“At a time when discretionary budgets are typically tightening, travel remains an outlier and a priority spend for many,” Turner said, and observed travellers are beginning to settle back into normalised travel patterns, with rising demand for higher-yielding categories such as cruises.

“For the past two years, the bulk of tourism has been people visiting friends and family where they’re likely to just require an airfare. That’s changing now as the recovery phase eases,” he said.

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Australia’s level of inbound tourism continues to lag at about 65 per cent of pre-COVID-19 numbers. Turner says this is unlikely to change until the return of Chinese tourists, which he expects could take months.

“Travelling patterns have also changed. Australia’s always been a long-haul destination, but airfares are a major factor and they’ve been at near historic highs. When you combine high airfares and long distances, you will not find many Europeans or Americans willing to make the journey,” he said.

Earnings before interest, tax, depreciation and amortisation in the December half almost doubled to $189 million and were buoyed by $11.3 billion in transactions, 15 per cent more than in the same period last year, Flight Centre said in its result.

The earnings rebound comes after Flight Centre closed hundreds of its stores as part of a cost-cutting drive after COVID-19 threw the travel sector into turmoil.

The group’s cost margins fell below 10 per cent and are expected to further reduce in the second half, with Flight Centre using $365 million to reduce its bank debt and overdraft facilities.

RBC Capital Markets analyst Wei-Wei Chen said the half was “weaker than expected” when accounting for amortisation costs and said the heavy reliance on earnings in the second half means a potential for a downgrade later in the year.

“Flight Centre has confidence in its guidance range, adding trading in January and February has been in line with expectations. However, management cautioned the months comprising [the fourth quarter] remain the most critical for achieving guidance,” he said after the group’s investor call.

Flight Centre will pay a 10¢ fully franked interim dividend per share on April 17.

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