The global Travel and Tourism Market is estimated to surpass $8.9 trillion mark by 2026 growing at an estimated CAGR of more than 3.1% during the forecast period 2021 to 2026. Globally, the tourism industry contributed to $8.9 trillion to the global GDP in 2019 equalling a contribution of 10.3%. However, In the midst of the worldwide Covid-19 pandemic, demand growth ceased in 2020. Travel and tourism have been one of the most affected industries from the very beginning of the outbreak of the virus, with airlines on the ground, hotels closing and travel controls enforced. In the first quarter of 2020, the pandemic limited international visitor arrivals to a fraction of what they were one year before. The financial forecast published in June by the International Air Transport Association (IATA) revealed that airlines are projected to lose $84.3 billion globally in 2020 with a net profit margin of -20.1 percent. It also reported that from $838 billion in 2019, profits would decline by 50 percent to $419 billion in 2020. In 2021, when revenues rise to $598 billion, losses are projected to be cut to $15.8 billion.
Travel and Tourism Market Segment Analysis – By Type
Airlines segment is anticipated to witness significant market growth during the forecast period 2021-2026 with a CAGR of 4.4%. The airline industry provides passenger or freight transportation services through flights. The airline industry consists of a number of different services ranging from a single plane used to transport cargo or mail to full-service carriers travelling worldwide. Based on the services they provide, airlines are classified into intra-continental, domestic, regional, intercontinental, or international. They can also be deployed as charters or scheduled services. All these factors together contribute towards the market growth. Airlines are changing the curb-to-gate-to-destination passenger experience with exponential innovations thus expanding their revenue streams.
Travel and Tourism Market Segment Analysis – By Travel Model
While millennials make up a rising proportion of the population, they have started to capitalise on a new, unofficial employment advantage. ‘Bleisure’ travel, the practise of mixing business with recreational interests on business trips, is on the rise, offering those who reap the benefits of it with a better quality of life and work/life balance.
In the past year, 90% of millennials have invested in bleisure travel, compared to 81% of Generation Xers and 80% of baby boomers, according to the second annual State of Business Travel Report. Recent industry studies suggest millennials have led the way in normalising the movement, while all three generations profit from bleisure travel. Almost half (49 percent) of millennials claim they have extended corporate travel to a leisure trip or planned a business travel break to save on holiday expenses. With the growing popularity of bleisure travel, the market for travel and tourism also develops.
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Travel and Tourism Market Segment Analysis – By Geography
Geographically, North America region is anticipated to witness the most significant market growth during the forecast period 2020-2025 with a CAGR of 4.2%. International visitor spending, infrastructure development and prioritization of tourism has been a key driver of Travel & Tourism growth in this region. Two out of the top 10 cities for international visitor spending were in North America, with international visitors to New York spending $21BN and those to Miami spending $17 billion in 2019. The World Travel & Tourism Council (WTTC), which serves the global private travel & tourism industry, released its detailed Cities Survey for 2019, which reports that North America is adding $686.6 billion (25%) to the global Tourism GDP. The study indicates that many cities across North America make a major contribution to the total GDP of the region, with Cancun’s Travel & Tourism industry contributing almost half (46.8%) and Las Vegas contributing more than a quarter (27.4%).
Travel and Tourism Market Drivers
Growing Trend of Eco-Tourism
Undoubtedly, individuals are more worried about the climate and the effect their travel plans have on it than ever before. People are obsessed with the CO2 pollution they cause and how they should ride in greener ways. This is why ecotourism is such a massive deal at the present time. People are checking for choices for environmentally responsible travel, and this encompasses all aspects of the tourism business. The increased demand for electric-powered rental cars is one minor indication of this. The demands of people are changing, and travel agencies now realise that these issues have to be taken into consideration. Another indication of how people are worried about the environmental effects of their journeys is an increased interest in rail travel and public transit. In cleaner and greener ways, people prefer to get around and long-distance rail travel helps them to do exactly that. Most people ride around Europe and take all sorts of long rail journeys instead of flying. A number of people already fly to their next holiday destination, of course, but due to tourism and travellers, train journeys are growing in many parts of the world.
Increasing Focus on New Experiences
Over the decade, the travel and tourism industry has seen a 59 percent rise in the arrivals of foreign visitors from 1.5 billion in 2019 compared to 880 million in 2009. Tourism is also a crucial force for socio-economic growth, with a rising number of national and foreign destinations witnessing unique trends in tourism. The economy of experience is something that has been evolving for years, but the pattern is still rising. People no longer like, as much as they used to, traditional travel experiences. Alternatively, they would like to pay for celebrations that are once in a lifetime experiences. These may not have to be tremendous interactions, but somehow simply unforgettable or special. With the rising focus of customers to avail good experience contributes towards the growth of travel and tourism market. This is leading to rise in travel and tourism for new markets rather than traditional domestic or international travel destinations.
Travel and Tourism Market Challenges
Economic Slowdown due to Covid-19
Globally, the tourism industry contributed to $8.9 trillion to the global GDP in 2019 equalling a contribution of 10.3%. However, In the midst of the worldwide Covid-19 pandemic, demand growth ceased in 2020. Travel and tourism have been one of the most affected industries from the very beginning of the outbreak of the virus, with airlines on the ground, hotels closing and travel controls enforced. In the first quarter of 2020, the pandemic limited international visitor arrivals to a fraction of what they were one year before. The Director-General and CEO of IATA reported that, “Financially, 2020 is the worst year in aviation history.” On average, $230 million will be added to business losses on each day of this year contributing to a net loss of 84.3 billion dollars.’ In 2020, with the extreme effects of the COVID-19 pandemic, in contrast to 2019 estimates, foreign tourism decreased by 22 percent in Q1 and by 65 percent in the first half of 2020. In March 2020, the UNWTO (World Tourism Organization) suggested three strategies for potential reductions in arrivals from 58% to 78% by 2020 based on the starting point for the phased expansion of borders and the easing of travel restrictions. The turnaround for the industry could be in latter half of 2021, according to the UNWTO March forecast and its September report. Domestic demand is estimated to improve faster than foreign demand. In May 2020, the proportion of UNWTO tourism analysts hope to see signs of improvement by the final quarter of 2020 but mostly by 2021.
Travel and Tourism Market Landscape
Product launches, acquisitions, and R&D activities are key strategies adopted by players in the Travel and Tourism Market. United Airlines, Emirates, Southwest Airlines, Uber, Mariott, Hyatt, Hilton, Carnival Cruise Line, Royal Caribbean, Central Japan Railway, East Japan Railway, Norfolk Southern and others are considered to be the key players of the Travel and Tourism Market.
Acquisitions/Technology Launches/Partnerships
In 2016, Alaska Airlines acquired Virgin America for a purchase price of $2.6 billion. This acquisition gave Alaska Airlines an expanded West Coast presence, a larger customer base, and an enhanced platform for growth.
In February 2019, Best Western Hotels & Resorts announced its acquisition of global hotel and resort collection WorldHotels.
Key Takeaways
On average, each US airline leaves as much as $1.4 billion in annual sales on the table by not making changes to their customer service, according to Forrestor Analysis (CX).
Airlines are changing the curb-to-gate-to-destination passenger experience with exponential innovations thus expanding their revenue streams.
Increasing Spending of the Middle-Class Population will create new opportunities, especially in the APAC market.
Escalating the Popularity of Solo Travel is creating new opportunities for travel and tourism companies to target.
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