Advertising in the travel industry is booming despite economic uncertainty

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

Soaring inflation has led to cuts in marketing spend in areas like crypto, finance and auto, but the travel industry has massively increased TV advertising as consumers are locked in by the pandemic and plan their grand escapes.

The travel industry — including airlines, cruise lines, and travel websites — spent $559 million on television advertising from January 1 through June 30, a 151% increase from the $223 million these companies spent in the same period spent on TV advertising in 2021, according to estimates by TV measurement company iSpot.

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

Travel has been a bright spot for advertising agencies amid declining spending in areas like autos and finance.

WPP CEO Mark Read said in his second-quarter 2022 earnings call that its travel customer business grew 23% in the first half of the year, although that’s still about 10% below 2019 levels.

Here’s what travel companies like Airbnb and Booking Holdings, the parent company of online booking companies like Priceline.com and Kayak, achieved by increasing their ad spend in the first half of the year.

Cruise lines are focused on attracting new customers

Carnival CEO Arnold Donald said on the company’s recent conference call that the second quarter marked the first time since the pandemic that the company had spent more on advertising than it did in 2019. He said Carnival’s marketing efforts focused on people who have never taken a cruise before are now showing interest.

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

Royal Caribbean Cruises President and CEO Jason Liberty said the company will increase marketing spend in the fourth quarter. With more and more people shopping online, Royal Caribbean has managed to get people to book additional shows and activities before boarding.

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

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

Online booking companies are returning to pre-pandemic levels of ad spend

Marketing spend for Booking Holdings increased 27% in Q2 2022 compared to Q2 2019. The return on investment exceeded the company’s expectations, said David Goulden, EVP and Chief Financial Officer of Booking Holdings, during the company’s recent conference call.

TripAdvisor ramped up its advertising in the second quarter, seeing more returning customers and higher conversions than 2018-2019, TripAdvisor SVP and CFO Ernst Teunissen said on the company’s conference call.

The Expedia Group also relies on loyalty. CEO Peter Kern said the company invests in its loyalty programs and that members get twice as many repeat business compared to non-members. Expedia also increased its investments in direct selling and marketing to $1.5 billion in Q2 2022, a 12% increase from Q2 2019.

Airbnb took a more cautious approach to marketing during its earnings call. Brian Chesky, the company’s co-founder and CEO, said Airbnb will slightly increase its marketing spend throughout the year compared to 2021 to capitalize on pent-up consumer demand for travel.

“Next, we need to make sure that once people are ready to travel, our product will continue to be updated and we’ll have the marketing campaign ready to go,” Chesky said.

National airlines spend a lot on marketing, but international airlines don’t

According to Kantar estimates, domestic airlines increased their advertising spend in Q1 2022 to $63 million from $23.6 million in Q1 2019.

Southwest Airlines said during the win that it attracted customers by marketing the fact that it would not charge for changing flights or checking bags. “That can lower the barrier to purchase for people,” said Chief Commercial Officer Andrew Watterson.

While United Airlines lost money when it decided to permanently eliminate rebooking fees, it was able to offset those losses by selling services like seat upgrades, Chief Commercial Officer Andrew Nocella said during the company’s conference call. Marketing was key to these sales.

“I have full credit for our digital team and our app and marketing on these things, and we’re accelerating on that front,” said Nocella.

But adspend by international airlines is far from returning to pre-pandemic levels. Foreign airline advertising spend was US$16 million in the first quarter of 2022, compared to US$41 million in the first quarter of 2019.

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

Some airlines don’t need to do marketing to drive demand. Swiss low-cost airline EasyJet, for example, said on its first-quarter earnings call that it had scaled back marketing spend as capacity without them reached 2019 levels.

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