travel industry predictions 2023

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The State of the Travel Industry in 2023: Current Trends and Future Outlook

How the country can fight organized retail crime, kentucky chamber ceo: we must protect the free enterprise system, how franchising can help fuel the american dream, microsoft president: responsible ai development can drive innovation, suzanne clark's 2024 state of american business remarks.

January 12, 2023

Featured Guest

Tony Capuano CEO, Marriott International, Inc.

Chip Rogers President & CEO, American Hotel & Lodging Association (AHLA)

As COVID-19 restrictions have continued to ease, the travel and hospitality industries have seen a resurgence in customers. Companies like Marriott have seen percentage increases in revenue and rate, even topping pre-pandemic levels.

During the U.S. Chamber of Commerce’s 2023 State of American Business event, Chip Rogers, President and CEO of the American Hotel and Lodging Association , and Tony Capuano, CEO of Marriott International, Inc. , sat down for a fireside chat. Read on for their insights on the post-COVID state of the travel industry, a shifting customer base, and the outlook for 2023 and beyond.

2022 Demonstrated the Power and Resilience of Travel

After declines amid the pandemic, 2022 brought about a positive recovery for the travel industry.

“[2022] reminded us of the power and resilience of travel,” said Capuano. “If you look at the forward bookings through the holiday season, [you’ll see] really strong and compelling numbers … so we’re really encouraged.”

“The only caveat I would give you about that optimism is, as you know, the booking windows are much shorter than we’ve seen them in a pre-pandemic world,” he added. “So those trends can change more quickly than we’re accustomed to."

The ‘Regular’ Customer Segments Are Shifting

At the start of pandemic recovery, industry leaders believed leisure travel would lead travel recovery, with business travel closely behind and group travel at a distant third, according to Capuano. While some of those predictions have held, others have shifted.

“Leisure [travel] continues to be exceedingly strong, and group [travel] has surprised to the upside,” he explained. “Business travel is perhaps the tortoise in this ‘Tortoise and the Hare,’ slow-and-steady recovery.”

However, Capuano noted customer segments are becoming less and less strictly defined.

“[There’s] this trend we've seen emerge over the pandemic of blended trip purpose … [where] more and more folks are combining leisure and business travel,” he said. “If this has staying power, I think it’s absolutely a game changer, as we get back to normal business travel and hopefully maintain that leisure travel.”

To accommodate this shifting demand, Marriott has focused on expanding offerings to accommodate both the business and leisure sides of travelers’ trips.

“[We’ve had] a very big focus on [expanding bandwidth], so that if [we’ve] got 300 rooms full of guests on Zoom calls simultaneously, we’ve got the bandwidth to cover it,” Capuano added. “[We’re also] being more thoughtful about fitness, leisure, and food and beverage offerings — and having the flexibility to pivot those offerings as somebody sheds their business suit on Thursday and changes into shorts and flip flops for the weekend.”

2023 Offers Hope for Continued Growth in the Travel and Hospitality Sectors

As the travel and hospitality sectors continue to grow and shift in the post-pandemic era, Capuano shared reasons for optimism in 2023.

“Number one, it's our people,” he emphasized. “When you see their passion, their enthusiasm, their resilience, their creativity, and just how joyful they are to have their hotels full again … it's hard not to be filled with optimism.”

“If you look at how far the industry has come over the last few years,” Capuano continued, “any lingering doubts folks may have had about the resilience of travel — and about the passion that the general public has to explore cities and countries — it's hard not to be excited about the future of our industry.”

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2024 travel industry outlook

Unpack the biggest travel trends for the year ahead.

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After more than two years of consistent year-over-year gains, leisure travel may have tapped all its pent-up demand from the peak pandemic years. Is US travel demand due for a correction? Our 2024 travel industry outlook explores signals of the strength of travel demand.

Balancing budgets with the benefits of travel

Even during times of financial anxiety, travel has held a consistent share of Americans’ wallets. Enthusiasm for in-destination activities, growing interest in more diverse destinations, and the return of baby boomers in greater numbers add to the positive indicators for travel. And workplace flexibility appears poised to further buoy demand. 

Despite this optimistic outlook, could an economic downturn shift travel behaviors? Travel frequency and certain indulgences may see a decline, but if higher-income groups are relatively insulated from economic headwinds, higher-end travel products could have a better year than budget ones. On the corporate side, many decision-makers in the coming year will seek a delicate balance between conservative budgeting and pursuing the strategic benefits that travel can support.

Our 2024 travel outlook takes a closer look at five trends expected to shape the industry this year:

• Suppliers find ways to touch up the travel experience. High interest rates and elevated costs of some goods can make it difficult to update, let alone upgrade, hotels. And some of airlines’ biggest challenges have stemmed from weather events and staffing matters not entirely in their control. Still, airlines and hospitality providers know they need to improve the experiences they offer or risk losing travelers’ attention.
• The corporate comeback continues, but gains decelerate. While trips to build client relationships and support team collaboration remain key to business success, costs are a significant concern. Amid these efforts at prudent budgeting, US corporate travel spend is still likely to finally pass the pre-pandemic line within the next year.
• More trips or longer trips? Travelers choose their own adventure. One of the most lasting effects of the pandemic has been a shift in how white-collar work gets done. Remote and hybrid arrangements appear to be here to stay, and the share of travelers who plan to work on their longest leisure trips has surged. In addition to adding and extending trips, this laptop lugger behavior also has an impact on travelers’ in-destination needs and preferences.
• Marketing spend shifts to account for changes in platforms and demographics. As travel demand has returned and shown continued resilience to economic anxiety, the industry’s marketing spend has trended up, and travel providers have ridden a wave of pent-up demand. But as travel growth slows, there will be a greater need for more targeted marketing and for travel providers to build new strategies for a changing landscape.
• Gen AI: Behind the scenes and front and center. Gen AI is already influencing travel, with call center efficiencies the most widely reported benefit. In the coming year, expect it to influence the industry in major ways. More visible applications (new options for discovery, shopping, booking) will garner much of the attention, but less visible applications might actually be more influential. Promising use cases for travel providers include advertising strategy, marketing content, and personalization.

Download our full report to learn more about the opportunities and challenges ahead.

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The future of tourism: Bridging the labor gap, enhancing customer experience

As travel resumes and builds momentum, it’s becoming clear that tourism is resilient—there is an enduring desire to travel. Against all odds, international tourism rebounded in 2022: visitor numbers to Europe and the Middle East climbed to around 80 percent of 2019 levels, and the Americas recovered about 65 percent of prepandemic visitors 1 “Tourism set to return to pre-pandemic levels in some regions in 2023,” United Nations World Tourism Organization (UNWTO), January 17, 2023. —a number made more significant because it was reached without travelers from China, which had the world’s largest outbound travel market before the pandemic. 2 “ Outlook for China tourism 2023: Light at the end of the tunnel ,” McKinsey, May 9, 2023.

Recovery and growth are likely to continue. According to estimates from the World Tourism Organization (UNWTO) for 2023, international tourist arrivals could reach 80 to 95 percent of prepandemic levels depending on the extent of the economic slowdown, travel recovery in Asia–Pacific, and geopolitical tensions, among other factors. 3 “Tourism set to return to pre-pandemic levels in some regions in 2023,” United Nations World Tourism Organization (UNWTO), January 17, 2023. Similarly, the World Travel & Tourism Council (WTTC) forecasts that by the end of 2023, nearly half of the 185 countries in which the organization conducts research will have either recovered to prepandemic levels or be within 95 percent of full recovery. 4 “Global travel and tourism catapults into 2023 says WTTC,” World Travel & Tourism Council (WTTC), April 26, 2023.

Longer-term forecasts also point to optimism for the decade ahead. Travel and tourism GDP is predicted to grow, on average, at 5.8 percent a year between 2022 and 2032, outpacing the growth of the overall economy at an expected 2.7 percent a year. 5 Travel & Tourism economic impact 2022 , WTTC, August 2022.

So, is it all systems go for travel and tourism? Not really. The industry continues to face a prolonged and widespread labor shortage. After losing 62 million travel and tourism jobs in 2020, labor supply and demand remain out of balance. 6 “WTTC research reveals Travel & Tourism’s slow recovery is hitting jobs and growth worldwide,” World Travel & Tourism Council, October 6, 2021. Today, in the European Union, 11 percent of tourism jobs are likely to go unfilled; in the United States, that figure is 7 percent. 7 Travel & Tourism economic impact 2022 : Staff shortages, WTTC, August 2022.

There has been an exodus of tourism staff, particularly from customer-facing roles, to other sectors, and there is no sign that the industry will be able to bring all these people back. 8 Travel & Tourism economic impact 2022 : Staff shortages, WTTC, August 2022. Hotels, restaurants, cruises, airports, and airlines face staff shortages that can translate into operational, reputational, and financial difficulties. If unaddressed, these shortages may constrain the industry’s growth trajectory.

