2023 Travel Outlook May Be Dimming as Prices Clash With Layoffs and Inflation
BY PYMNTS | APRIL 10, 2023
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Even as pent-up travel demand was unleashed throughout 2022 with airlines and lodgings firms reporting strong performance and outlook, the word “uncertainty” was used a lot and could be taking a more definable form as doubt has entered the picture for the travel sector in 2023.
While airline stocks soared on the 2022 travel resurgence as COVID restrictions fell like dominos across Europe, then ultimately Asia, some operators sounded notes of caution in fourth-quarter earnings reports, or more accurately, their outlooks for 2023.
Vacation home rental platform Vacasa was among those readying investors and analysts for an “anything could happen” year in 2023. On its Q4 earnings call on March 14, Vacasa CEO Rob Greyber said, “Today, we are operating in an environment that is more dynamic relative to the prior two record years. While I’m optimistic about Vacasa’s long-term potential, I see challenges which are fixable, but not yet fixed.”
Using language like “As the industry exits this period of record growth…” strikes a less bullish tone than was heard throughout the travel and hospitality sector through 2022, and Greyber also pointed to the fact that Vacasa had reduced its workforce by 17% in the preceding months.
Some of the rumblings are coming from Wall Street analysts weighing widespread layoffs across the tech sector against record-high prices for airfares, hotel rooms and restaurant meals, all of which spiked last year as inflation hit 40-year highs. Yet demand was undimmed to year’s end.
In January, however, Barron’s reported, “Analysts are getting jittery about online travel stocks, as the economy softens both in the U.S. and Europe. Concerns about the outlook spurred downgrades Wednesday for both Booking Holdings and Airbnb,” each of which handed in strong financials in Q4 and throughout last year.
The “jitters” are on a 2023 outlook where the ranks of high-paid luxury travelers have thinned, with the axe falling hardest in the tech sector, causing ripples into finance and adjacent areas. And with households living paycheck to paycheck trading down and cutting back on nonessentials, they’re unlikely to pick up the slack on pricey vacation travel and dining.
Analysts’ warnings should always be taken with a grain of salt, but major stock indexes are another matter. As CNBC reported in March, “The NYSE Arca Airline index, which includes mostly U.S. carriers, was down about 6% Wednesday afternoon, on track for its biggest one-day percentage decline since last June. It outpaced a drop in the S&P 500.”
PYMNTS research also recorded a dip in consumer sentiment into the first quarter as inflation and rising interest rates took their toll.
According to the New Reality Check: The Paycheck-to-Paycheck Report — The Economic Outlook And Sentiment Edition, a collaboration with LendingClub, “With inflationary pressures dampening their optimism, many consumers are likely to shy away from large purchases in 2023, primarily electronics, appliances and leisure travel. Only 35% of consumers said they will incur leisure travel expenses in 2023, and just 24% plan to purchase expensive electronics or appliances in 2023.”
Issues for airlines — most of which had exceptional years in 2022 — include ongoing high fuel prices and labor shortages. Still, consumer demand is the true wildcard and something no one can accurately predict. But sky-high airfares and lodgings prices may prove unsustainable.
Additional PYMNTS data gathered in March from a sample of over 2,100 U.S. consumers found that people are dialing back travel plans, with almost 43% of respondents saying they’ll choose lower-cost travel providers, close to 42% saying they’ll opt to stay with friends/family over booking hotels or home shares, and just over 40% saying they’ll stay at home more often.
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SEE MORE IN: AIRBNB, ECONOMY, EDITOR’S PICKS, INFLATION, NEWS, TRAVEL, TRAVEL PAYMENTS, VACASA, VACATION RENTALS, VRBO
FTX Lawyers Recover Billions and Bill Millions Investigating Exchange Reboot
BY PYMNTS | APRIL 13, 2023
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FTX’s collapse destabilized the global cryptocurrency market and left creditors with $11.6 billion in claims.
Now, lawyers for the bankrupt crypto exchange are considering giving the business another shot.
As of Wednesday (April 12), the FTX Debtors have recovered $7.3 billion in total assets.
Per recent court filings, and as discussed during a hearing Wednesday before federal bankruptcy judge John Dorsey, attorneys for FTX have been exploring the feasibility of rebooting the crypto exchange to help close the asset-claim gap and make FTX’s millions of customers whole again.
This comes just days after the FTX Debtors took harsh aim at the company’s operations and prior management team, including disgraced paper billionaire founder and alleged criminal Sam Bankman-Fried, in their latest report.
Bankman-Fried, 31, has maintained his innocence in the face of more than a dozen charges being levied against him.
“The situation has stabilized, and the dumpster fire is out,” Sullivan & Cromwell (S&C) attorney Andy Dietderich said during the hearing as he outlined S&C’s “Q2 2023 exchange restart assessment.”
FTX co-founder and engineering leader Gary Wang, who has admitted guilt to four criminal charges relating to the company’s collapse and is cooperating with federal authorities, gave “material assistance” to help debtors recover more assets, lawyers told the court.
Read also: FTX Debtors Say ‘Greed and Incompetence’ Triggered Collapse
Legal Bills Show FTX Team Is Exploring Rebooting Crypto Exchange
FTX’s new CEO, John J. Ray, is tasked with creating as much value as possible for the bankrupt exchange’s creditors, including assessing whether undertaking a revival of FTX would create more value than just selling off the company’s existing assets.
A presentation filed with the Delaware court revealed that FTX’s “Category A” crypto assets have steadily increased in value as the broader cryptocurrency market shows signs of rebounding from 2022’s disastrous crypto winter, leading to a $900 million rise in FTX’s holdings.
Category A assets are crypto tokens with a market capitalization of at least $15 million, and an average daily trading volume of at least $1 million during the past 30 days.
Complicating matters is the fact that many of the alternative digital assets on FTX’s balance sheet are held in such large quantities as to make them impossible to sell on the open market without substantially affecting their values — making rebooting the exchange in such a way as to facilitate the mediation of their return to the market a potentially more attractive option than selling them outright.
Whether or not the new FTX CEO decides to move forward with bringing FTX’s operations back to life, S&C lawyers are billing for their hours of work assessing any restart’s viability.
Various time entries included in the firm’s more than $15 million February bill show line items such as, “analysis re: potential FTX exchange reboot,” “review notes re: potential security concerns re: potential FTX exchange reboot,” “email correspondence with various teams re: working groups for reboot project,” and much more.
Per the court filings, S&C is working with cyber technology and services company Sygnia as it irons out details involving the “reboot project.”
Neither Syngia nor S&C partner Nicole Friedlander, the lawyer listed on many of the reboot-related time entries, replied immediately to PYMNTS’ request for comment on the matter.
An Irreparably Damaged Brand?
Dietderich, the lead attorney for FTX, told the court Wednesday that re-starting the exchange is one of many potential options being considered for the future of the company.
“There are as many opinions on this as there are professionals in this case, and that’s a lot,” he said about the army of professional services firms working to recoup as much value for FTX’s creditors while at the same time billing millions of dollars for their work.
“The services performed by S&C during the fee period represent one of the most complicated, multi-disciplinary exercises by any law firm in any area of law,” the firm stated in its invoice.
But if FTX were to restart, just how would it work? Any reboot would entail a litany of regulatory and compliance nightmares, and it remains unclear whether the investigative work undertaken was centered around a limited effort meant to assist in processing customer withdrawals, or whether the FTX Debtors are looking to relaunch the entire FTX business.
As PYMNTS reported Wednesday, the crypto industry as a whole is at a crossroads as it finds itself locked out of the U.S. banking sector — throwing into question just where, exactly, any reboot would be based.
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