By DAMIAN FRANCIS, Editorial Director
Will the recent rate hike hurt the travel industry?
This year has not kicked off well in general for the travel industry, through no fault of its own.
Conflict in the Middle East has presented travel with the toughest period since the pandemic (thankfully nothing so severe on a business front – I can’t say the same on a humanitarian front).
That led to a number of leading travel brands, including Air New Zealand, to reforecast their H2 results, unsurprisingly slightly south of original expectations.
As a result of the conflict, fuel prices soared and on Tuesday past, the RBA, by a far narrower margin than we have seen in recent history (5-4), voted to lift the cash rate target by 25 basis points to 4.10%.
Aside from being the first non-unanimous decision since July last year, it was also meant two rate hikes in a row – lucky for some, but a big blow for mortgage holders.
As a mortgage holder myself, I land in the second category, but I won’t let that taint the rest of the piece.
The consecutive rate hike with the Middle East situation still looming large has led to a lot of questions around ‘certainties’ – what are we, at Travel Daily, hearing about the market?
Who is confident at the moment? Who is hitting the panic button? Is anyone putting their head in the sand?
While we won’t betray anyone’s confidence who has shared those details on background with us, I will sympathise with one side of the industry in particular.
Last year I went to Chicago for IPW, the largest US inbound travel conference. It’s always a great show, but this time it was in the shadow of riots, including in Chicago itself, and President Trump’s second term not landing well with groups of citizens.
This year, it is now in the shadow of a conflict involving the US. It’s a great country with a lot to offer – some of the people working in the industry on the US side of things have certainly had easier times.
Moving on, while we can’t necessarily just spill all the beans, what we can do is create some talking points for you.
Over the last couple of years, travelBulletin has created original graphs and data analysis for the industry as a point of difference.
Data, like most things, can be taken in different ways, so the exercise is not always about finding conclusive points (doing that from historical data to assert future trends can be dangerous), but about gaining some context for, if nothing else, interest, but hopefully a bit more than that.
Finding no pattern, after all, is still context.
So the question is – will the rate hike make any real difference to the travel industry’s performance?
Below, I have pulled out the last five years of interest rate data, and then overlayed it on three different areas within the travel industry, using Microsoft Copilot to create the graphs.
The caveat here is that other scenarios are not taken into account – it’s purely a snapshot of the cash rate versus something else, but it is still interesting to see what patterns emerge, and travel industry professionals are generally aware of other factors around certain dates, such as the aforementioned inauguration of President Trump, or the Russia-Ukraine conflict.
There are other data sets we could use as well, like TTV, and perhaps will at some stage, but in the interests of time and not incurring the wrath of the team for creating too many graphs, we’ll start with these three.
RBA cash rate versus Flight Centre (FLT) and Helloworld (HLO) share values.
It’s clear to see that share price value has dipped recently, for reasons we are well aware of, but there is also an interesting pattern.
As the cash rate has risen, generally so have the share prices, of course with a lot more ups and downs than the cash rate.
Where it dipped again in early 2025, so did FLT and HLO.
Baby Boomer market with no mortgage and large investment funds?
That pattern has ended now with the Middle East crisis.
RBA cash rate versus Qantas (QAN)
It would have been nice to include another airline here, but with Virgin Australia recently refloating, REX vanishing from the ASX, Alliance not being a fair comparison and Air New Zealand’s ASX market value being too hard to plot against Qantas, we will leave it with the national carrier.
At the recent cash rate peak, QAN continued to climb, while the late 2023 drop was down to significant legal issues, governance turmoil, and reputation damage, before a strong climb in 2024/25.
The recent dip was again more Middle East than it was cash rate, but a tighter hip pocket for some, plus higher airfares thanks to fuel challenges, could change things into the future.
RBA cash rate versus domestic and international PAX
This graph is potentially the most interesting one.
Have we seen passenger numbers (data from BITRE) increase or decrease against the cash rate?
The caveat here is that the effect of a cash rate change would not be seen immediately in pax numbers, but rather, a month or even a year down the track, as Australians tend to book in advance.
This would be true for international in particular.
Interestingly, as the cash rate began to rise in 2022, we did see a blip on both domestic and international pax at the start of 2023, but it was fleeting.
We saw another blip with domestic when the cash rate went up again after some stability, and a few months later that was followed by a blip in international.