The current labor shortage may have its roots in factors related to the nature of work in the industry. Chronic workplace challenges, coupled with the effects of COVID-19, have culminated in an industry struggling to rebuild its workforce. Generally, tourism-related jobs are largely informal, partly due to high seasonality and weak regulation. And conditions such as excessively long working hours, low wages, a high turnover rate, and a lack of social protection tend to be most pronounced in an informal economy. Additionally, shift work, night work, and temporary or part-time employment are common in tourism.

The industry may need to revisit some fundamentals to build a far more sustainable future: either make the industry more attractive to talent (and put conditions in place to retain staff for longer periods) or improve products, services, and processes so that they complement existing staffing needs or solve existing pain points.

One solution could be to build a workforce with the mix of digital and interpersonal skills needed to keep up with travelers’ fast-changing requirements. The industry could make the most of available technology to provide customers with a digitally enhanced experience, resolve staff shortages, and improve working conditions.

Would you like to learn more about our Travel, Logistics & Infrastructure Practice ?

Complementing concierges with chatbots.

The pace of technological change has redefined customer expectations. Technology-driven services are often at customers’ fingertips, with no queues or waiting times. By contrast, the airport and airline disruption widely reported in the press over the summer of 2022 points to customers not receiving this same level of digital innovation when traveling.

Imagine the following travel experience: it’s 2035 and you start your long-awaited honeymoon to a tropical island. A virtual tour operator and a destination travel specialist booked your trip for you; you connected via videoconference to make your plans. Your itinerary was chosen with the support of generative AI , which analyzed your preferences, recommended personalized travel packages, and made real-time adjustments based on your feedback.

Before leaving home, you check in online and QR code your luggage. You travel to the airport by self-driving cab. After dropping off your luggage at the self-service counter, you pass through security and the biometric check. You access the premier lounge with the QR code on the airline’s loyalty card and help yourself to a glass of wine and a sandwich. After your flight, a prebooked, self-driving cab takes you to the resort. No need to check in—that was completed online ahead of time (including picking your room and making sure that the hotel’s virtual concierge arranged for red roses and a bottle of champagne to be delivered).

While your luggage is brought to the room by a baggage robot, your personal digital concierge presents the honeymoon itinerary with all the requested bookings. For the romantic dinner on the first night, you order your food via the restaurant app on the table and settle the bill likewise. So far, you’ve had very little human interaction. But at dinner, the sommelier chats with you in person about the wine. The next day, your sightseeing is made easier by the hotel app and digital guide—and you don’t get lost! With the aid of holographic technology, the virtual tour guide brings historical figures to life and takes your sightseeing experience to a whole new level. Then, as arranged, a local citizen meets you and takes you to their home to enjoy a local family dinner. The trip is seamless, there are no holdups or snags.

This scenario features less human interaction than a traditional trip—but it flows smoothly due to the underlying technology. The human interactions that do take place are authentic, meaningful, and add a special touch to the experience. This may be a far-fetched example, but the essence of the scenario is clear: use technology to ease typical travel pain points such as queues, misunderstandings, or misinformation, and elevate the quality of human interaction.

Travel with less human interaction may be considered a disruptive idea, as many travelers rely on and enjoy the human connection, the “service with a smile.” This will always be the case, but perhaps the time is right to think about bringing a digital experience into the mix. The industry may not need to depend exclusively on human beings to serve its customers. Perhaps the future of travel is  physical, but digitally enhanced (and with a smile!).

Digital solutions are on the rise and can help bridge the labor gap

Digital innovation is improving customer experience across multiple industries. Car-sharing apps have overcome service-counter waiting times and endless paperwork that travelers traditionally had to cope with when renting a car. The same applies to time-consuming hotel check-in, check-out, and payment processes that can annoy weary customers. These pain points can be removed. For instance, in China, the Huazhu Hotels Group installed self-check-in kiosks that enable guests to check in or out in under 30 seconds. 9 “Huazhu Group targets lifestyle market opportunities,” ChinaTravelNews, May 27, 2021.

Technology meets hospitality

In 2019, Alibaba opened its FlyZoo Hotel in Huangzhou, described as a “290-room ultra-modern boutique, where technology meets hospitality.” 1 “Chinese e-commerce giant Alibaba has a hotel run almost entirely by robots that can serve food and fetch toiletries—take a look inside,” Business Insider, October 21, 2019; “FlyZoo Hotel: The hotel of the future or just more technology hype?,” Hotel Technology News, March 2019. The hotel was the first of its kind that instead of relying on traditional check-in and key card processes, allowed guests to manage reservations and make payments entirely from a mobile app, to check-in using self-service kiosks, and enter their rooms using facial-recognition technology.

The hotel is run almost entirely by robots that serve food and fetch toiletries and other sundries as needed. Each guest room has a voice-activated smart assistant to help guests with a variety of tasks, from adjusting the temperature, lights, curtains, and the TV to playing music and answering simple questions about the hotel and surroundings.

The hotel was developed by the company’s online travel platform, Fliggy, in tandem with Alibaba’s AI Labs and Alibaba Cloud technology with the goal of “leveraging cutting-edge tech to help transform the hospitality industry, one that keeps the sector current with the digital era we’re living in,” according to the company.

Adoption of some digitally enhanced services was accelerated during the pandemic in the quest for safer, contactless solutions. During the Winter Olympics in Beijing, a restaurant designed to keep physical contact to a minimum used a track system on the ceiling to deliver meals directly from the kitchen to the table. 10 “This Beijing Winter Games restaurant uses ceiling-based tracks,” Trendhunter, January 26, 2022. Customers around the world have become familiar with restaurants using apps to display menus, take orders, and accept payment, as well as hotels using robots to deliver luggage and room service (see sidebar “Technology meets hospitality”). Similarly, theme parks, cinemas, stadiums, and concert halls are deploying digital solutions such as facial recognition to optimize entrance control. Shanghai Disneyland, for example, offers annual pass holders the option to choose facial recognition to facilitate park entry. 11 “Facial recognition park entry,” Shanghai Disney Resort website.

Automation and digitization can also free up staff from attending to repetitive functions that could be handled more efficiently via an app and instead reserve the human touch for roles where staff can add the most value. For instance, technology can help customer-facing staff to provide a more personalized service. By accessing data analytics, frontline staff can have guests’ details and preferences at their fingertips. A trainee can become an experienced concierge in a short time, with the help of technology.

Apps and in-room tech: Unused market potential

According to Skift Research calculations, total revenue generated by guest apps and in-room technology in 2019 was approximately $293 million, including proprietary apps by hotel brands as well as third-party vendors. 1 “Hotel tech benchmark: Guest-facing technology 2022,” Skift Research, November 2022. The relatively low market penetration rate of this kind of tech points to around $2.4 billion in untapped revenue potential (exhibit).

Even though guest-facing technology is available—the kind that can facilitate contactless interactions and offer travelers convenience and personalized service—the industry is only beginning to explore its potential. A report by Skift Research shows that the hotel industry, in particular, has not tapped into tech’s potential. Only 11 percent of hotels and 25 percent of hotel rooms worldwide are supported by a hotel app or use in-room technology, and only 3 percent of hotels offer keyless entry. 12 “Hotel tech benchmark: Guest-facing technology 2022,” Skift Research, November 2022. Of the five types of technology examined (guest apps and in-room tech; virtual concierge; guest messaging and chatbots; digital check-in and kiosks; and keyless entry), all have relatively low market-penetration rates (see sidebar “Apps and in-room tech: Unused market potential”).

While apps, digitization, and new technology may be the answer to offering better customer experience, there is also the possibility that tourism may face competition from technological advances, particularly virtual experiences. Museums, attractions, and historical sites can be made interactive and, in some cases, more lifelike, through AR/VR technology that can enhance the physical travel experience by reconstructing historical places or events.

Up until now, tourism, arguably, was one of a few sectors that could not easily be replaced by tech. It was not possible to replicate the physical experience of traveling to another place. With the emerging metaverse , this might change. Travelers could potentially enjoy an event or experience from their sofa without any logistical snags, and without the commitment to traveling to another country for any length of time. For example, Google offers virtual tours of the Pyramids of Meroë in Sudan via an immersive online experience available in a range of languages. 13 Mariam Khaled Dabboussi, “Step into the Meroë pyramids with Google,” Google, May 17, 2022. And a crypto banking group, The BCB Group, has created a metaverse city that includes representations of some of the most visited destinations in the world, such as the Great Wall of China and the Statue of Liberty. According to BCB, the total cost of flights, transfers, and entry for all these landmarks would come to $7,600—while a virtual trip would cost just over $2. 14 “What impact can the Metaverse have on the travel industry?,” Middle East Economy, July 29, 2022.

The metaverse holds potential for business travel, too—the meeting, incentives, conferences, and exhibitions (MICE) sector in particular. Participants could take part in activities in the same immersive space while connecting from anywhere, dramatically reducing travel, venue, catering, and other costs. 15 “ Tourism in the metaverse: Can travel go virtual? ,” McKinsey, May 4, 2023.

The allure and convenience of such digital experiences make offering seamless, customer-centric travel and tourism in the real world all the more pressing.

