By Dina DeCarlo and Christa Ouderkirk Franzi, Camoin Associates, Inc.
The travel industry is continuously evolving and responding to technological advancements and changes in consumer preferences. When thinking about trends affecting the travel industry, companies like Uber, Lyft, and Airbnb come to mind; and in terms of preferences, discovering “how to reach millennials” is always a hot topic. We have all heard about these, but, what are some other less obvious trends affecting change in the travel industry? And how can communities and businesses in the hospitality and tourism industry harness these trends to stay on the cutting edge of travel?
Economics of Travel and Tourism by the Numbers
Before diving into trends, it is important to understand the industry overall, how it operates, and its place in the greater economy. Broadly, tourism can be defined by the activities engaged in by people while visiting an area located outside of their typical geographic environment. To economic analysists, the hospitality and tourism industry consists of economic activity within four industry categories: 1. accommodations and services, 2. transportation, 3. food services and drinking places, and 4. recreation, entertainment, and shopping.
The tourism industry generated over $900 billion in revenues in 2017, and grew 1.2 percent annually between 2012-2017. About 70 percent of tourism industry demand comes from leisure travel.1 This includes going on vacation, visiting friends and family, and attending various events. The rest of industry demand arises from business travelers, including people attending conferences or meetings related to their careers.
Over the past five years, the tourism industry in the United States has grown steadily. Consumer spending on tourism-related activities, and the amount of travel overall, has increased. The increased spending is due in part to rising disposable incomes, lower unemployment, and positive consumer sentiment. However, despite these trends, industry revenue growth has been mixed because of increased competition. More specifically, growth in the sharing economy has allowed new types of accommodations and transportation to emerge and thrive (including companies like Airbnb and Uber).
Despite competition and volatility, over the next five years, IBISWorld projects that industry revenues will continue to increase at an annualized rate of 1.8 percent, reaching $1 trillion in 2022. In 2017, tourism industry revenue growth was estimated at 2.4 percent.
Spending on transportation accounts for nearly 41 percent of industry revenues in the U.S. This is followed by recreation, entertainment and shopping at nearly 25 percent, then accommodations at nearly 21 percent and food services and drinking places at 14 percent.
In 2017, there was an uptick in the percentage of industry revenues generated from tourist spending on recreation, entertainment, and shopping – at nearly 25 percent in 2017, up from just above 22 percent in 2016. As indicated in the chart below, revenue share from food services and drinking places, as well as revenues from transportation decreased from 2016 to 2017, whereas the revenue share from accommodations, along with recreation, entertainment, and shopping, increased.
Domestic travelers account for more than half of tourism industry demand; however, international travelers are expected to increase the revenue share in the next few years. Specifically, the number of travelers coming from emerging economies within South and Central America, as well as Asia, are projected to increase due to rising incomes and a growing middle class in those regions. At the same time, U.S. residents traveling internationally are projected to increase, which is expected to negatively impact domestic travel in the U.S. as an increasing amount of tourism-related spending will be lost to other countries.
Trends to Keep Tabs on in the Tourism Industry
About a year ago, Tom Dworetsky of Camoin Associates explored the Top Trends in Tourism and What They Mean for Your Community, describing the major disruptors of the past. This included the increase in experiential travel, growth in the sharing economy, and the increase use of mobile devices and social media for all things travel. These trends have continued to grow steadily and evolve.
So, considering these past disruptors that are now the norm, what are the current trends to watch in the tourism industry? We’ve identified two that, in our opinion, are most important to keep tabs on in 2018:
Consumers Expecting Personalized Experiences. Traditionally, vacationing may have been thought of as heading to a beach resort for a week of relaxation, but data shows that is not what today’s consumers are necessarily looking for in a vacation anymore. A trend that has been researched and written about extensively is the preference of travelers to spend their time and money on experiences and cultural emergence when traveling. Increasingly, they also expect those experiences to be tailored to them.
Just like Amazon personalizes product recommendations based on a consumer’s shopping trends, travelers want a personalized travel experience consistent with their interests, and they expect the places they visit to provide it. Consumers have access to an unlimited amount of information, giving them unlimited options for choosing the right restaurant, shopping center, or midday activity.
