10 mega trends about the future of Tourism

Horwath HTL has identified 10 global trends which will influence mid- and long-term tourism development.

The first five trends will have a major influence on demand in the tourism sector but will also impact the second set of trends, which concerns changing supply. Together, they represent forces which will shape the future of tourism.

According to the report, people are definitely changing, and we can see that in three megatrends which are reshaping global economy as well as future of tourism. Those are: Silver hair tourists, Generations Y and Z, Growth of the middle class.

Silver hair tourists

Global population is aging and so called, silver hair tourist are becoming a major segment. In 2014, 12% of the world's population was aged over 60 years, and that percentage is estimated to grow to 21% by 2050. With a satisfactory disposable income, less home responsibilities, more time to travel and relatively good health, they are an important tourist segment and are expected to spend more than all other age groups on holiday travels.

On the other hand, there are generation Y, also known as Millennials, and generation Z, also known as iGen. Millennials will represent 50% of all travelers by 2025, and are already recognized by the tourism sector as a current and future driving force of revenues. Generation Z (6-20 years old) is yet to come. Predictions of their lifestyle and living environment present a more radical shift than it was a shift from generation X to generation Y.

"Generation Z is totally different than the generation Y. Some of their important characteristics are: higher access to information, more dynamic lifestyle (including more travel), higher level of education, accelerated adoption of change and faster spending. Those are clear indicators of a market segment which represents a game changing factor, opening new possibilities in the next 20 to 30 years." says Emanuel Tutek, Partner in Horwath HTL.

Emerging middle class 

With the increase in average incomes and the fall in levels of absolute poverty, middle class is emerging. They will represent 4.9 billion people by 2030 and 2/3 of this population will come from Asia – Pacific region. They are going to be one of the mayor sources of income in tourism. As they are placing an importance on value for money, better deals which are more diversified and customized will have to be developed.

On the supply side we have trends which are partially caused by demand trends and partially are also causing changes in demand. E.g. Generation Y and Z are shaping and being shaped by technological advancement of a mankind. On the other hand, silver hair tourists and entire middle class can expect new and better traveling experience which will be technologically enhanced and customized to their specifics. Three mutually very related megatrends are Technological (r)evolution, Digital channels and Loyalty v.X.0.

Technological innovations which can now days be found in some individual examples, are expected to become a standard offering around the world. Digitalization of the tourism sector has already happened. Some companies got a digital slap in the face, as their traditional business environment got totally changed by digital disruptors all over digital channels.

Social and Mobile will grow further

"The pace of digital change is further increasing and SoMo (Social + Mobile) will grow further. Mobile has taken over the tourism in 2015 (in terms of search), by 2017, 30% of online travel value is expected to be made on mobile devices. It is clear that there is a room for further innovations which will ensure a piece of that pie, on all the mobile platforms." says Matt Gebbie, Director in Horwath HTL.

Multiple screens and multiple channels, with a 24/7 accessibility, have increased a complexity of a customer's journey. Therefore identifying the moments of truth when customers makes small decisions which are all leading to a particular travel is getting more and more challenging. The entire travel and vacation experience is changing while being enhanced by digital. Digital innovations and analytical tools enable companies to engage customers and build loyalty in a new way. Old fashioned loyalty programs together with physical loyalty cards are vanishing and new loyalty solutions are imperative. They will be fully digitalized and integrated in the overall tourist experience.

 Emerging Destinations

With the growing middle class and their search for value for money and different travel interests, many destinations in the emerging and developing regions (Asia, South America, Eastern Mediterranean, Middle and East Europe, Middle East and Africa) have managed to develop and exploit their tourism potential to attract and retain visitors. These countries will soon have more international arrivals than developed markets (North America, Western Europe, developed areas of Asia and the Pacific). In 1950, while almost all of international arrivals (97 percent) were concentrated in only 15 destination countries, this share had fallen to 56 percent by 2009. Currently there are close to 100 countries receiving over 1 million arrivals a year. Asia’s growth was illustrated back in 2012 when Bangkok was the number one global destination in terms of international overnight visitors, accoring to MasterCard’s Global Destinations Cities Index. London overtook Bangkok as the front runner in 2014 due to the Thai political situation. Bangkok’s potential should allow for a quick comeback if it is not impacted by further negative influences like terrorism and political issues.

