The travel industry in March 2026 is grappling with a stark divergence in fortunes, primarily driven by the escalation of the US-Israel/Iran conflict. While the sector entered the year with a degree of optimism, the geopolitical shock has rapidly accelerated a contraction in passenger volumes. As the prospect of higher interest rates and energy costs puts additional pressure on already squeezed household budgets, a clouded outlook for year-end profitability has emerged.
Sharp contraction in passenger volumes
The optimism seen in January, where 55% of businesses reported growth, has largely evaporated. Currently, 43% of travel businesses report that passenger numbers are behind by 10% or more compared to last year. Although polarisation is still there, only 27% of businesses remain ahead of their 2025 numbers, a significant drop from the January majority.
Affected customers prefer to divert or defer
Where trips have been directly affected by the Middle East conflict, holidaymakers are largely committed to travelling despite deviations from the original plan. The data shows a strong preference for flexibility over outright cancellations. However, a high volume of deferrals will mean businesses carry the liability of future travel without the immediate benefit of new cash flow.
Profitability: a three-way split
Confidence in meeting profit targets is fractured, with respondents split almost equally into thirds: 34% say “Yes”, 34% say “No”, and 31% remain “Unsure”. This uncertainty is fuelled by a perfect storm of current geopolitics, macroeconomics and higher internal costs – even where volumes have remained stable, the increased NI burden this year has eroded the bottom line for some.
Strategic manoeuvres
In response to the conflict, businesses are prioritising tactical agility over major changes to overall business strategy. Marketing has been the most common lever for adjustment, with businesses dialling spend up or down for specific destinations depending on viability.
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