For communities and companies in the tourism industry to stay on the cutting edge, they must constantly be working to gauge consumer expectations, and provide travelers with what they are looking for. Or, better yet, provide travelers with something new and unexpected that they didn’t know they wanted. Staying in tune with what travelers are doing, purchasing, and researching is important, now more than ever, because consumers have access to so many different options. To remain competitive, communities and companies in the tourism industry must differentiate themselves by delivering personalized experiences.
Women Travelers Taking the Lead. Women are increasingly finding their voice and asserting their power in the workforce, in politics, and in the economy as a whole. This trend, which hit a pivotal point in 2017, is having a significant impact on the travel industry. As women continue to make strides in the workforce and in higher education, many women are traveling for business, and studying abroad in college. This increased exposure to travel may be the driver prompting more women to take more leisure trips.
You may be surprised to know that, based on statistics by the Travel Industry Association of America,2 the average adventure traveler is not a young male in his mid- to late-twenties, but a 47-year old woman. Women overall are dominating the travel industry. Women ranging in age from 20 to 70 years old compromise 75 percent of people taking nature, adventure, or cultural-related trips.3 Tourism experts agree that women are promoting substantial growth in the industry by making 80 percent4 of the travel decisions. According to Harvard Business Review, by making most of the travel decisions, women hold $15 trillion in spending power.
Interestingly, women are not only making the bulk of travel decisions, but they are also choosing more often to travel alone, with their friends, and with their sisters and daughters, as opposed to traveling with their families as a whole (spouses and all children). On average, women are getting married later in life, which is giving many the opportunity to travel in their mid- to late-twenties. Additionally, a trend among women from the baby boomer generation show they are looking to travel more and gain new experiences, especially post retirement. The sheer volume of women travelers is altering the various aspects of the industry to better suit their preferences. Travel experts say adventure, sight-seeing, volunteer work, and cultural emergence are important to female travelers. Additionally, women like to be immersed in activities and experiences with other women. A trend that is growing in Europe are female-only hotels (including the staff), which also include special programs and day-trips for women.5 (And yes, the hotel rooms are female-centric as well, featuring large bathrooms fully stocked with clothing steamers, blow dryers, and makeup remover.)
The trend of women and travel has been emerging for nearly ten years,6 and is only continuing to grow. For communities and companies to stay relevant, they must continue to understand what their specific consumer is looking for, and how they can stay ahead of the trends and give unique consumers things that exceed expectations, ranging from coordinating interesting experiences and providing them with amenities that better meet their needs.
The Role of Big Data and Artificial Intelligence
The tourism industry, like many others, must be agile in responding to market trends. Although these trends many be disruptive to the industry status quo, they bring with them a host of previously unexplored benefits to both businesses and consumers.
High consumer expectations can be a challenge for tourism-based communities and businesses because they are forced to constantly improve to meet those expectations. However, this both increases the quality of products and services available for consumers, and creates space in the market for new and unique products and services that can satisfy increasingly-high consumer expectations.
The increasing participation of women in the tourism economy is something of note. Not only are businesses now challenged with meeting high expectations of consumers, they also must be cognizant of their shifting consumer base. Many travel consumers are women, which leaves an opportunity for new businesses to emerge and existing businesses to creatively adjust services to better suit the needs and wants of female travelers.
Big data and artificial intelligence (AI) are critical to meeting and exceeding consumer expectations. By leveraging big data and AI, consumer preferences can be understood in a much more detailed way, and consumers can then receive tailored products and services that best fit their needs.
Although big data and AI can sound intimidating, they may become the most important asset communities with large hospitality sectors and tourism-based businesses have in understanding and capturing consumer interest, and subsequent consumer dollars. Analyzing big data and utilizing AI can help communities and companies first, understand consumer preferences, and second, provide consumers goods and services tailored to their specific desires in real time. Big data can be used to gather extensive amounts of information about travelers including what time of day they research and purchase goods and services, and the specific characteristics of goods and services they purchased. After gathering and analyzing this data and with the help of AI, companies can read consumer-intent signals and then use automated marketing to provide visitors with a good or service tailored specifically to them.
