Here are key takeaways from Morgan Stanley Research:
Americans Want to Keep Traveling
U.S. consumers’ intentions to travel remain solid, despite economic uncertainties. A Morgan Stanley AlphaWise survey conducted in June showed that 61% of consumers are expecting to travel within the next six months. It’s a little above the results of May (59%) and June of last year (60%).
Although the number is still below the 64% reached in the survey carried out in March, before the announcement of new U.S. tariffs, the slight recovery in sentiment is boosting optimism in the travel industry.
The June survey also showed that fewer consumers (33%) are planning to reduce spending in response to tariffs. In April, after the so-called Liberation Day, that number rose to 42%, with travel in second place among the categories most likely to be cut back, only behind food away from home.
Record-Breaking Temperatures
Europe experienced two heatwaves in mid- and late-June to early-July. June was the warmest on record in Western Europe. During the second heatwave, temperatures exceeded 40° C (104° F) in several countries and reached 46° C (115° F) in Spain and Portugal.
The remainder of the summer is expected to be warmer and drier than average for most of Europe.
Meanwhile, a U.S. heatwave in June impacted nearly half of the country’s population, with temperatures setting new record highs in several cities on the east coast.
The hotter-than-average weather could influence both where and how consumers spend their vacation and leisure time, ultimately affecting businesses.
“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.”
Fewer Foreigners Visiting the U.S.
Recent data from U.S. transportation agencies and airlines confirm that Americans haven’t reduced their travels within the country or abroad.
However, international arrivals of non-American citizens into the U.S. decreased 7% in June from a year earlier and remained 17% below 2019, or pre-pandemic levels.
“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 industry 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 showed that U.S. airlines are cautiously optimistic that travel demand is returning to the normal trendline expected at the beginning of the year.
Initial earnings and guidance for the rest of 2025 were above consensus estimates. Additionally, U.S. airlines highlighted the strength in bookings of premium seats, their most profitable 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.”