Three innovations to solve hotel staffing shortages

Is the future contactless.

Given the advances in technology, and the many digital innovations and applications that already exist, there is potential for businesses across the travel and tourism spectrum to cope with labor shortages while improving customer experience. Process automation and digitization can also add to process efficiency. Taken together, a combination of outsourcing, remote work, and digital solutions can help to retain existing staff and reduce dependency on roles that employers are struggling to fill (exhibit).

Depending on the customer service approach and direct contact need, we estimate that the travel and tourism industry would be able to cope with a structural labor shortage of around 10 to 15 percent in the long run by operating more flexibly and increasing digital and automated efficiency—while offering the remaining staff an improved total work package.

Outsourcing and remote work could also help resolve the labor shortage

While COVID-19 pushed organizations in a wide variety of sectors to embrace remote work, there are many hospitality roles that rely on direct physical services that cannot be performed remotely, such as laundry, cleaning, maintenance, and facility management. If faced with staff shortages, these roles could be outsourced to third-party professional service providers, and existing staff could be reskilled to take up new positions.

In McKinsey’s experience, the total service cost of this type of work in a typical hotel can make up 10 percent of total operating costs. Most often, these roles are not guest facing. A professional and digital-based solution might become an integrated part of a third-party service for hotels looking to outsource this type of work.

One of the lessons learned in the aftermath of COVID-19 is that many tourism employees moved to similar positions in other sectors because they were disillusioned by working conditions in the industry . Specialist multisector companies have been able to shuffle their staff away from tourism to other sectors that offer steady employment or more regular working hours compared with the long hours and seasonal nature of work in tourism.

The remaining travel and tourism staff may be looking for more flexibility or the option to work from home. This can be an effective solution for retaining employees. For example, a travel agent with specific destination expertise could work from home or be consulted on an needs basis.

In instances where remote work or outsourcing is not viable, there are other solutions that the hospitality industry can explore to improve operational effectiveness as well as employee satisfaction. A more agile staffing model  can better match available labor with peaks and troughs in daily, or even hourly, demand. This could involve combining similar roles or cross-training staff so that they can switch roles. Redesigned roles could potentially improve employee satisfaction by empowering staff to explore new career paths within the hotel’s operations. Combined roles build skills across disciplines—for example, supporting a housekeeper to train and become proficient in other maintenance areas, or a front-desk associate to build managerial skills.

Where management or ownership is shared across properties, roles could be staffed to cover a network of sites, rather than individual hotels. By applying a combination of these approaches, hotels could reduce the number of staff hours needed to keep operations running at the same standard. 16 “ Three innovations to solve hotel staffing shortages ,” McKinsey, April 3, 2023.

Taken together, operational adjustments combined with greater use of technology could provide the tourism industry with a way of overcoming staffing challenges and giving customers the seamless digitally enhanced experiences they expect in other aspects of daily life.

In an industry facing a labor shortage, there are opportunities for tech innovations that can help travel and tourism businesses do more with less, while ensuring that remaining staff are engaged and motivated to stay in the industry. For travelers, this could mean fewer friendly faces, but more meaningful experiences and interactions.

Urs Binggeli is a senior expert in McKinsey’s Zurich office, Zi Chen is a capabilities and insights specialist in the Shanghai office, Steffen Köpke is a capabilities and insights expert in the Düsseldorf office, and Jackey Yu is a partner in the Hong Kong office.

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2023 Global Business Travel Forecast

The price of flights, hotels, ground transportation, and meetings and events will continue to rise this year and next, says a report from CWT and the GBTA

Global travel prices will continue to rise significantly in the remaining months of 2022 and throughout 2023, according to a report out today from CWT and the GBTA.

The price of meetings and events is expected to climb particularly sharply this year, while air fares and hotel rates are also being pushed up, driven by soaring fuel prices, staff shortages and inflationary pressures in raw material costs.

According to the 2023 Global Business Travel Forecast, prices will continue to rise next year but not at such a dramatic rate.

“Demand for business travel and meetings is back with a vengeance, of that there is absolutely no doubt,” said Patrick Andersen, CWT Chief Executive Officer.

“Labour shortages across the travel and hospitality industry, rising raw material prices, and greater awareness for responsible travel are all having an impact on services, but predicted pricing is, on the whole, on par with 2019.”

The report says the main forces exerting pressure on the economy and the business travel industry are Russia’s invasion of Ukraine, other geopolitical uncertainties, inflationary pressures, and the risk of further Covid outbreaks that could restrict business travel.

It also highlights that greater visibility at the point of sale for greener travel options, as well as carbon foot-printing and environmental impact assessment, as an opportunity for the travel industry to actively assist in responsible choice-making.

Meetings and events

The cost-per-attendee for meetings and events in 2022 is expected to be around 25% higher than 2019 and is forecast to rise by a further 7% in 2023.

Alongside pent-up demand, corporate events are now competing with many other types of events that were cancelled in 2020.

Demand is also being fuelled by the move to remote working, which means companies are now booking meeting spaces when staff gather in person.

Shorter lead times for events, varying from one to three months versus six to 12 months, are also contributing to this perfect storm, perhaps underscored by corporate concerns that the situation they face today could change very rapidly.

Air fares are expected to rise 48.5% in 2022 compared to 2021, but even with this steep price increase prices are expected to remain below pre-pandemic levels until 2023.

Following an increase of 48.5% in 2022, prices are expected to rise 8.4% in 2023.

Premium class tickets comprised over 7% of all tickets purchased in 2019. The share of premium class tickets fell to 6.5% in 2020 and to 4.5% in 2021 but have started to rise in 2022.

Through the first half of the year, premium tickets made up 6.2% of all tickets purchased.

The report says following two years of minimal to no expenditure, business travellers are likely to be willing to spend more on tickets, especially as availability reduces due to labour shortages.

Hotel rates

Hotel prices fell 13.3% in 2020 from 2019 and a further 9.5% in 2021, however the report expects them to rise 18.5% in 2022 followed by an 8.2% lift in 2023.

Hotel prices have already eclipsed 2019 levels in some areas such as Europe, the Middle East & Africa and North America and are expected do so globally by 2023.

Hotel rates have risen sharply in parts of the world including a 22% rise in North America – and a forecast 31.8% across Europe, the Middle East & Africa – driven by an accelerated recovery coupled with continued capacity constraints.

Hotel rate increases were initially driven by strong leisure travel in 2021 but group travel for corporate meetings and events is improving and transient business travel is similarly gaining healthy pace, putting further pressure on average daily hotel rates.

Ground transportation

Global car rental prices fell 2.5% in 2020 from 2019, before rising 5.1% in 2021.

Prices are expected to increase 7.3% in 2022, hitting new highs, and rise a further 6.8% in 2023.

The vehicle industry remains capacity constrained and rental agencies that reduced fleet sizes in the wake of the pandemic have not yet fully recovered – due in part to component shortages and supply chain disruptions that have reduced global auto production.

Rental agencies have reverted to buying used vehicles to increase fleet sizes and are keeping their vehicles longer.

Some agencies are also buying vehicles from auto-makers outside of their historically supported brands.

Skyrocketing prices, vehicle shortages and the need for visibility into carbon emissions from door-to-door are driving corporate travel managers to factor ground transport into full trip planning from the beginning.

* The 2023 Global Business Travel Forecast uses anonymised data generated by CWT and GBTA , with publicly available industry information, and econometric and statistical modelling developed by the Avrio Institute .

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7 Top Travel Industry Trends (2024 & 2025)

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• Transportation Industry Trends
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This is our list of the top 7 travel trends happening right now (in 2024).

Along with expert predictions about trends that are likely to blow up in 2025.

1. Travelers go it alone

A survey by American Express found that 69% of travelers are planning a solo trip this year .

The same survey discovered that 76% of Gen Z and Millennials were open to solo travel.

There are other signs that this trend is on the rise.

Google searches for "solo travel" have increased by 223% over the last 10 years . 

Solo travelers are big on social media too. We're seeing a large increase in videos and images posted on social media that feature solo adventures.

The big question is: why are more people planning trips alone?

• Self-care: AMEX's recent Global Travel Trends Report found that 66% travelers planning to go solo did so to focus on treating themselves.
• Less hassle:  No need to coordinate agendas or competing interests. Solo travelers can book the exact trip they desire without compromise.
• Quick refresh:  Most solo trips are for smaller getaways. Which makes them ideal for a weekend or single-week trip. Travelers still prefer a partner for longer journeys.
• Meeting new people: Traveling alone makes it more likely to make new connections with locals or with other travelers.

2. Travelers crave local experiences

The "experience economy" is huge in the travel industry.

However, fewer travelers are seeking traditional sightseeing expeditions. 

Instead, “consumers [will] pursue authentic experiences , distancing themselves from mainstream tourism providers and venturing into pastimes that feel more meaningful”.

Data insights company AirSage marks this as an emerging trend because “people no longer want boring and conventional travel experiences as much as they used to. Instead, they would rather pay for vacations that are once-in-a-lifetime opportunities”.