Political issues and terrorism

As new destinations emerge at a time of global change, we are witnessing how ethnic, cultural and religious differences together with different political agendas across the globe can cause various tensions. As a result political unrest, terrorist attacks and civil riots are becoming more of a reality. All such things impose a threat to the future of tourism. Governments around the world are facing numerous political issues that might influence tourism in destinations. For example, riots in Greece have been an influence on Greek tourism both in the short and long-term. Short-term problems occurred with the media warning tourists to avoid traveling to Greece. Long-term concerns might be losing investments and investors’ confidence in the tourism sector due to financial instability. An example of a recent political issue is the EU’s struggle with the flow of migrants and its own asylum policies. More than 800,000 refugees have already arrived this year in Europe and the European commission estimates up to three million refugees arriving in 2016. How to solve this problem remains a pressing question for the EU. Terrorism threats or tragic events might cause a major setback for any destination, but in a tourist destination it is also likely to decrease the number of international visitors. The most recent tragic attacks in France are opening key questions on how to address this global threat. Other recent terrorist attacks that have occurred in Egypt, Tunisia and Thailand, had a direct negative impact on tourism. Crisis management is therefore becoming a necessity for destination managers. Transportation insecurity is also a potential issue for travellers, often caused by terrorism attacks on airports and on trains. Europeans currently fear for the security of their rail system after the attempted terrorist attack which occurred in France in the summer of 2015. Furthermore, travellers are facing a problem of waiting longer at security check points before boarding and they might face further inconvenience by having difficulty in storing their baggage at the airport due to security reasons. 

Technological (R)evolution

The preceding five trends have a major influence on the demand aspect of tourism and also influence the next five trends, which impact changes in supply, thus together they shape the future offering in tourism. Tourism is strongly influenced by the progess of the technological revolution that is shaping and changing everyday life. Technology has become an integrated part of daily life with mobile internet, navigation systems and smartphones, thanks to which people are constantly connected to the digital world. The Internet has already changed the way tourists search, explore, book and experience travel. The whole industry has to adopt new technology trends, rethink their strategies and reshape the way they provide services. Robots (maintenance, guest service, and room service), holograms with avatars (reception, staff), interactive displays, smartphones and gadgets are already becoming a reality for the hotel industry. Some parts of this technological future are expected to become an integrated part of the tourism sector; however the level of technology in each company will depend largely on its strategy and positioning. So what does the techonolgical future look like in hotels specifically? Some hotels are already offering different solutions to accomodate guests, which might build a picture of a typical hotel in the future. The registration at reception is carried out immediately via smartphone; the receptionist can see in real-time guests’ insights on a tablet screen, and all the preferences related to the room are adjusted in real-time so that when a guest enters the room the lighting is automatically adapted, the temperature is optimal, the guests’ favourite music is playing and the TV programs are filtered. During the vacation, the guest gets real-time information on programs and activities in accordance with documented preferences and gets proposals for new possibilities on the selected devices (via smartphones, wearables etc.). All of this contributes to a complete experience for the guest leading to their greater contentment, increased level of consumption and ultimately it will increase their loyalty. Nevertheless, there will be challenges like selecting the appropriate technology for the guest, avoiding the pitfalls of using technology just for the sake of it, and optimizing such technology for the benefit of the guest and to improve their experience. 

Digital Channels

Conduting our lives online is swiftly becoming the norm rather than a novelty. Mobility (smartphones, smart gadgets, wearables) and social networks - so-called SoMo (Social + Mobile) - are channels which still have room for further growth. Generally speaking, the process of a vacation begins and ends with the Internet. It starts with research and collection of ideas, through to an intent to travel, then fine tuning the trip details and ultimately sharing their experiences after the trip. After returning from a vacation, guests are now providing feedback about their experience via the same social networks (Facebook, Twitter, Instagram) and distribution channels by which they gathered information for their trip in the first place (Tripadvisor, Booking, Airbnb). On average, almost every person in the world owns a cell phone, and soon the ratio will be greater than 1:1, meaning that most tourists will be able to explore, plan and make decisions wherever and whenever they want. Currently 65% of searches begin on mobile phones and continue on computers. In 2013 time spent on smartphones exceeded time spent on a PC. In 2014 time spent using mobile devices exceeded time spent watching TV.

In Q3 2013, on average people spent 34 minutes on a mobile search versus 27 minutes spent on PC search. In Q3 2014, the daily average for time spent on mobile devices was 177 minutes versus 168 minutes spent watching TV. 60% of time spent on the Internet is dedicated to social networks. Since social networking exceeded gaming activities, it became the first activity on mobile apps. 28% of the global population is using social networks and 77% of them access social networks via mobile devices. Facebook has become a serious player in the world search; the daily number of searches on Google is 3.5 billion compared to searches on Facebook with already 1 billion. The importance of social networks in tourism is increasing. Some examples are the interaction with the guest; targeted communication; location services; the confidence in friends’ recommendations; and creating and sharing content by guests. For instance, 48% of business travellers and 40% leisure travellers in the United States enjoy sharing travel experiences online. Key digital travel trends Tourists tend to spend a lot of their time online.