Consumers are getting more comfortable with using these types of technologies as well, because it makes their experiences easier and more enjoyable. Google reports that one in three travelers want to use digital assistants to both research and book travel.7 An example of digital assistants being powered by AI are travel bots being used by hotel chains, airlines, and other transportation services.8 These travel bots can communicate with consumers, answer their questions, and better yet – predict questions that they may want to ask, and answer these questions prior the consumer even asking, or even prompt consumers to do things or go places based on previously gathered data about their preferences (check out Taylor the travel bot at taylorbot.com). Ultimately, accommodation, transportation, and other travel-related companies, hope that by harnessing this type of technology, their products will be so well-produced and marketed to individuals’ preferences that they will more easily capture consumer dollars.
What Does This Mean for Economic Development?
The persistent problem with using big data and AI to identify, assess, and respond to consumer trends in the hospitality and tourism industry is that travel is fragmented and visitor data and information is spread across countless companies and travel organizations.9 As they plan for and embark on a trip, travelers leave bits of data about themselves across countless platforms – structured and unstructured. An example of structured data includes information that comes from a customer management system or email marketing list that a local business might manage. Unstructured data stems from platforms like Facebook, TripAdvisor, and other third-party sites where brands can be rated, discussed, and marketed.
While large companies in the tourism industry – like hotel chains and airlines – can build their own rich consumer data sets, midsized and smaller businesses typically do not have the financial resources or technical capability to collect, synthesize, and analyze copious quantities of visitor data. They are getting left behind as a result.
Economic development organizations (EDOs) who want to grow their community’s hospitality and tourism sector must find ways to break down ‘data silos’ and aggregate visitor data from many sources to better analyze consumer trends. This type of data synthetization and analysis is a new frontier for most economic development organizations, even for those whose core services include advanced industry data analytics.
The first step is to gain an understanding of what data exists. Through a focused business retention and expansion program, determine which companies are collecting what kinds of tourism data and their willingness to share that data. It is also important to identify and assess all sources of unstructured data from third-party sources. Once the existing data conditions are fully considered, the strategy for data aggregation can be designed, which could include investing in a data management platform, hiring staff with advanced data-analysis skills, and/or creating a tourism data co-op for the community.
1 IBISWorld Industry Report: Tourism in the US, August 2017
2 Girls Guide to Paris Shows That in Travel, Women Are on Top
3 Girls Guide to Paris Shows That in Travel, Women Are on Top
4 According to Forbes
5 Most travelers today are women, and the industry may finally be catching on
6 Why Women Are the Biggest Emerging Market
7 The future of travel: New consumer behavior and the technology giving it flight, by Jaclyn Loo
8 Trends to Expect In The Travel Industry In 2017
9 2017 travel and hospitality industry outlook
With her background in economics and mathematics, Dina brings analytical and data-driven problem-solving skills to her work at Camoin Associates. Dina has worked on a number of workforce development strategic plans and market analyses focusing on the use of data to inform decision-making. She has also worked on various projects focusing on quantifying economic impacts for communities related to residential, industrial, and commercial development, as well as tourism and visitation.
Dina is particularly interested in analyzing labor market data to inform strategic plans that create and enhance opportunities for a region’s workforce. She has written several articles for the Camoin Associates’ Economic Development Navigator relating to the labor market, including “A Look at What’s Happening in the U.S. Wind Power Industry” and “Workforce Development & Replacement Demand: Northeastern Maine Workforce Development Board.”
Dina earned her Bachelor’s in Economics and Mathematics from Siena College, and is working toward her Master’s in Public Economics and Finance from the Rockefeller College of Public Affairs & Policy. During her undergraduate career, she spent an academic-year studying economics at the London School of Economics and Political Science in England
Christa Ouderkirk Franzi, Senior Economic Development Specialist
Successful economic development initiatives require an interdisciplinary perspective, which is just what Christa brings to the Camoin team. With a developed understanding of the complex relationships between economic growth, land-use planning, workforce, quality of place, and environmental sustainability, she has devised economic development strategies that will be financially, environmentally, and socially sustainable for years to come.
Her unique talent for creative problem solving helps communities make sense of complex systems and capitalize on otherwise “hidden” opportunities. Her passion is working with rural communities and small cities to address their distinct economic development needs with innovative strategies.
Prior to joining Camoin Associates, Christa began her professional career as a planner in the New York Capital District. She holds a Masters in Geography, with a concentration in Natural Resource Planning and Management from Binghamton University and a dual Bachelors of Science degrees in Environmental Science and Geography from the SUNY College at Oneonta.