Airbnb is betting on this trend.

Their Experiences feature makes it easy for people to have unique experiences on their trip "hosted by locals".

Airbnb currently offers around 50,000 experiences . 

The company also recently launched " Icons ", which is essentially a VIP version of Experiences.

For example, travelers can book a night to hang out with comedian Kevin Hart.

Other companies are banking their entire business model on this trend.

Withlocals offers “personalized traveling” — the opportunity for travelers to book private tours and activities with locals around the world.

Camping (and glamping) trips have also become a popular way for people to travel while experiencing the local culture.

Companies riding this trend include:

Outdoorsy has been called the “Airbnb of RV rentals”.

Under Canvas runs seven glamping camps in wilderness locations across the United States aimed at exploring the local landscape and inspiring human connections.

3. Travel tech adoption accelerates

Technology is presenting the travel industry with seemingly endless opportunities.

The pandemic served to increase the speed of tech adoption in the travel industry.

A McKinsey survey showed that “companies have accelerated the digitization of their customer and supply-chain interactions and of their internal operations by three to four years".

One example: room service robots.

Two Chinese hotel giants invested in ExcelLand, a manufacturer that already had 3,000 robots in operation.

BTG Homeinnes is looking at these robots as a way to control costs and safeguard guests.

Hotels, airlines, booking sites, and others are using chatbots like never before.

Travelers can chat with providers during every stage of their journey.

And, they won’t (always) feel like they’re talking to a robot. Advances in generative AI have made this type of communication hassle-free.

United Airlines has launched an “ Agent on Demand ” service that allows travelers at the airport to video chat with a customer service representative simply by scanning a QR code.

More and more airlines and airports are deploying facial recognition technology.

Corporations and government entities tout this technology as a boon for travel safety.

But many privacy advocates have put a halt to this emerging trend. They warn that this type of surveillance could easily turn dystopian.

With all of this new tech, companies are also continuing to capitalize on an older piece of technology — the smartphone.

Stats show that travelers who book tours and activities on their phone spend 50% more than those who book elsewhere.

4. Consumers blend business and leisure travel

The latest statistics say there are nearly 17 million digital nomads in America.

The concept of being location-independent, traveling and working remotely, has become even more popular since the start of the pandemic.

The hospitality industry is starting to cater specifically to digital nomads.

Aruba is opening its beaches up to travelers who’d like to work remotely, calling the marketing campaign “ One Happy Workation ”.

Visitors can stay for up to 90 days. And do not need any governmental documentation.

Barbados and the Cayman Islands will also let you work remotely from paradise for an extended period of time.

Booking.com reports that the "workation" trend is going strong.

More than 50% of travelers say they would extend their business trip to enjoy personal time at their destination.

Hotels are beginning to even cater to locals who needed a quiet place to work.

The Hamilton Hotel in Washington, DC, is just one example. It’s WFH-Work From Hamilton program offers rooms on a 6:00 am to 7:00 pm schedule.

5. The travel industry gets serious about sustainability

Recent data shows that more than half of US travelers believe there aren’t enough options when it comes to sustainable travel.

A poll conducted on behalf of Exodus Travels went even deeper into consumers’ attitudes .

• 91% of travelers see the importance of taking ethical trips
• 56% believe in buying souvenirs from local merchants
• 44% want to support local businesses at their destination

Sustainable travel involves minimizing impact on the local cultural environment.

And also taking an eco-friendly approach to the physical environment.

Nearly 70% of travelers say they are more likely to book accommodations if they know the property is planet-friendly.

Many in the travel industry have recently made commitments to preserving the environment.

For example, India-based ITC Hotels Group has LEED certified each of its hotels.

As of 2023, hotels in the state of California will no longer be allowed to provide single-use toiletries in plastic bottles to their guests.

Marriott International has made a pledge to remove these types of plastics from all their hotels, too. But the pandemic has put a temporary stop to that plan.

A recent report from Skift made this summary statement regarding sustainable travel in the future:

“[It’s a] less flashy way of viewing and traveling the world . . . with an emphasis on safety, sustainability, and profound experiences while getting from point A to B without wrecking the climate and local quality of life in the process”.

Sustainability isn't just about helping the environment. 

Offering sustainable travel options has the potential to increase revenue as well.

A survey by Simon Kucher found that high net worth consumers are willing to pay up to 40% more for a travel option focused on sustainability. 

Booking.com surveyed travelers and found that they'd be happy to pay a premium for accommodations that were certified sustainable. 

The exact figure of how much consumers are willing to pay for sustainability varies from study to study.

But overall, we see that most travelers are happy to pay around 10-20% extra for vacations that have sustainability in mind. 

6. Younger Travelers Seek Exotic Destinations

McKinsey recently discovered a generational divide among travel preferences.

Specifically, they found that Gen Z and Millenials were just as likely to book an international trip than a domestic one.

Members of Boomers and Generation X were 2x more likely to travel domestically. 

Notably, older generations have different goals when it comes to travel.

Younger generations are primarily looking for fun, novel experiences.

While older folks are aiming to spend quality time with family.

In fact, older travelers specifically cite that  having fun with loved ones is a bigger priority than seeing a new place .

Here are a few other reasons that younger generations are seeking destinations abroad more often:

• Lower barrier to entry (literally):  More and more countries are offering visa on arrival or other programs to encourage international visitors. Older generations likely remember the hassle of needing to arrange visa and other travel arrangements well before booking a trip. 
• Staying in touch: Smart phones and communication apps makes it easy for travelers to keep in touch with friends and family at home.
• Easy navigation:  Travelers can use apps like Google Translate and Apple Maps to get around their destinations without hassle. 
• Bragging rights: Showing off a video or picture from an exotic place is likely to get more engagement on social media compared to posts featuring local destinations.

7. AI Adoption Increases

Generative AI platforms (ChatGPT, Perplexity etc.) could see real world impacts on the travel industry in the very near future.

In fact, Skift recently asked 17 executives from the travel industry about their outlook on AI.

These executives largely saw tremendous promise in adopting AI and machine learning technology to their businesses.

Specifically, these executives saw a few areas that AI could be used to improve operations in the travel space:

• Personalization: Generative AI tools can be used to help plan personalized itineraries for guests. For example, a travel agent could prompt ChatGPT with: "My client is a 40 year old single mother with a 10-year old son. They want to travel somewhere abroad that has plenty of gluten free eating options". And the AI could provide a list of suggestions for that specific traveler. 
• Advanced segmentation:  AI has the potential to offer hyper specific targeting options. Some even think that AI could even generate campaigns for a specific customer. 
• Customer service: Incorporating AI tools into workflows can help improve the customer experience for both the traveler and staff members. For example, AI can automatically answer common questions that come in. Which empowers workers to spend more time on challenging situations or edge cases.

Other uses cases for AI in travel include:

• Predictions: AI can analyze large amounts of data to help predict future demand at specific destinations.
• Booking agents: The process of booking a trip may change from manually buying airline tickets and hotel rooms online. Instead, AI agents may take care of all of the details on the traveler's behalf.
• Real-time translation: LLMs like ChatGPT-4o are capable of essentially real-time translation via audio.

That’s it for the top seven trends driving the travel and tourism industry forward into 2024 and beyond.

Through these trends, we can see a dynamic relationship between the travel industry and consumers.

It’s a push-and-pull that’s sure to continue in 2025 and companies that can adapt quickly to the changing wants and needs of travelers are the best suited for future success.

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Travel & Tourism - Worldwide

• The Travel & Tourism market is projected to experience a significant increase in revenue in the coming years worldwide.
• By 2024, revenue is estimated to reach US$916.00bn and is projected to grow annually at a rate of 3.99%, resulting in a market volume of US$1,114.00bn by 2029.
• The largest market within Travel & Tourism is the Hotels market, which is projected to reach a market volume of US$426.40bn in 2024.
• Looking ahead, the number of users in the Hotels market is expected to increase to 1,863.00m users by 2029.
• In 2024, the user penetration rate was 25.6%, and it is expected to reach 33.2% by 2029.
• The average revenue per user (ARPU) is projected to reach US$0.46k.
• Online sales are expected to account for 75% of total revenue in the Travel & Tourism market by 2029.
• It is worth noting that United States is expected to generate the most revenue in this market, reaching US$214bn in 2024.
• Following the profound ramifications of the COVID-19 pandemic, the travel and tourism sector demonstrates robust indications of resurgence.

Key regions: Malaysia , Europe , Singapore , Vietnam , United States

Definition:

The Travel & Tourism market encompasses a diverse range of accommodation services catering to the needs and preferences of travelers. This dynamic market includes package holidays, hotel accommodations, private vacation rentals, camping experiences, and cruises.

The market consists of five further markets.