The global market of wearable devices (‘wearables’) will nearly triple by 2019 with a predicted average CAGR of 35%. Some wearable devices used nowadays include earpieces, digital glasses and smart watches. An example would be the wireless ear piece headphones, “The Dash” which enables users to listen to music, track body performance or even communicate via an ear bone microphone. Sales by global on-line travel intermediaries grew 8% CAGR over the period between 2008 to 2013, and now stand at 25% of the total travel sales (Euromonitor).

Loyalty vs X.O

Loyalty programs are integrated in the tourist experience and they should adequately respond to a dynamic digital environment. Previously analysed trends (e.g. Generation Z, Technological (re)volution, Digital channels) require us to rethink current business models and routines. In a world that is constantly changing, it is crucial to respond to those changes in timely manner. Likewise, change is needed with old fashioned loyalty programs, where collected bonus points are being exchanged for rewards. Disparity occurs when the benefits for targeted customers are questionable. In a world where everything strives for personalization, the real challenge is how to tailor each benefit to each customer’s needs.

Additional mismatch may occur by lack of ease in redeeming reward points. Sometimes, it is difficult for customers to understand what they can redeem for their points and what actions they have to do in order to turn those points into an actual benefit. Further discrepancy can be evident in inadequate metrics used for the loyalty program. Some of those metrics can be old-fashioned, inconsistent, or just difficult to understand for the customer. To avoid confusion, changes in current loyalty programs should be introduced. One possibility is to integrate loyalty programs into the overall tourist journey thereby enhancing the overall experience. Loyalty can find its purpose in the whole process, starting from planning, accommodation, activities, experiences in a hotel and in a destination, all the way to aftermath of a travel experience. Integration is also needed between various stakeholders in the tourism sector (carriers, hoteliers, tourist boards etc.), where alignment of business processes and a higher level of collaboration between stakeholders is required. 

In order achieve an identified form of integration more easily, this process needs to take place in the digital environment. The digital environment in loyalty programs requires new technology solutions and improvements. Best practice loyalty programs are already moving from physical loyalty cards only to a digital form (mobile apps, online portals etc.). A complete shift of loyalty programs in the tourism sector to the digital world is inevitable, enabling innovations in loyalty. Using “Big Data” tools and techniques allows deeper and more relevant insights (e.g. what products and services a tourist needs at the particular time and place), which are opening a spectrum of new possibilities in optimizing the current offering as well as in innovation. “Big Data” also enables faster data collection. Analysis of a large amount of data that has been quickly collected allows the opportunity for a quick response on guests’ needs such as adjustment of the hotel’s program within a couple of days, or real time adjustments for a guest while in a hotel. Those benefits should be leveraged to increase tourists’ experience, making them feel valuable and included.

Health and healthy lifestyle

Healthy lifestyle implies prevention, which is one of the key factors in health improvement. Taking care of personal health is getting more important. Wearable technology is growing rapidly, therefore spas and medical-focused destination spas will further embrace diagnostic medical technology for real time health monitoring and to facilitate a better connection between a doctor and a patient. In the first half of 2014, mobile health applications saw an increase of 62%. The mobile fitness & wellness market is the fastest growing category within the mobile health segment, with a CAGR of 37% by 2018. Integrated cooperation between the health and tourism sector will open up new possibilities in health tourism. Spectrum of healthy trends in tourism Treatments, relaxation, exercise and healthy diet are some of the already well-known product segments.

Sustainibility

Tourism is growing at a phenomenal rate and is one of the key socio-economic drivers worldwide, therefore impacting world development, prosperity and well-being. With over a billion travellers in 2013, tourism generates 9% of world’s GDP and 1.4 trillion USD of export. Tourism induces extra job opportunities and more importantly helps improve the structure and balance of the economic activities in a society. In addition, it brings indirect effects from which almost every sector in an economy benefit, and acts as a catalyst in the development of a destination. It is clear that tourism is affecting everyday life, therefore it is imperative to ensure its sustainability.

