According to Phocuswright’s research report Australia-New Zealand Travel Market Brief 2026, the ANZ travel market is heading into a contraction after several years of steady growth.
Rising fuel costs, geopolitical instability tied to the Iranian conflict and continued cost-of-living pressure on domestic travelers are combining to pull gross revenue down across nearly every major segment, with only car rental holding steady.
The report breaks down what’s driving the slowdown, which segments are most exposed and when the market is expected to return to growth.
Here’s a closer look at the five key trends shaping the ANZ travel market in 2026:
- Market growth is stalling and reversing. ANZ travel gross revenue grew just 3.6% to $39.2 billion in 2025, weighed down by weak domestic leisure spend amid cost-of-living and interest rate pressure. The market is projected to contract nearly 5% in 2026 to $37.4 billion before recovering to $43.3 billion by 2029.
- Airlines missed their growth targets. Qantas, Virgin Australia and Air New Zealand all failed to capitalize on Rex Airlines’ retreat or resolve their own operational issues. The segment is expected to contract 1% to $20.7 billion in 2026 as fuel costs rise and capacity gets cut, with recovery to $24 billion by 2029 tied to new routes and carrier partnerships.
- Hotels face a sharp reversal after a strong 2025. A run of major events (the British and Irish Lions Tour and the Ashes among them) drove strong Australian occupancy last year, but the sector is projected to fall 9% to $15.6 billion in 2026 as international travelers stay away and fuel costs keep domestic drive tourists home.
- Car rental is the one segment holding steady. Growth continues on the back of the domestic leisure and fly-drive international markets and rising interest in renting over owning, with international brands like Enterprise, Hertz and Avis leading on booking technology and loyalty programs.
- Online penetration keeps climbing even as the market shrinks. It reached 59.5% in 2025 and should accelerate in 2026 as international trips decline in favor of more easily booked domestic travel, reaching 62% by 2029. Hotels remain the biggest online travel agency (OTA) opportunity, though Booking.com’s dominance (ahead of Expedia and Agoda) is expected to erode slightly as direct booking gains ground, with OTA share slipping to 30% by 2029.