• The Cruises market covers multi-day vacation trips on a cruise ship. The Cruises market encompasses exclusively passenger ticket revenues.
• The Vacation Rentals market comprises of private accommodation bookings which includes private holiday homes and houses as well as short-term rental of private rooms or flats.
• The Hotels market includes stays in hotels and professionally run guest houses.
• The Package Holidays market comprises of travel deals that normally contain travel and accommodation sold for one price, although optional further provisions can be included such as catering and tourist services.
• The Camping market includes bookings at camping sites for pitches using tents, campervans, or trailers. These can be associated with big chains or privately managed campsites.

Additional Information:

The main performance indicators of the Travel & Tourism market are revenues, average revenue per user (ARPU), users and user penetration rates. Additionally, online and offline sales channel shares display the distribution of online and offline bookings. The ARPU refers to the average revenue one user generates per year while the revenue represents the total booking volume. Revenues are generated through both online and offline sales channels and include exclusively B2C revenues and users for the above-mentioned markets. Users represent the aggregated number of guests. Each user is only counted once per year. Additional definitions for each market can be found within the respective market pages.

The booking volume includes all booked travels made by users from the selected region, independent of the departure and arrival. The scope includes domestic and outbound travel.

Prominent players in this sector include online travel agencies (OTAs) like Expedia and Opodo, as well as tour operators such as TUI. Specialized platforms like Hotels.com, Booking.com, and Airbnb facilitate the online booking of hotels and private accommodations, contributing significantly to the market's vibrancy.

For further information on the data displayed, refer to the info button right next to each box.

• Bookings directly via the website of the service provider, travel agencies, online travel agencies (OTAs) or telephone

out-of-scope

• Business trips
• Other forms of trips (e.g. excursions, etc.)

Travel & Tourism

• Vacation Rentals
• Package Holidays
• Analyst Opinion

The Travel & Tourism market has been experiencing significant growth worldwide, driven by various factors such as increasing disposable income, ease of travel, and desire for unique experiences. Customer preferences: Travelers are increasingly seeking authentic and unique experiences, moving away from traditional tourist attractions to more off-the-beaten-path destinations. This shift in preferences has led to the rise of experiential travel, where immersive cultural experiences and interactions with locals are highly valued. Trends in the market: In the United States, there has been a noticeable trend towards sustainable and eco-friendly travel practices. Travelers are becoming more conscious of their environmental impact and are actively seeking out destinations and accommodations that prioritize sustainability. This has led to the growth of eco-tourism initiatives and the popularity of destinations known for their conservation efforts. Local special circumstances: In Europe, the rise of budget airlines and the Schengen Area agreement have made travel within the region more affordable and convenient. This has resulted in a significant increase in intra-European tourism, with travelers exploring multiple countries in a single trip. The diverse cultural offerings and close proximity of European countries make it an attractive destination for those seeking a mix of history, art, and culinary experiences. Underlying macroeconomic factors: The Asia-Pacific region has seen a surge in outbound tourism, driven by a growing middle class with higher disposable incomes. Countries like China and India have witnessed a significant increase in international travel, with travelers from these markets exploring destinations beyond their borders. This rise in outbound tourism has also led to an influx of international visitors to Asia-Pacific countries, boosting the tourism industry in the region.

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Travel forecast.

FORECAST January 17, 2024

Driven by Tourism Economics' travel forecasting model, the latest U.S. Travel Forecast projects the following:

International travel to the U.S. is growing quickly but is still far from a full pre-pandemic recovery. 

An expected global macroeconomic slowdown, a strong dollar, and lengthy visa wait times could inhibit future growth, with volume reaching 98% of 2019 levels in 2024 (up from 84% recovered in 2023) and achieving a full recovery in 2025. Spending levels, when adjusted for inflation, are not expected to recover until 2026. 

Other countries with whom the U.S. directly competes have recovered their pre-pandemic visitation rates more quickly, and some countries—such as France and Spain—have even increased their share of the global travel market. Meanwhile, U.S. global market share is declining.

Business travel is still expected to grow in 2024, albeit at a slower rate. 

Volume in the sector is expected to end the year at 95% of 2019 levels—up from 89% recovered in 2023. Slowing economic growth will hinder domestic business travel’s recovery, with a full comeback in volume not expected until 2026. Domestic business travel spending is not expected to recover to pre-pandemic levels within the range of the forecast.

Domestic leisure growth decelerated through three quarters of 2023 as consumer spending slowed amid higher borrowing costs, tighter credit conditions and the restart of student loan repayments. 

The sector achieved a full recovery to pre-pandemic levels in 2022. 

To complement the travel forecast table, U.S. Travel has released an accompanying slide deck , which provides context for the latest projections. This document, which appears on the right under "downloads," is available exclusively to U.S. Travel members.

Member Price: $0

Non-Member Price: Become a member to access.

Industries Overview

Latest articles, search saw consistently higher clickthrough rates than social and retail media worldwide in the last year, the new era of peer-to-peer resale: how major brands are entering the secondhand marketplace, out-of-home advertising lifted by digital formats, an election year, and investment in transit, us senate passes bills that restrict social media usage for minors, most gen z and millennials are comfortable making travel purchases on mobile, exclusive: marketers project sales growth to outpace ad spend in q4 2024, 3 ways gen z is paving their own path to purchase, 4 factors supercharging ad spend the rest of 2024, kroger cuts prices to keep pace in fight for us consumers’ grocery dollars, bad ad breaks and latency hamper ctv's advertising potential, about emarketer, the daily: how travel is changing—has it actually fully recovered, how budget airlines are pivoting, and more.

On today's podcast episode, we discuss the travel stats that sum up how the year has gone, if a full recovery is even on the cards, and what’s next for budget airlines. Tune in to the discussion with host Marcus Johnson, forecasting writer Ethan Cramer-Flood, and forecasting analyst Zach Goldner.

Subscribe to the “Behind the Numbers” podcast on Apple Podcasts , Spotify , Pandora , Stitcher , YouTube , Podbean or wherever you listen to podcasts. Follow us on Instagram

Episode Transcript:

Ethan Cramer-Flood:

I would be cautious in assuming that things are "back to normal." We're acting as if the world has now returned to pre-pandemic times. Let's compare everything to 2019 and see if things are better or worse, and then make some decision from that point. I'm not sure things are really back to normal. I think there's still distortions in how regular people are choosing to spend their money.

Hey gang. It's Thursday, September 12th, Ethan, Zach, and listeners, welcome to the Behind the Numbers Daily, an eMarketer podcast. I'm Marcus. Today I'm joined by two folks. We have one of our senior forecasting analysts based in Colorado. His name is Zach Goldner.

Zach Goldner:

Hey, Marcus. Thanks for having me.

Hello, sir. Yes indeed. Thank you for being here. We're also joined by our visible forecasting writer. He is over in New York City and we call him Ethan Cramer-Flood.

Marcus. It's apple picking season.

But instead of apple picking, I'm here with you on a podcast. Let that sink.

Okay. Don't say it like that.

Ethan, how many apples did you have last year?

So many. The amount of apples that you come back from an apple picking sojourn with will dominate your kitchen for the next two months. It's just outrageous.

I think you're taking too many. I think that's what's happening.

Yeah, no, yes.

Leave a few behind.

We take too many. I'm not taking full blame for this. But let's say things happen and you end up eating nothing but apple related content for the next two months.

Sounds like a crime taking place, but we'll talk about it later.

The only crime here is that Ethan didn't give me me an apple, but I-

The only crime here is apple pie and that Americans think that's a socially acceptable dish.

Ooh. Shots fired.

Yeah, it's truly awful.

I enjoy apple pie, but after two months of nothing but apple related food, I don't enjoy any of it.

Okay. All Americans, apple pie, peanut butter?

Chicken and waffles.

You got to keep these hot takes to yourself.

My ears are bleeding.

They know I'm right. If I ever ran for president.

You got to keep these takes to yourself.

Is that not true? Do you guys not like peanut butter?

No, I love peanut butter. I love apple pie. I'm a normal person.

There we go. Exactly.

It's a staple.

See? All Americans. If I ever ran for office, free peanut butter for everyone, and I'll get elected like that. Marcus 2028. Look out. All right, we probably don't need a fact of the day because we've been talking about American foods the whole time. So let's just start the episode. Today's real topic, how travel is changing. Has it fully recovered and how budget airlines are pivoting.

All right, let's talk about the state of travel. So at the start of the year globally, a record 4.7 billion people were expected to fly this year surpassing 2019's figure of 4.5 billion according to a projection at the time by the International Air Transport Association, IATA. The travel world certainly had a tailwind going into this year. US and tourism related spending grew 7% last year, outpacing 2019's previous high, according to the World Travel and Tourism Council. US domestic travelers, zooming in on America for a second, spent 9% more than they had in 2019.

So those numbers all look good. But looking at major travel periods for this year in America, couple for you, 7.7 million folks flew around the country over Memorial Weekend. That's over half a million more than a year ago. And around 44 million families hit the road over the holiday weekend as well. It's close to the 2005 record. Juliana Kim of NPR notes that Labor Day, another major holiday, travel holiday, in America, was expected to see the busiest ever for the holiday at airports with 17 million passengers playing to fly through Wednesday, according to the TSA. The best we've seen in five plus, six plus years. Ethan, I'll start with you. What has been the most interesting travel stat to you that you've seen this year and why?