Sustainable tourism is defined as “tourism that respects both local people and the traveller, cultural heritage and the environment”. Economic, social and environmental pillars have to be balanced in order to ensure the longterm sustainable development of tourism. Economic sustainability Sustainable tourism needs to ensure feasible, long-term economic operations. It has to provide socio-economic benefits to all stakeholders involved, implying fair distribution of income, stable employment and earning opportunities. Sustainable tourism serves as a social service to host communities, and contributes to poverty alleviation. An economy can be overly dependent on tourism (while the travel industry is highly susceptible to risks and uncertainties). Key factors of economic sustainability include the rise in living standard, increased leisure time, economic development and prosperity, and political stability.

Socio-cultural sustainability refers to issues related to community wellbeing, cultural assets, community participation and tourist satisfaction. Tourism puts an economic value on traditional arts, crafts and cultural practices and encourages preservation of historical sites and heritage buildings. It respects the socio-cultural authenticity of host communities, conserves their established and living cultural heritage, and traditional values, and contributes to inter-cultural understanding and tolerance. Sustainable tourism has to allow community participation but requires global understanding and acceptance. It enhances income distribution within a society and poses a catalyst effect on infrastructure development. Tourism is often blamed for the commoditization of local culture. Tourism may potentially transform the local values, social and moral behaviors, consumption pattern and occupational structure of the society.

Meaningful experience

That is why sustainable tourism should maintain a high level of tourist satisfaction and ensure a meaningful experience to the tourists, raising their awareness about sustainability issues and promoting sustainable tourism practices among them. If not managed sustainably, overdevelopment may lead to antipathy and/or opposition of the local residents towards tourism. Environmental sustainability For many destinations, the natural environment is one of the primary attractions for leisure visitors.

The whole destination offer may be based on a natural resource meaning that tourism activities often take place in environmentally sensitive areas, especially for nature-based tourism and eco-tourism. The development of tourism requires a careful balance between providing adequate visitor experiences and services, protecting the ecological and cultural values of the area and ensuring the longterm sustainability of the site. Cruising is one of the most polluting vacation models, which has one of the higher incidences of total CO2 production in the tourism sector, and it is guilty of the destruction of marine systems. Cruise ships produce at least 17% of the total emissions of nitrogen oxides. Some of the waste streams generated by cruise ships include bilge water, sewage, greywater, ballast water, and solid waste. There is significant concern about the potential environmental impacts of these waste stream discharges. Moreover, ports are invaded by thousands of tourists that visit only for a few hours with organized tours.

This is just one of the examples of how some vacation models affect the environment. Making optimal use of environmental resources, maintaining essential ecological processes and helping to conserve natural heritage and biodiversity are key goals of sustainable tourism. Sustainability, as a trend in tourism, is positive and has already become a reality. Its importance will further grow in the future, as it is imperative. The implications range from a macro level of a destination, to a micro level of each accommodation (hotels, camping sites).

Holistic approach

As sustainability implies a holistic approach, ad hoc solutions are not a guarantee for a long-term success. Therefore it is necessary to look for the role models in thoroughly planned and comprehensive projects (e.g. Soneva Fushi). When designing a sustainable concept the key success factors which should be considered are: 1. Sustainable design 2. Environmental protection 3. Waste management 4. Sustainable procurement 5. “Green programs” 6. Renewable energy sources From this perspective, technological advancements in the area of increasing energy efficiency may lead to better economic and environmental sustainability of the whole travel industry. At a micro level, “green”, “eco”, and “organic” have already become everyday reality due to tourists’ expectations. Furthermore, individual businesses already assess problems like carbon emission, pollution, overcrowding and littering. On an operational basis, modern technologies increase the efficiency of service delivery and facilitate the provision of enhanced consumer experiences. Currently it is questionable whether the segment size that is willing to pay for “greener programs” is big enough to ensure profitability and viability of this kind of project. It is certainly part of the positioning of hotel brands. In the long run, this part of the offer will have to become the wider standard considering that generation Z perceives it as normal.

As a conclusion, it is clear that sustainable tourism development requires the informed participation of all relevant stakeholders, as well as strong political leadership to ensure wide participation and consensus building. Achieving sustainable tourism is a continuous process and it requires constant monitoring of impacts, introducing the necessary preventive and/or corrective measures whenever necessary.

About Horwath HTL

Horwath HTL is the world"s largest hospitality consulting brand with 45 offices across the world providing expert local knowledge. Since 1915 we have been providing impartial, specialist advice to our clients and are recognized as the founders of the Uniform System of Accounts which subsequently has become the industry standard for hospitality accounting. We focus one hundred percent on hotels, tourism and leisure consulting and have successfully completed over 16,000 projects.  If you have any questions, please contact James Chappell, Global Business Director at jchappell@horwathhtl.com

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