But context also needs to be taken into account here – downward blips at the start of each year correlate to the end of the holiday period where people stop travelling for a bit and settle into the work/school year.
What is evident is that pax are steadily increasing since the pandemic, and the cash rate likely has not dramatically affected the figures.
If there is a general conclusion that can be taken from the graphs, it is that, with the cash rate looking likely to increase steadily, it feels like it shouldn’t materially affect the travel industry, or at least QAN, FLT, HLO and pax figures, based on what these graphs suggest.
Not yet anyway.
IN OTHER NEWS
By Jo-Anne Hui-Miller, Associate Publisher
The impacts of the Middle East conflict continued this week, with the United Arab Emirates closing all of its airspace as a precautionary move against Iranian missile attacks.
It came after Dubai International Airport was struck by military fire again, this time by a drone that hit a fuel tank near the terminal.
As a result, an Australian flight from Melbourne to Dubai was forced to divert course to another UAE airport hub.
Meanwhile, China temporarily ceased all exports of refined fuels, adding pressure to Australia’s aviation sector.
Australia is highly dependent on jet fuel supply from overseas, with Chinese refineries responsible for about a third of total aviation supply in 2025.
There has been talk that countries like South Korea, Singapore, Malaysia and Japan may also look to drastically limit their refined fuel exports, too.
However, later in the week, Federal Minister for Transport Catherine King stated that Australia has about a month’s worth of jet fuel left and that she sees no reason for the country to run out of supply.
In other aviation news, British Airways announced it will launch its daily flights from Melbourne to London via Kuala Lumpur in 2027.
Over at Solomon Airlines, it looks like their pleas for the IASC to reject Qantas’ bid to add capacity to its region from Brisbane have fallen on deaf ears.
According to the IASC, Solomon Airlines’ arguments really only affected their own operations and did not provide enough grounds to reject the benefits for Australian travellers.
Solomon Airlines previously labelled the move “a cynical attempt to dump capacity on a struggling route in order to reduce competition by driving out the only other player”.
On Thursday, our page one lead in Travel Daily was Qantas kicking out its Jetstar-flying members from its lounges. However, those booked on a Qantas codeshare flight operated by Jetstar will still have access.
On the seas, travel and cruise veteran Sture Myrmell is exiting Journey Beyond to take on the president role with Saudi Arabian line Aroya Cruises, relocating from Australia to Jeddah.
Uniworld revealed a first look at its upcoming Super Ships, SS Audrey and SS Marlene, which are set to debut on European rivers in 2027.
Meanwhile, Travel Daily editor Adam Bishop chatted with Tahiti Tourisme president Bud Gilroy about the growing popularity of cruise in French Polynesia, accounting for 25% of all tourism revenue in the territory.
“We’ve grown our cruise industry from 500 calls to 1,400 calls in just 10 years,” Gilroy said.
“For us this is very important growth because it really helps to diversify our offering.
“This segment is the only transportation vector that can get so many tourists to so many remote islands – one ship can sometimes be the equivalent of six domestic flights.”
Elsewhere, we chatted with Tourism Authority of Thailand’s director Pichaya Saisaengchan on a recent famil to the under-the-radar region of Trat, who had a hot take on the common perception that Aussies are well-travelled.
Saisaengchan claimed that Aussies are not actually particularly adventurous travellers and instead, prefer the comforts of familiarity and returning to the same destinations over and over again.
“They want to know what to expect, they don’t want surprises,” he told Travel Daily.
“Many Australians who are in Thailand have been here many, many times before.
“[But] they keep going back to where they like…they have gone five times to Phuket, they have gone three times to Koh Samui and four or five times to Bangkok.
“They think they have seen and done everything, but actually, Thailand is much more than that.”
Meanwhile, Cruise Weekly editor Myles Stedman recently attended Luxury Travel Collection’s Product Showcase in Brisbane and came back with a raft of stories.
GM Nikki Glading discussed the booming luxury sector, predicted to command $2 trillion globally by the end of the decade, and shared the latest trends, including the continued popularity of shoulder seasons, as travellers reject overcrowded destinations and heatwaves.
And yesterday, we published a breaker on Flight Centre Travel Group’s acquisition of UK meeting and events agency, Fresh Approach.
The company will integrate into FCTG’s FCM M&E operation while retaining its creative identity, with CEO Lee Harris and his leadership team to continue to run the business, which has offices in Manchester and Edinburgh.
Have a great weekend.