So one thing I just recently discovered via these articles that you sent around, although they were primarily about flying, the stat that was buried in there was about gasoline prices in the US and the fact that they're actually down. Which I found somewhat counterintuitive and in some cases they're tremendously down. So if we're talking about these travel related data points that we constantly see, it seems like every holiday weekend there's a new record being set, more people are spending money traveling, more people are flying, more people, just everything. We set a new record all the time. It's also that gas prices are actually down and there's almost no category I can think of in the world across any industry or any product set where prices are lower now than they were just a couple of years ago.

Good point.

But they're significantly lower. It was like $5 in 2022 and then in 2023 it got under four and now it's like 3.50. That's a major decline.

So people have the ability to drive around. Now once you get there, the pricing reality of after you travel, we spend a lot of time talking about ticket prices and airlines and whether they're up or down and whether flying internationally is higher and we're going to talk about low cost airs and then gasoline prices being down. Once you get there, hotel prices and the cost of everything that you intend to do once you arrive in your destination, those are still outrageous. But it is fascinating that there's almost nothing in America that's cheaper now than it was a couple years ago, but in travel, some of it is.

I mean, lower gas prices definitely helping, particularly on that Labor Day weekend. Gas prices over that weekend were about 3.35 a gallon for regular down from 3.82 a year ago. So a significant drop. And that has contributed to Americans hitting the road a lot more. AAA reporting domestic travel over Labor Day weekend was up 9% year-on-year and that seems to be something people are doing instead of international travel. That was down 4%, international travel over Labor Day weekend, according to AAA down 4%, as international travel costs up 11%. Zach, for you?

What jumps out?

So as you had mentioned the article and what our own forecast show in terms of ad spending on travel, but we're seeing that the industry remains elevated here in the US and internationally. And that is as inflation continues to hurt the average American's pocketbook, the effects that we're seeing are not being distributed equally. So the statistic I want to share with you guys is something from CoStar Group and a Wall Street Journal piece regarding ultra luxury hotels.

The number of US hotels with an average daily rate of $1000 plus in the first half of this year was 80. That's compared to 22 in 2019. Now, if we were to look across the pond in Europe, you have the number of places have tripled in that time. So I don't know about you, I can't afford $1000 hotel a night, but what we're seeing in travel is also being reflected in the economy. As when the middle class is getting a little more squeezed, we're seeing luxury being hotter than ever before. Those that do have the money to spend are making up from their time during COVID being spent inside their homes and they're splurging.

It's interesting to hear you make this observation about that in Europe as well because one of, at least an anecdotal experience I had is that although, I mean to Marcus's point, international travel declined 4% even while we're seeing these explosive travel figures for within the US. But in my experience as an individual, I would encourage everyone to think about the cost of their trip after they've landed. So while it is true that flying overseas is incredibly expensive, the ticket, the airfare, is prohibitively expensive and can be scary, once you land, things are a lot cheaper. Every hotel I've stayed in in Europe in the last couple of years has been less expensive and better than what it would be in the US where prices have absolutely exploded. So what it takes for you to have a good time on your trip after you've gotten there can often actually be less expensive if you leave the country. But the problem is that barrier. It's getting on the flight in the first place.

Personally, I'm a big skier. I've seen on social media a lot of comparisons comparing the US ski resorts to that of the European ski resorts, which can be five times the size or larger. And when you look at day pass here in the States, some resorts are up to $300 a day. Compare that to Europe where you might be spending 25, 50, 75 bucks?

Yeah, exactly.

But to your point, Zach, there does seem to be a bit of a travel bifurcation that's getting worse. And you mentioned hotels. Marriott's high-end brands, Ritz-Carlton, St. Regis, W Hotels, outperforming those of the lower chains that they have. Also home rentals. Rachel Wolfe, who writes for our retail briefing was pointing this out. Slowing demand from US guests in Q2, except for those in higher income brackets who pick more expensive listings, that was according to Airbnb CEO, Brian Chesky. And then in terms of airlines as well, Delta and United reporting strong growth in revenues from their premium cabins in Q4, up 15% year-on-year for Delta and 16 for United. While budget carriers like Spirit and Frontier had to resort to steep discounts to fill the seat. So it does seem like it's getting harder for travel for people in the lower income brackets. And Deloitte's summer travel survey showing consumers with incomes under 50 grand making up 19% of travelers. That's down from 31% of travelers a year ago.

It did feel to me though, I mean maybe we said this last time, it does feel like travel is back and there's some numbers from the TSA showing this summer, so June, July, August, the TSA screened an average of 2.7 million passengers a day versus 2.3 million over the same period in 2019. And then Labor Day, I mentioned that 17 million figure, 17 million Labor Day flyers would be 4% more than last year, 11% more than pre-pandemic 2019.

And Marcus, as you do mention how some of those more budget airlines are changing up some of their features and their offerings, they're moving more towards a premium strategy where they're allowing you to maybe block off the middle seat or allowing wifi on all plans, which are going to eventually increase up the price of the ticket, squeezing the middle class even more for a pricier ticket.

Let's talk about those budget airlines for a second because there was an Economist piece that was titled from Southwest to Spirit, Budget Airlines are in a Tailspin, pointing out that today Southwest is America's biggest domestic carrier and the world's fourth-largest airline, turning an annual profit every year since inception in 1973 to 2019. However, it points out the pandemic has hammered profit. Southwest's revenue of 26 billion last year was above pre-pandemic levels, but net profits fell from 2.3 billion in 2019 to just 500 million, the article noting that neither Spirit or JetBlue have turned an annual profit since the pandemic. Ethan, what's next for budget airlines, particularly in America?

Well, unfortunately it seems like what's next is basically what Zach said in that they're going to attempt to turn their fortunes around by leaning into more premium options and trying to compete maybe a little bit more with the legacy carriers. That doesn't seem like the way to go.

I mean, my initial instinct was they need to get back to actually competing at being low cost options because they hardly seem like they are anymore. Again, this is anecdotal. I live in New York City, so I realize that my experience as a frequent traveler over the last 10 years or so may be distorted because we have weird idiosyncrasies with how competitive it is flying in and out of New York and the airport fees, et cetera. But rarely do these low cost airlines actually present the lowest option anymore.

It used to obviously you would know that they would be your lowest price option and then you would make the decision as to whether you want to deal with everything that comes with that. Nowadays they don't even, when you're searching for your airfare and your flight here, they're not even the ones that come up because the legacy carriers have done such a good job at competing at the lower end. They put you in the back, the very end of economy, coach class, whatever. That's fine. And you're going to have to pay for all your add-ons. But very frequently for us, it would be more JetBlue. We don't have as much Southwest here, but something like JetBlue that always used to be the cheapest just isn't anymore except for in certain routes. And very frequently they're being undercut. So be low cost. This is what people are looking for. It's expensive to ride on these guys now, so why wouldn't you just go with the legacy carriers that give you more ancillary benefits?

I do wonder if they can compete with that because those folks, to your point, they're offering lower cost seats. Keith McMullan, Aviation Strategy, agreeing with you, Ethan, saying legacy carriers are filling up the empty seats to the back with no frills fares. And I wonder how to look, I mean I'd known because booked flights recently and I'd seen the tickets, but there's a couple of examples. Virgin Atlantic that flies from the US to Europe, they split their economy ticket into economy light, classic, and delight. United split their economy into basic economy, economy, and economy fully refundable. Americans split economy into basic economy, main cabin, and main plus. And so they have taken that lower end ticket option they had, made an even lower end one, one in the middle, and one that's a little bit above that, and it seems to be working.

Zach, my question is, can low cost airlines exist in the US the way that they exist in Europe? And I say that because, so Ryanair, that's Europe's biggest airline by passenger volume and their main low cost carrier over there, they hit record profit and their August numbers were also at record highs. So they're doing well. Wizz Air is another Hungarian based one. They're doing well as well. But part of the reason they're doing well, Europe has more secondary airports, so they don't fly you necessarily to the big hub airport. They'll fly you to an airport just outside the city, so it's cheaper for them to rent the space from those secondary airports for low cost airlines. And two, the country's a lot smaller, and so when you're flying between places, there's an hour flight here and there. You can get an hour flight here and there to some parts of the US, but it's just so much bigger. So can they even exist at low cost airlines in America?

You look at what's happening in the economy right now, they're trying to merge and be acquired by a bigger group. The consolidation among US airlines right now is intense. There's only a handful of real competing airlines.

I think you brought up a great point about Ryanair. I think that if an airline really were to just be cheap, there are two factors that Americans look for most. One, they want to look at the cheapest price, and two, they want to make sure they get to their destination and on time. If you were to get those two factors down, I think that you could replicate a strategy like Ryanair. Yes, the airline that even openly mocks its customers for giving negative reviews.

It's true.

