Travel Industry Tendencies 2025 | Morgan Stanley

The busiest time of the 12 months for the journey trade started with warmer-than-average temperatures in Europe and the U.S., fewer flight delays than final 12 months, and resilience amongst American shoppers. Those developments are influencing shoppers’ trip plans and the outlook for firms’ earnings.

Here are key takeaways from Morgan Stanley Research:

Americans Want to Keep Traveling

U.S. shoppers’ intentions to journey stay strong, regardless of financial uncertainties. A Morgan Stanley AlphaWise survey performed in June confirmed that 61% of shoppers expect to journey throughout the subsequent six months. It’s a bit above the outcomes of May (59%) and June of final 12 months (60%).

Although the quantity remains to be beneath the 64% reached within the survey carried out in March, earlier than the announcement of latest U.S. tariffs, the slight restoration in sentiment is boosting optimism within the journey trade.

The June survey additionally confirmed that fewer shoppers (33%) are planning to cut back spending in response to tariffs. In April, after the so-called Liberation Day, that quantity rose to 42%, with journey in second place among the many classes more than likely to be reduce, solely behind meals away from house.

Record-Breaking Temperatures

Europe skilled two heatwaves in mid- and late-June to early-July. June was the warmest on document in Western Europe. During the second heatwave, temperatures exceeded 40° C (104° F) in a number of nations and reached 46° C (115° F) in Spain and Portugal.

The the rest of the summer season is predicted to be hotter and drier than common for many of Europe.

Meanwhile, a U.S. heatwave in June impacted practically half of the nation’s inhabitants, with temperatures setting new document highs in a number of cities on the east coast.

The hotter-than-average climate may affect each the place and the way shoppers spend their trip and leisure time, in the end affecting companies.  

“In the hotel sector, ‘coolcations,’ or destinations with cooler climate, are an emerging theme, with consumers looking to escape the heat,” says Jamie Rollo, who leads Morgan Stanley’s Europe Travel & Leisure Research. “For pubs and restaurants, whilst those with more outdoor space are likely to benefit, very hot weather may drive people to stay home.”

Flight Delays Decline in Europe

The enhance in journey volumes inevitably results in extra flight delays as airports change into stretched. Delays fear each shoppers and airways. In Europe, airways might have to supply passengers compensations of €250 to €600, relying on the delay and flight size.

The excellent news is that, to date this 12 months, the typical delay in Europe was 11.1 minutes, 5% lower than final 12 months and a couple of% beneath pre-Covid ranges.

“We note that last year also showed an encouraging start, but delays jumped in June and July due to air traffic control strikes, the CrowdStrike IT outage, airspace restrictions and weather disruption,” Rollo says. “Given that there are still periodic labor strikes in France, the weather has been very hot, and the airspace remains busy, we caution against expecting a disruption-free summer holiday in Europe.” 

Fewer Foreigners Visiting the U.S.

Recent knowledge from U.S. transportation companies and airways affirm that Americans haven’t diminished their travels throughout the nation or overseas.

However, worldwide arrivals of non-American residents into the U.S. decreased 7% in June from a 12 months earlier and remained 17% beneath 2019, or pre-pandemic ranges.

“It’s not a surprise that non-U.S. citizen international arrivals decline amidst heightened geopolitical uncertainty,” says Ravi Shanker, who covers the North American transportation trade at Morgan Stanley. “That said, this decline does not appear to be nearly as deep or broad as feared earlier this year.”

Optimism From U.S. Airlines

Preliminary second-quarter earnings from the sector confirmed that U.S. airways are cautiously optimistic that journey demand is returning to the conventional trendline anticipated at the start of the 12 months.

Initial earnings and steering for the remainder of 2025 have been above consensus estimates. Additionally, U.S. airways highlighted the energy in bookings of premium seats, their most worthwhile ones.

“Industry results reflect stable demand in the consumer and corporate traveler, and diverse revenue streams remain resilient,” Shanker says. “We believe capacity cuts and a consumer that still wants to travel could set up a healthy demand-supply environment.”

Cruise Lines Holding Prices Up

The cruise line sector is coping with extra weak point in bookings, which declined in June each on a month-to-month and a yearly foundation.

“Agents cited weaker consumer confidence, fears around the conflict in the Middle East and concerns about the perception and treatment of Americans abroad as reasons behind the weaker results,” Rollo says.

However, cruise line operators have been in a position to maintain up costs, with tickets rising about 10% year-over-year. Additionally, about 85% of capability for the second half of this 12 months has been bought. Companies are actually specializing in gross sales for 2026 and past.

The introduction of personal islands is popping right into a win-win initiative for cruise strains. By providing their very own land-based locations, the trade creates a superior, managed setting completely for his or her visitors, captures high-margin income misplaced to third-party distributors and reduces gasoline and port prices. 

Luxury Hotels Outperforming

In the lodging sector, income per accessible room (RevPAR) decelerated within the second quarter.

“Data generally remains dull in both Europe and the U.S. for hotels,” Rollo says.

However, RevPAR within the U.S. luxurious phase grew 4% from a 12 months earlier, outperforming the economic system phase, the place RevPAR declined 3%.

“These data points to a more resilient higher-end consumer,” Rollo says.