Travel Industry Trends 2025: Insights on Demand and Shifting Preferences

Despite resilient interest in travel, the second quarter of 2025 reveals a cooling market. Rising economic uncertainty, changing consumer sentiment, and the continued effects of inflation and tariff policies are weighing on traveler behavior and slowing growth across the travel and tourism industries.

This quarter, we delve into new travel trends shaping investment opportunities, pricing strategies, and consumer preferences, from leisure trip plans to business travel headwinds.

In the Q2 2025 Travel Services Pulse report, we dig into US travel industry trends, future outlooks, and more.

Waning Consumer Sentiment Is Denting Travel Spending Growth

While inflation in the United States has moderated, consumer sentiment has weakened, leading to more conservative spending patterns. The Consumer Price Index, a key measure of inflation, dropped to 2.4% in May 2025, compared with a 2.6% average over the last 10 months. However, inflation expectations have increased, with consumers anticipating prices to rise 6.6% year over year, a sharp increase from under 3% in late 2024.

As a result, discretionary spending has slowed. Personal savings rose to $1.117 trillion in April, up from $765 billion in December. The personal savings rate increased to 4.9% of disposable income, up from 4.3% in the prior three months.

The allocation of discretionary income to goods has largely converged with services over the last year, affecting travel-related spending growth. Real services spending has averaged 2.5% growth over the last three months, while real goods spending has grown 4.2%.

Price Uncertainty Is Affecting Hotel Bookings

Price uncertainty is altering not only travel budgets but also the timing and type of bookings. Hotels, for instance, continue to push average daily rates higher, but occupancy rates have declined for six straight months. In April, occupancy dropped by 125 basis points year over year, suggesting that rate-focused strategies may now be encountering demand limits.

Economy hotels, in particular, have experienced softness. Their revenue per available room declined 3.9% in April and has averaged just 1.1% growth over the past 10 months, which is below long-term trends.

While shares of hotel and global distribution operators are up 19% over the past year as of June 3, we still see a few compelling investment opportunities in our travel-related coverage. Three companies in the lodging industry hold Morningstar Economic Moat Ratings of wide, indicating a durable competitive advantage:

• Marriott International MAR
• Hilton Worldwide Holdings HLT
• InterContinental Hotels Group IHG

Luxury Still Outperforms

High-end travel segments are outperforming. Luxury hotel revenue per available room remains above prepandemic levels thanks to resilient demand from higher-income travelers. Meanwhile, budget travel growth has underperformed recently amid economic pressure on low-income households.

Policy Uncertainty Leads to Travel Pauses

Tariff uncertainty has rippled across both the leisure and business travel segments. Global distribution system volume, often seen as a proxy for business travel bookings, declined. Sabre’s SABR bookings fell 2% in the first quarter of 2025 after growing in the prior quarter, while Amadeus’ AMADF volume growth decelerated to just 2% growth from 9%.

This softening reflects how trade policy concerns can directly affect consumer confidence and corporate travel decisions.

Leisure Travel Growth Remains Resilient, Business Travel Falters

Consumer intent to vacation has remained steady: 29% of respondents planned to take a trip in the next four months, consistent with April 2024 data. This ongoing demand supports cruise operators, online travel agencies, and hoteliers with leisure exposure.

Business conditions are expected to materially worsen over the next year, as shown in the University of Michigan’s index for expected business conditions, dropped to 59 in April 2025, down from 103 in November 2024. This highlights a potential drag on companies tied to corporate travel bookings like Sabre, Amadeus, and many of the hotel operators.

Remote work continues to support flexible travel schedules, especially for leisure travelers seeking longer stays and blended work/vacation experiences. While this shift remains a tailwind for travel companies, it is not enough to fully offset headwinds from broader economic caution.

Cruises Are Regaining Ground

Cruise lines are seeing robust demand. North American travelers often commit to cruising six months or longer in advance, providing cruise operators with near-term visibility on demand. Advance ticket sales from the top four publicly traded operators rose 4% year over year in first-quarter 2025, totaling more than $17 billion, surpassing prepandemic levels, when they held $10 billion in advance ticket sales in fourth-quarter 2019.

The cruises in our travel services coverage all hold Morningstar Economic Moat Ratings of narrow:

• Carnival Corporation CCL
• Royal Caribbean Cruises RCL
• Norwegian Cruise Line Holdings NCLH

The US Travel Industry Outlook in Numbers

Let’s break down how various travel sectors are performing and where attention is needed:

• Hotels: We estimate sales can increase 4% on average in 2025, supported by international demand and group bookings. While occupancy levels have dipped, average daily room rates continue to climb, reflecting hoteliers’ strategies to maintain revenue amid reduced volume.
• Online Travel Agencies: We expect 5% average sales growth, driven by increasing mobile penetration and alternative accommodation options.
• Cruising: Buoyed by new ship launches and higher spending, cruise sales are estimated to grow at 7%.
• Global Distribution Systems: Our forecast calls for a 7% sales growth forecast, benefiting from pricing gains and further recovery in business travel.

Top Picks for Travel Investment in 2025

Despite the softened economic landscape, investment opportunities exist within the travel sector. Here are the companies that stand out to our analysts:

Norwegian Cruise Line Holdings: Norwegian leverages strategic marketing to fill ships without heavy discounting. Coupled with capacity growth, its forecast earnings before interest, taxes, depreciation, and amortization margins are close to prepandemic levels (31% in 2019), offering a positive long-term outlook.

Carnival Corporation: Carnival is capitalizing on its market position to improve revenue through managed price increases and limited capital expenditures. At the end of March, the vast majority of 2025 was already booked, and 2026 bookings and pricing were at all-time highs, which gives confidence that near-term pricing risk is limited. This makes it an attractive option for long-term investment.

Tripadvisor TRIP: While facing competition in the metasearch segment, Tripadvisor remains a strong contender in the experiences and dining verticals. We expect consolidated operating margins to hold steady, with revenue growth averaging 10% annually through 2034.

These picks reflect a strategic balance of undervalued stocks and businesses poised for stable growth across targeted travel sectors.