People don't care about the experience on the actual plane nearly as much, where if you're able to just get those two factors down, I think you'd really be open up to a big base of Americans that are making under $50,000 a year that would be willing to take more flights if the fares were lower.

Yeah. Ethan, do you agree?

I would be cautious if I was these companies and anyone thinking about this. I would be cautious in assuming that things are back to normal, "back to normal." We're acting as if the world has now returned to pre-pandemic times. Let's compare everything to 2019 and see if things are better or worse and then make some strategic decision from that point. I'm not sure things are really back to normal. I think there's still distortions in how regular people around this country are choosing to spend their money in terms of the balance between services and consumer goods and retail and also we have this incredibly distorted housing market and this sort of frozen housing market, which also changes the availability of money in people's pockets. And at the end of the day, I think we will get back to a point where more consumers will go back to looking for the low cost carriers.

I mean, right now their legacy ones are able to fill up all their seats and the low cost ones are not able to fill up all their seats, but when these spending decisions actually get back to a truly "normal" level, I think the demand will pick back up, if they're there offering those low cost options. That's my concern is like they're going to shift their strategy and they're going to go premium, and then three years from now when people are making normal decisions again and they're looking for these cheap options, they're not going to be there.

Yeah. Good take.

I think what you see that has the most amount of momentum at the moment is with business travel and with first class, upper class people, that are getting a premium offering on planes, and since we're now three, four years post-pandemic, we're looking at that momentum is going to eventually slow down and you're going to want to tap into a bigger audience. And that's where I see that airlines are continuing to want to price segment their demographics and airlines might want to try to open up more towards lower income individuals here in the US.

Yeah. Budget airlines seem to be working around the world, just struggling more in the US. The Economist was pointing out in 2001, budget carriers accounted for less than a 10th of global flight capacity. That figure now at one-third, according to the consultancy OAG. In America, yeah, things just aren't great. The share prices of America's four biggest low cost airlines tanked by nearly 50% on average since the start of last year, 2003. Those of America's three legacy carriers, American, Delta, and United are up by 5%.

Marcus, I know we're up against time, but let me get in a plug on something here.

Because we're thinking about these airlines and how they can get back to profitability and become sustainable. We have a possible solution to that coming out relatively soon. Our forecasting team is hard at work on our debut forecast for travel media ad spending, which is part of this whole commerce media trend.

Oh, interesting.

And when you think about additional sources of revenue, particularly in a low cost environment where part of the deal is that you're going to have a relatively bad experience, but you're going to get a cheap ticket and you're going to get where you want to go. If you think about these, that travel media is the way in which all transit and travel related companies, be they car services or airline services or anything in the travel world, can leverage their first party data to deliver advertising to their customers or their passengers or whatever. You think about the screen in the front of the seat when you're sitting in an airplane or all the different ways that there could and probably will be more ads coming at you in the future.

Now all the airlines are doing this, not just the low cost ones, but it's a pretty obvious way for more revenue to come in. That's the trade off that, again, maybe the premium travelers are going to say, "I want an ad-free experience." But the low cost providers are going to be like, "We're going to drown you in ads, but the ticket's going to be cheap because we're making up all this revenue." So we're going to have a forecast on how much money is in that.

That's a great point.

And your seat, the screen in front of you, knows who you are.

Yeah. They've got a lot of information about you.

Or personalized ads.

Ethan, one more time. The title of that forecast?

Digital Travel Media Ad Spending.

Okay. ProPlus subscribers, you can head to eMarketer.com and get hold of that. This month, it's coming out?

Within the month. Yeah.

Yeah, by the end of the month.

Okay, perfect. All right, that's all we've got time for this episode. Gents, thank you so much for hanging out as always. Thank you to Ethan.

Thanks a lot.

Thank you, Zach.

Thanks for having me.

Yes, indeed. Thank you to everyone who took time to listen to this episode. Thank you to Victoria who edits the show. Stuart runs the team. Sophie does our social media. We hope to see you tomorrow for the Behind the Numbers Weekly Listen, an eMarketer video podcast that you can of course check out on YouTube if you want to follow along to some of the data and the charts that we put up on the screen and see our faces. Or you can of course listen to us on any of the podcast platforms.

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Is the Thrill Gone in Online Travel? Experiences to the Rescue? Hear More at Skift Global Forum

Dennis Schaal , Skift

September 13th, 2024 at 3:26 PM EDT

Five years from now, will Airbnb be at the top of the heap in short-term rentals? Will Chase Travel be a headliner? Will future generations yearn to travel as current ones do?

Dennis Schaal

• What are the potential outcomes of Tripadvisor's discussions about selling or spinning off its Viator experiences unit?
• What role will generative AI and personalization play in the future of online travel?
• How is Airbnb's rebooted experiences product expected to impact its growth?

Select a question above or ask something else

• Executives from Booking Holdings, Expedia Group, and Airbnb will discuss future growth strategies at the Skift Global Forum.
• Ariane Gorin will share updates on changes at Expedia Group since becoming CEO, including growth rates.
• Airbnb has rebooted its experiences product, and leaders from GetYourGuide, Viator, and Klook will speak on this topic at the Forum.

Executives from leading online travel companies, including Booking Holdings, Expedia Group, and Airbnb, will discuss growth strategies and recent changes at the Skift Global Forum. Ariane Gorin, in her first major interview as Expedia Group CEO, will talk about the company’s recent performance. Additionally, Airbnb's rebooted experiences product and the potential sale or spin-off of Tripadvisor's Viator experiences unit will be key topics of discussion.

Where is the growth and momentum going to come from in online travel over the next few years as the law of large numbers and increased competition take hold? Is the thrill gone?

We expect the bosses of Booking Holdings, Expedia Group and Airbnb to push back on that notion at the Skift Global Forum September 17-19 in New York City.

For Expedia Group CEO Ariane Gorin, this will be her first interview at a major travel industry conference since taking the top job. We’ll hear more about the changes she’s been making during her first four months. While room night growth rates in the high 20% range were common a decade ago, only one of the big three major online travel companies – Expedia Group – broke into the double digits in the second quarter.

Experiences to the Rescue?

Could higher growth come from experiences? Airbnb has just rebooted its experiences product so we’ll be hearing more about that at the Forum. The leaders of GetYourGuide, Viator and Klook will all be on stage, too.

And what about Tripadvisor? Will it get sold and will its Viator experiences unit get spun off? Tripadvisor CEO Matt Goldberg will surely weigh in on that subject, as well as its new instant booking feature in partnership with Hopper, and other strategy changes.

Tripadvisor board member and Certares founder Greg O’Hara will close out the Forum on Thursday. Liberty Tripadvisor, which is Tripadvisor’s controlling shareholder, and Certares are in talks about Liberty Tripadvisor’s need to repay O’Hara’s company for a $325 million preferred stock investment by March 2025, a scenario that would weigh on Tripadvisor’s future.

We’ll be hearing at the Forum from both Booking’s Glenn Fogel and Airbnb’s Brian Chesky. Booking claims to generate two-thirds of Airbnb’s room nights, and to be growing faster. Can Booking close that gap even though its “alternative accommodations” still lag in the U.S. And what’s next regarding Airbnb’s pledge to expand beyond its core short-term rental product?

Without a doubt there will be much discussion about generative AI and personalization? Is the real impact in 2025 plans or still many years away?

Have a confidential tip for Skift? Get in touch

Tags: airbnb , booking holdings , certares , expedia , getyourguide , skift global forum 2024 , tripadvisor , viator

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Tech firms halve business travel in 2023 but alphabet, apple lag, study shows.

(Reuters) - Global tech giants halved their business flight emissions in 2023 compared to 2019, but companies like Apple and Google's parent Alphabet are falling behind, risking a return to pre-pandemic levels, a Brussels-based NGO said in a report.

Business travel last year approached pre-pandemic levels but trailed behind leisure trips, as geopolitical conflicts and a slower rebound in key markets hindered full recovery.

Emissions from corporate flights by 26 major tech companies analysed by Travel Smart, a campaign led by Transport & Environment (T&E) dropped by an average of 49% in 2023, it found.

While this shows that many tech firms are on the right path, only seven have set specific reduction targets that are essential to keeping business flight numbers in check, T&E said.

Alphabet, which has not set a goal to cut emissions, and Apple, which set a broader target, are slowly creeping back toward 2019 levels, T&E said.

The two were among the worst performers, with reductions in corporate travel emissions of just 23% and 31% in 2023, respectively.

"How can (Google chief) Sundar Pichai say that Google is progressing to a sustainable future when its travel emissions are going in the wrong direction?" said Denise Auclair, corporate travel manager at T&E.

Microsoft, IBM, and SAP, despite significant cuts, are also at risk as they are among the companies that fly the most without having set reduction goals, T&E said.

"Tech companies have claimed to be climate leaders for a long time and many have substantially reduced their business travel emissions, but if they want to be credible they must set reduction targets," Auclair added.

Asked about its performance, Apple said it has already reduced its greenhouse gas emissions by more than 55% since 2015 as part of its goal to become carbon-neutral by 2030.

