Travel sector is fastest growing in digital ad spending

DIGITAL SALES

Digital travel sales* continue to surge by double-digits, having surpassed pre-pandemic levels in 2022. This year, digital travel sales will grow 20.0% to $296.77 billion. For context, sales were $208.44 billion in 2019, before plummeting 50.0% in 2020. But by 2021, sales started growing by double-digits as Americans ventured back onto planes and cruise ships and into hotels.

“Digital travel sales are still experiencing a period of exceptional growth, as the rebound from 2020’s historic low continues,” said Ethan Cramer-Flood, principal forecasting writer at Insider Intelligence. “An abnormally large share of digital travel sales growth in the US is going towards international travel this year. This is disproportionately benefiting air carriers, while domestic hotels are seeing a little less of the boom.”

Last year, total online travel sales finally exceeded pre-pandemic levels, and this year, the total figure will reach nearly $300 billion, almost three times what we saw in 2020. Digital travel sales are now on pace to surpass $350 billion by the end of 2027.

TRAVEL DIGITAL AD SPENDING

The increase in digital travel sales has fueled double-digit increases in digital ad spend by the sector. After slashing spending amid the pandemic, the US travel industry is now the fastest growing sector in terms of digital advertising, outpacing the category as a whole; digital ad spending as a whole will grow 7.8% in the US in 2023. Travel will grow even more than retail, traditionally the biggest growth driver of the online ad market. But some sub-categories will grow their spend faster than others.

“Pent up consumer demand is expected to keep travel spending up through 2024,” forecasting analyst Oscar Orozco said. “Travel companies will follow suit by increasing their digital ad budgets, as competition among airlines, cruise ships, and online travel agencies for business is expected to intensify.”

This year, the US travel sector will grow its digital ad spending by 14.3% (compared to 12.2% for retail) to reach $6.79 billion, surpassing pre-pandemic levels for the first time. In 2019, the industry spent $6.31 billion on digital ads. Then in 2020, the travel sector slashed its spending a whopping 50.0%, as COVID-19 halted bookings. Since then, the industry has slowly rebounded, along with digital ad budgets. Over the next two years, double-digit growth will continue, putting spend on track to hit $8.77 billion in 2025, the highest level ever.

“The travel sector spends heavily on search advertising with over half of travel ad spending going to search formats,” said Evelyn Mitchell-Wolf, senior analyst at Insider Intelligence. “Given Google’s dominance in the search market, it will receive the biggest windfall from travel ad spending growth. But Google is also positioned to capture a sizable chunk of travel display ad dollars, having introduced targeted tools like Performance Max for travel goals to entice accommodations advertisers.”

The top spender of online ads within the travel sector is accommodations companies, such as hotels, Airbnb, and VRBO. The sub-category will grow its spend 10.9% to $2.70 billion, representing 39.7% of online travel ad spend. A close second is spending by the “other”** category, which includes tourism boards, online travel agencies (OTAs), travel agents, visitor centers, and car rental companies (complete list below). It will spend $2.68 billion on digital ads in 2023, up 16.5% over 2022.

The third highest spender of digital ads are airlines, accounting for 13.2% of travel spend. It’s also the fastest growing category, increasing spend 18.1% this year to reach $895.6 million. By next year, airlines will surpass their 2019 peak spending, reaching $1.09 billion, following a steep drop in 2020.

“Cruise lines, airlines, and OTAs are driving this rebound in digital ad spending,” Orozco said. “With occupancy rates surpassing 100% on some of the top cruise lines, many are reinvesting their profits into advertising. Airlines have also increased their budgets this year with demand for air travel at an all-time high. OTAs like Booking.com and Expedia have become go-to solutions for travel bookers searching for accommodations and flights.”

Lastly, the cruise industry will increase its digital ad spending 14.9% this year to $515.7 million. That’s still down sharply from its peak in 2019 of $790.7 million. We expect it won’t surpass that level of spend until after 2025.

*includes leisure and unmanaged business travel sales booked using the internet via any device, regardless of the method of payment or fulfillment

** tourism boards, destination marketing organizations, travel bureaus, country clubs, OTA’s, travel agents, travel websites, visitor centers, car rental companies and leisure and unmanaged business travel.

Methodology

Insider Intelligence forecasts and estimates are based on our proprietary analysis, and include both quantitative and qualitative data curated from public companies, government agencies, research and media firms, and interviews with expert executives in relevant fields. We regularly re-evaluate available data to ensure our forecasts reflect the latest business and economic  developments and trends.

About Insider Intelligence

Insider Intelligence is a leading research provider focused on digital transformation. We empower professionals with actionable data, insights, and analysis to make informed decisions in a digital world. Formed as a merger of eMarketer and Business Insider Intelligence in 2020, we produce nearly 200 forecasts, 300 reports, 7,000 charts, and 1,500 newsletters across the Advertising, Media, and Marketing; Financial Services; Healthcare; and Retail and Ecommerce industries. Insider Intelligence is a division of Axel Springer S.E.