Wednesday, March 16 2016
By Tom Dworetsky, Analyst at Camoin Associates
Tourism is big business worldwide, and communities of all sizes want in on the action. Understanding the key trends that are reshaping the industry can give your community a boost in transforming from unknown to unequaled.
Essentially all major sub-industries within travel and tourism are projected to experience revenue growth over the next five years. Hotels and motels, which raked in $167 billion in revenue in 2015, are expected to see strong growth, especially in specialty categories such as extended-stay accommodations, boutique hotels, spa and health retreats, and resorts, as consumers seek out unique experiences. Collectively, U.S. foreign and domestic airlines account for $223 billion in revenues and will also experience growth as demand for travel rises in tandem with growing discretionary spending. Domestic airlines will see more robust revenue growth as industry consolidation has lowered price competition, while international carriers may experience downward pressure on prices and revenue due to foreign competition.
While travel agencies, including major web-based players Expedia and Priceline.com, have seen healthy growth in recent years, this trend may start to slow as consumers become more comfortable booking their own travel on easy-to-use metasearch platforms such as KAYAK. Growth in this industry will slow from 3.8 percent to 2.3 percent per year. Tour operators will experience a similar slowdown—from 3.2 percent to 2.4 percent—as travelers turn to freely available trip planning resources.
The following table summarizes past and projected revenue growth for a variety of industries that primarily cater to the travel and tourism market.
It’s about the journey, not the destination. Experiential travel is gaining ground as a preferred way of exploring new places. In contrast to more traditional vacations, where tourists might book a week at a resort hotel and opt for an itinerary focused around strictly tourist-oriented activities, such as guided tours, museum visits, and theme restaurants catering to the tourist palate, the modern traveler craves a higher level of authenticity to their experience. Leisure is no longer the sole purpose for taking a trip. For many, travel is seen as a way of understanding and appreciating alternative ways of life, learning new things about cultural and natural landscapes, and even as a means of self-discovery. Travelers seek to connect to a destination on an emotional level, and not experience the place as a mere backdrop for activities that could easily be experienced anywhere else. Even the word “tourist” itself has acquired a negative connotation among certain travelers who consider their journey within a place to be much more personal and meaningful than what the typical tourist would experience.
Experiential travel has become mainstream in recent years, with an increasing share of consumers reporting that they would rather spend money on experiences than on things.1 And the travel industry is evolving to capitalize on this trend. Adventure travel has risen in popularity, as travelers seek out activities such as riding rapids, swimming with sharks, and trekking to remote locations. Activities such as language lessons and craft and cooking classes have also become popular. There is a waning focus around checking must-see sites and monuments off the to-do list, and more emphasis on seeking out activities that appeal to niche personal interests.
The sharing economy. The trend toward experiential travel goes hand-in-hand with the rise of the sharing economy. What better way to authentically experience a place than to experience it with a local? Numerous sharing-based travel web platforms and apps have popped up that are geared toward tourists who seek to engage with locals. Well-known lodging platform Airbnb, for example, connects home owners with travelers who are looking for a place to stay, offering both private and shared accommodation options. Couchsurfing also connects travelers with places to stay, but stays are completely free. EatWith and BookaLokal enable users to share a meal at the homes of local cooks. BlaBlaCar is a ridesharing platform that connects people who need to travel with drivers who have empty seats. Vayable bills itself as a way of allowing users to discover and book unique experiences offered by local insiders, such as themed walking tours.
These web-based platforms are giving consumers more choices in all aspects of travel, from transportation and lodging to dining and recreation. For in-demand tourism destinations, these options are often more affordable and flexible. At the same time, for budding destinations located away from the standard tourist circuit, they offer visitor infrastructure that can help to put these places on the proverbial map.
Social media and mobile. Another tech-based travel trend is the use of social media and apps to plan and share trips. Travelers are increasingly using these tools to exchange information, resources, and recommendations. The industry is keen on this trend, leveraging Facebook, Twitter, and Instagram, as well as niche travel platforms like TripAdvisor, to provide exposure to destinations and brands and maintain their relevance. But beyond its promotional aspects, the social media strategy is also focused around creating a forum for interaction between brands and consumers. These platforms provide highly visual and interactive content that tantalizes the potential traveler and allows him/her to engage much more effectively than static advertisements and brochures.2 Moreover, harnessing the power of social influencers—bloggers, vloggers, and other online personalities—through sponsored posts has become a lucrative way of turning consumers on to travel brands.
Social media is being used not only for trip planning, but also as a real-time travel tool. For example, TripAdvisor has developed an app for Apple Watch that includes a feature called “Glances,” which provides users timely recommendations for discovering points of interest based on the person’s GPS coordinates and the time of day. It might suggest a highly-rated nearby restaurant around dinner time, for instance.
Capturing foreign spending power. Foreigner spending accounts for about one-fifth of all visitor spending in the U.S.3 While it is no surprise that Canada, given its close proximity and cultural ties to the U.S., has continued to occupy the top position in terms of visitor spending, China has been quickly gaining ground. In 2014, China accounted for 10.9 percent of foreign visitor spending, with Chinese visitors spending $24.0 billion, up 14 percent from the previous year. The two other countries in the top 10 with double-digit spending growth are also in Asia: South Korea (11 percent growth) and India (10 percent).4
The numbers underscore the significance of spending by foreign visitors—and especially Asians—in the U.S. In light of these facts, the travel industry has been adapting to cater to unique preferences of this market. For example, the Massachusetts Office of Travel and Tourism holds a workshop providing tips to travel-oriented businesses on how to tailor their services to Chinese consumers. The California Travel and Tourism Commission has developed a "China Ready Toolkit," which offers training materials on Chinese culture, as well as best practices for marketing to Chinese consumers.5 Businesses that understand the preferences of Chinese travelers and other international groups will have a leg up when it comes to capturing visitor spending.
Supporting Tourism Locally
Here are some ways that communities can leverage the big trends in the industry:
Bio: Tom Dworetsky is an Analyst at Camoin Associates, an economic development firm based in Saratoga Springs, New York. In his two years with Camoin, Tom has completed numerous economic and impact analyses, real estate market analyses, supply chain studies, and economic development strategic plans. His work has included quantifying the economic impacts of complex policies and projects, building pro forma financial statements for multi-million-dollar developments, and conducting regional and site-specific real estate market analyses for a range of communities and use types.
Tom’s prior experience as a land use planning consultant serves as a valuable foundation for tackling economic development problems in communities with unique land use and zoning challenges. Tom has a special interest in strategies for downtown revitalization and the positive economic and social impacts that reinvigorating historic town centers can have on communities. Taking a data-driven approach, Tom has developed innovative, community-specific initiatives to spur revitalization through redevelopment, historic preservation, adaptive reuse, and other creative methods.
Tom earned his Master of City and Regional Planning degree from the University of North Carolina at Chapel Hill, where he specialized in Real Estate Development and Placemaking. He also holds a Bachelor of Science in Business Administration from Boston University and is a member of the American Planning Association.