"We're achieving this by making reductions across our entire carbon footprint — including business travel — and implementing significant cuts to the largest sources of our emissions," a spokesperson for Apple told Reuters.

Other companies were not immediately available for comment.

(Reporting by Dagmarah Mackos; Editing by Aurora Ellis)

After an Underwhelming 2023, the Semiconductor Industry Is Back on Course for Stellar Growth

By Alexander Jones , International Banker

F ew material products are more foundational to the modern world than semiconductors. With billions of transistors now possible on just a single chip, these hugely intricate devices underpin many of the most useful and cutting-edge innovations that power the global digital economy. This has been no more acutely observed over the last 18 months or so than in the chips being produced for the buoyant generative AI (GenAI) industry. After a rocky 2023, is the industry back on course for robust growth this year?

Last year was undeniably challenging for semiconductors. The Semiconductor Industry Association (SIA), a global industry body that represents 99 percent of the US semiconductor industry by revenue and nearly two-thirds of non-US chip firms, reported in February that the global semiconductor industry’s sales for 2023 totalled $526.8 billion, a hefty 8.2 percent lower than 2022’s all-time high of $574.1 billion.

According to Deloitte, it was the volatile market for memory chips—chips that function to store and retrieve data and preserve critical information—that caused the downturn. “In 2022, memory sales were almost US$130 billion, or just under 23 percent of the overall chip market, but they dropped 31 percent (about US$40 billion) in 2023, compared to down 1 percent for logic [logic chips are used for computation, processing data and executing instructions],” Deloitte noted in its “2024 Global Semiconductor Industry Outlook”. “The market is expected to get almost all of that back in 2024, with sales expected to reach 2022 levels. If we exclude memory, the rest of the industry was down in 2023, but only by about 3 percent.”

Much of the decline in 2023 was also confined to the first half of the year, with sales picking up formidably in the second half. Fourth-quarter (Q4) 2023 sales were 11.6 percent higher year-on-year to reach $146.0 billion and were also 8.4 percent more than the third quarter (Q3), which meant that the industry had gathered significant growth momentum as it entered 2024. “Global semiconductor sales were sluggish early in 2023 but rebounded strongly during the second half of the year, and double-digit market growth is projected for 2024,” said John Neuffer, the SIA’s president and chief executive officer. “With chips playing a larger and more important role in countless products the world depends on, the long-term outlook for the semiconductor market is extremely strong.”

Indeed, the SIA’s figures for May 2024 saw global semiconductor-industry sales hit $49.1 billion, a massive 19.3-percent increase on May 2023’s total of $41.2 billion and a hefty rise of 4.1 percent compared to April’s $47.2 billion. “The global semiconductor market has grown on a year-to-year basis during each month of 2024, and year-to-year sales in May increased by the largest percentage since April 2022,” according to Neuffer. “The Americas market experienced particularly strong growth, with a year-to-year sales increase of 43.6 percent.”

On June 4, the World Semiconductor Trade Statistics (WSTS) released its latest forecast for the global semiconductor market, in which it anticipated “robust growth” for 2024 and 2025. As such, a strong recovery is expected for 2024, compared with last year’s largely underwhelming performance, with the WSTS projecting 16-percent growth in the global semiconductor market this year to reach a market valuation of $611 billion.

“For 2024, mainly two Integrated Circuit categories are anticipated to drive the growth for the year with [a] double-digit increase, Logic with 10.7 percent and Memory with 76.8 percent. Conversely, other categories such as Discrete, Optoelectronics, Sensors, and Analog Semiconductors are expected to experience single-digit declines,” the WSTS noted. “The Americas and Asia-Pacific regions are projected to see significant growth, with increases of 25.1 percent and 17.5 percent, respectively. In contrast, Europe is expected to show marginal growth of 0.5 percent, while Japan is forecasted to see a slight decline of 1.1 percent.”

As for 2025, solid market growth is expected to continue throughout the year, with the WSTS forecasting a 12.5-percent expansion to reach an estimated valuation of US$687 billion. Again, this growth is expected to be mainly driven by the Memory and Logic sectors, which are each on track to surpass $200 billion in 2025. If achieved, it would represent growth of 25 percent and 10 percent, respectively, from 2024’s forecasts. “All other segments are anticipated to record single-digit growth rates,” the WSTS also noted. “In 2025, all regions are poised for continued expansion. The Americas and Asia-Pacific are expected to maintain their double-digit growth on a year-over-year basis.”

What is driving this semiconductor resurgence, then? For one, the astronomical growth of GenAI is having an increasingly profound impact on chip development. “This growth is fuelled by advancements across several key chip technologies, including logic processors built on cutting-edge nodes, high-bandwidth memory (HBM3), advanced 2.5D packaging, and advanced connectivity chips,” Deloitte also stated.

Gartner, meanwhile, projected in late May that revenue from AI semiconductors globally will reach $71 billion in 2024, which would represent a massive 33-percent expansion from 2023. “Today, GenAI is fuelling demand for high-performance AI chips in data centres. In 2024, the value of AI accelerators used in servers, which offload data processing from microprocessors, will total $21 billion and increase to $33 billion by 2028,” said Alan Priestley, Gartner’s VP Analyst. “While AI semiconductor revenue will continue to experience double-digit growth through the forecast period, 2024 will experience the highest growth rate during that period,” Gartner added. “In 2024, AI chips revenue from compute electronics is projected to total $33.4 billion, which will account for 47 percent of total AI semiconductors revenue. AI chips revenue from automotive electronics is expected to reach $7.1 billion, and $1.8 billion from consumer electronics in 2024.”

And with the United States and China jockeying over accessibility to—and control of—the global chip-making supply chain, semiconductors have never been more important from a global geopolitical perspective. And that means, as has been the case in recent years, that the welfare of Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s largest manufacturer of advanced chips and chipmaker for Apple and Nvidia, remains fundamental to the outlook for global semiconductors.

Thanks largely to the growing global AI boom that is powering soaring investments in data centres across the world, TSMC announced on July 10 that revenue for June came in at NT$207.9 billion, which means that a whopping 40-percent growth was registered for the entire second quarter, at NT$673.5 billion, against analyst estimates of a 35.5-percent rise. The results swiftly followed news that TSMC’s market capitalisation had briefly passed the $1-trillion mark on July 8, as businesses worldwide continued to expand their chip-buying for their AI-powered IT (information technology) infrastructures.

In particular, demand for Nvidia chips has helped TSMC’s earnings surge, while reports of a solid recovery in smartphone sales after last year’s slump are also proving hugely supportive. Indeed, the International Data Corporation (IDC) reported in June that global smartphone shipments increased 6.5 percent on an annual basis to reach 285.4 million units in the second quarter of 2024. As such, the market-intelligence firm forecasted the smartphone market to reach 1.21 billion units shipped in 2024, up 4 percent from the 1.16 billion units shipped in 2023, before climbing to 1.30 billion units in 2028 at a compound annual growth rate (CAGR) of 2.3 percent.

“In terms of end markets, both PC and smartphone sales are expected to grow 4 percent in 2024, after 2023 declines of 14 percent and 3.5 percent, respectively,” Deloitte also predicted in its “2024 Global Semiconductor Industry Outlook”. “Returning to growth for these two end markets is likely important for the semiconductor industry: In 2022, communication and computer chip sales (which include data centre chips) made up 56 percent of overall semiconductor sales for the year.”

The proliferation of 5G networks and the corresponding demand for 5G devices will also drive considerable growth for advanced semiconductors that can support faster speeds and more advanced connectivity. “5G-powered devices continue to fuel the market as these devices will display a near 16 percent growth in 2024 as adoption continues to expand across all regions and markets,” said Anthony Scarsella, research director with the IDC’s Worldwide Quarterly Mobile Phone Tracker. He also stated that he expected 13.2-percent growth in 2025 as 5G’s market share climbs to 74.4 percent from 67.2 percent in 2024. “With 5G devices becoming less relevant in most developed markets, the growth of 5G in emerging markets will play a central role in driving shipments throughout the forecast period,” Scarsella predicted. “With the overall smartphone demonstrating a CAGR of 2.3 percent from 2024 to 2028, 5G shipments will display an imposing 9.1 percent growth rate for the same period.”

“I remain bullish on the industry reaching $1 trillion around the end of this decade. Fast-growing demand for a diverse range of disruptive technologies and emerging applications—from AI, autonomous and electric vehicles, and high-performance computing to 6G and autonomous machines—will fuel this historic expansion,” Ajit Manocha, president and chief executive officer of semiconductor market-intelligence firm SEMI, wrote in February. “To support anticipated industry growth, 109 new fabs [semiconductor fabrication plants] are expected to come online between 2022 and 2026, according to our most recent SEMI World Fab Forecast report. Fully 89 of these fabs have already either begun operation, equipping or construction and, of course, more fabs will be needed through the end of the decade to support burgeoning demand for chips.”

Initiatives to Remedy the UK’s Deficit in Tech Skills and Knowledge as Quantum Computing Looms Large Over Financial Services

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