimates from TV measurement company iSpot.

After halting ad spending in 2020, these companies have almost returned to pre-pandemic spending levels. Travel companies spent $585 million on TV ads in the first half of 2019, according to iSpot.

Travel is a bright spot for ad agencies amid falling spending in areas such as automotive and finance.

WPP CEO Mark Reed said during his Q2 2022 earnings call that its business from travel customers grew 23% in the first half of the year, although that was still around 10% below 2019 levels.

That’s what travel companies including Airbnb and Booking Holdings, parent of online booking companies like Priceline.com and Kayak, said they were able to achieve by increasing their advertising spending in the first half of the year.

Cruise lines are focused on attracting new customers

Carnival CEO Arnold Donald said during the company’s recent earnings call that the second quarter was the first time since the pandemic that the company spent more on advertising than it did in 2019. He said Carnival’s marketing efforts are aimed to people who have never been on a cruise before but are now interested.

“We have begun to step up our advertising efforts selectively to help attract first-time cruise ships,” Donald said.

Royal Caribbean Cruises President and CEO Jason Liberty said the company will increase marketing spending in Q4. As more people shop online, Royal Caribbean has been able to get people to book additional shows and activities before boarding.

“I believe everything we’ve done with our pre-cruise marketing is really proving to be very effective,” Liberty said.

The company’s YouTube blog, for example, shows customers what they can book before their cruise.

Online booking companies are returning to pre-pandemic ad spending levels

Marketing spending for Booking Holdings increased 27% in the second quarter of 2022 compared to the second quarter of 2019. The return on investment exceeded the company’s expectations, said David Gulden, Booking Holdings’ executive vice president and chief financial officer, during on the company’s recent earnings call.

TripAdvisor boosted its advertising in the second quarter and saw more repeat customers and higher conversions than in 2018-2019, TripAdvisor senior vice president and CFO Ernst Theunissen said on the company’s earnings call.

Expedia Group also focuses on loyalty. Chief executive Peter Kern said the company was investing in its loyalty programs and that members had twice as much repeat business as non-members. Expedia also increased its investment in direct sales and marketing to $1.5 billion in the second quarter of 2022, a 12% increase over the second quarter of 2019.

Airbnb, during its earnings call, took a more cautious approach to marketing. The company’s co-founder and CEO Brian Chesky said Airbnb will modestly increase its marketing spend in the year compared to 2021 to take advantage of pent-up consumer demand for travel.

“The next thing is just making sure that once people are ready to travel, our product continues to be updated and we have a marketing campaign ready,” Chesky said.

Domestic airlines spend heavily on marketing, but international airlines do not

Domestic airlines increased advertising spending to $63 million in the first quarter of 2022 from $23.6 million in the first quarter of 2019, according to Kantar estimates.

Southwest Airlines said during earnings that it attracted customers by touting the fact that it would not charge fees for changing flights or checking bags. “It can lower the barriers for people to buy,” chief commercial officer Andrew Watterson said.

Although United Airlines lost money when it decided to get rid of change fees for good, it made up for those losses by selling services like seat upgrades, Chief Commercial Officer Andrew Nocella said on the company’s earnings call. Marketing was the key to making those sales.

“I give all the credit to our digital team and our app and the way we market to these things, and we’re accelerating on that front,” Nocella said.

But international airline advertising spending is far from returning to pre-pandemic levels. Foreign airline advertising spending was $16 million in Q1 2022, compared to $41 million in Q1 2019.

Despite a recovery in travel over the summer, many international airlines have not invested heavily in marketing as they grapple with staff shortages that are forcing them to cancel flights.

Some airlines don’t need a market to drive demand. Low-cost Swiss airline EasyJet, for example, said in its first-quarter earnings call that it had cut marketing costs as capacity reached 2019 levels without it.

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