The state of tourism and hospitality 2024

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The state of tourism and hospitality 2024

By Matteo Pacca et al., | McKinsey & Company | Report published in later half of May 2024

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Tourism and hospitality are on a journey of disruption. Shifting source markets and destinations, growing demand for experiential and luxury travel, and innovative business strategies are all combining to dramatically alter the industry landscape. Given this momentous change, it’s important for stakeholders to consider and strategize on three major themes:

1. The bulk of travel spending is close to home. Stakeholders should ensure they capture the full potential of domestic travel before shifting their focus to international travelers. And they should start with international travelers who visit nearby countries—as intra-regional trips represent the largest travel segment after domestic trips.  Given travelers’ preference for proximity, how can tourism stakeholders further capitalize on Domestic and intra-regional travel demand? Here are a few strategies:  Craft offerings that encourage domestic tourists to rediscover local gems.  Fold one-off domestic destinations into fuller itineraries.  And make crossing borders into neighboring countries seamless.
2. Source markets are shifting. Although established source markets continue to anchor global travel, Eastern Europe, India, and Southeast Asia are all becoming fast-growing sources of outbound tourism.  The destinations of the future may not be the ones you imagine. Alongside enduring favorites, places that weren’t on many tourists’ maps are finding clever ways to lure international travelers and establish themselves as desirable destinations.  While acknowledging that historical source markets will continue to constitute the bulk of travel  spending, tourism players can consider actions such as these to capitalize on growing travel demand from newer markets:  Reduce obstacles to travel.  Use culturally relevant marketing channels to reach new demographics.  Give new travelers the tech they expect.  And create vibrant experiences tailored to different price points.
3. The destinations of the future may not be the ones you imagine. Alongside enduring  favorites, places that weren’t on many tourists’ maps are finding clever ways to lure  international travelers and establish themselves as desirable destinations.  Tourism players might consider taking some of these actions to lure tourists to less familiar destinations:  Collaborate across the tourism ecosystem.  Use infrastructure linkage to promote new destinations.  Deploy social media to reach different demographics.  Embrace unknown status.

As destinations and source markets have changed, tourism and hospitality companies have evolved too. Six key trends have shaped business models in this sector over the past decade.  In accommodation, asset-light models like franchising and management have proliferated, though luxury and small-scale brands are opting out. Consolidation has driven economies of scale. Hotels are looking to reclaim their relationship with guests, and almost two decades in, home sharing is charting its own course.  In the experiences space, reinvention is the name of the game. Cruises and theme parks have both focused on attracting new demographics while fine-tuning their revenue management strategies. Experiences remains a highly fragmented, legacy sector, creating massive opportunity for those able to crack the code on aggregation.

2 key takeaways from the report

1. Tourism and hospitality are on a journey of disruption. Shifting source markets and destinations, growing demand for experiential and luxury travel, and innovative business strategies are all combining to dramatically alter the industry landscape. Given this momentous change, it’s important for stakeholders to consider and strategize on three major themes:  The bulk of travel spending is close to home.  Source markets are shifting.  And the destinations of the future may not be the ones you imagine.
2. In order to capitalize on these themes we should craft offerings that encourage domestic tourists to rediscover local gems, fold one-off domestic destinations into fuller itineraries, make crossing borders into neighboring countries seamless, reduce obstacles to travel, use culturally relevant marketing channels to reach new demographics, give new travelers the tech they expect, create vibrant experiences tailored to different price points collaborate across the tourism ecosystem, use infrastructure linkage to promote new destinations, deploy social media to reach different demographics and embrace unknown status.

Full Report

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Topics:  Tourism, Hospitality, Global Economy, Trends, Inter-regional Tourism, Domestic Tourism, International Tourism, Tourism Destinations, Tourism Destination Organizations.